This Week's Topic: SAVINGS BONDS TRANSFERRED TO A REVOCABLE TRUST

A February 6, 2002 IRS Private Letter Ruling held that the transfer of United States Series E and EE savings bonds to a Family Living Trust from the Trustors that provided that the Trustors were also its beneficiaries would allow the Trustors/Transferors to continue to defer reporting interest accrued each year.

The transferor is treated as the owner of the trust if the transferor can revoke the trust. The transferor must include the total interest accrued in his or her income when the bonds are cashed in or finally mature, whichever is earlier. If, however, the owner of the savings bonds transfers them to a trust and the transferor is not treated as the owner of the trust, then gross income must be reported by the transferor, for the year of reissue for all interest earned on the bonds and previously reported.

The IRS letter further referred the taxpayer to pages 57 through 60 of IRS Publication 17, Your Federal Income Tax for individuals, providing tax information on U.S. Savings bonds.