Dealing With Government Bonds A Complicated Process

QUESTION: What are the tax consequences when someone dies and leaves a series E government bond that has matured, not redeemed?
Is the heir obligated to pay tax on the gain since the purchase or is it assessed on a stepped-up basis?
R.C., Spring Hill
ANSWER: Dealing with government bonds is a complicated issue for tax purposes. You don't give enough information for a precise answer to your question.
Certified public accountant Geoffrey Mosher notes that most people use the cash method of accounting and reporting income. If the decedent used that method, all the interest on the bond could have been reported year by year and taxes on that interest already could have been paid since the bond had matured (and assuming that it had reached any extended maturity date).
However, if the taxes on the interest were not paid annually, the executor of the estate could redeem the bond and pay the tax on the total accrued interest in the final tax return of the decedent.
Or, the heir could receive the unredeemed bond and, whenever the bond is redeemed, pay the tax on the entire bond, minus whatever might have been the estate tax on the original capital invested in the bond. The choice would depend on the tax bracket of both the decedent and the heir.
If either the decedent used the accrual method is accounting or the heir uses that method there are other applicable rules. You need to consult a tax attorney or your accountant for advice.
QUESTION: I am 86 and have been living with my girlfriend, who is 78, for 14 years. I want to marry her but she says she would lose her income if she marries. She owns and manages several apartments.
Since we have a common-law arrangement, would I have any rights to compensation should she put me out?
L.S., Hallandale
ANSWER: Florida does not recognize common-law marriages so you probably would have no right to compensation should she put you out.
However, there appears to be no reason she would lose income if she were to agree to marry you. If she has qualms on that score, she could ask you to sign a prenuptial agreement to forego any claim on her income.
QUESTION: My husband is collecting Social Security disability benefits. In the past year, we have had two different individuals tell us that they know of situations where the wife of a man on Social Security disability was collecting benefits even though she was working and wasn't of age to collect.
This seem strange to me but, if this is correct information, then I could certainly use the additional income. Can you give me any information on this?
J.R., Brooksville
ANSWER: In general, Social Security disability and related benefits are similar to those for Social Security retirement and related benefits.
The spouse of a person receiving Social Security disability benefits ordinarily is not eligible for benefits based on benefits for the disabled person before the spouse is 62 years of age.
Common exceptions are if there is a child 16 years old or younger in the home or a child no more than 19 years old who still is in elementary or secondary school or a child who was disabled before age 22.
The same earnings limitations that apply to Social Security retirement benefits apply to benefits for which the spouse of a person receiving disability benefits is entitled.

If you have any questions about issues connected with aging, except medical conditions, write to Life to the Fullest, Hernando Today, 15299 Cortez Blvd., Brooksville, Fla. 34601, or send e-mail to adontaft@yahoo.com. Please include your name and address.