Client received a 1099B (from one of the large brokerage houses) with a treasury note matured & redeemed showing as a sale. All other redemptions have shown the difference between the purchase price and maturity value as interest income when the bill matured & was redeemed. In other words, only one sale/redemption was reported even though there were several redeemed/matured during the year. Even had one bill disposed of before maturity and had a small loss but it was not reported on the 1099B, the difference between the purchase adjusted cost & the disposition was shown as interest. None of the purchases were through a secondary market.

My understanding is that, the difference between adjusted cost & redemption that treated as interest, is not taxable to California.

My concern is that because this one redemption of a fully matured Treasury bill is being reported on the Schedule D/Form 8949, California is treating this as taxable.

Am I missing something? Should I be adjusted somehow so it is not taxable to California?