After they stop paying interest, you can defer the income taxes due by converting them to H bonds. My aunt did this. Her estate failed to pay the income taxes when it could. So the heirs got stuck with the tax burden from way back. And yes, it does count toward the amt.As with any investment that defers income taxes, its a good idea to sit down and work out when is the best time to pay income taxes and plan accordingly.My aunt ended her days in a nursing home and I think her nursing home bill was deductible as a medical expense. Hence, her estate could probably have paid the taxes with minimal actual liability. I called this to the attention of the executor, but executors thought it was too complex. So heirs got stuck paying taxes at their rates on the deferred interest inherited as saving bonds.
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