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I have a relative that has $400,000 in series E bonds. They matured in equal amounts in 2005, 2006, 2007 and 2008. The $400K is the current redemption value.

Is there any way to spread out the tax hit on these bonds? ie. can amended returns be filed for 05, 06, 07 and 08? Can they be redeemed in increments over the next 4 years?

Are there penalties due since they were not redeemed when mature? I have read pub 550 but don't see any guidance.

Any and all suggestions on how to proceed would be appreciated.

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