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I own some GNMAs. They were bought at auction at 100 cents on the dollar. Every month for the past 15 years I have received a payment, which is partly interest and a little bit of principal returned.

One of the first years I had those, I didn't report the principal returned, and got one of those letters. The agent was able to fix it on the phone. For each month the amount of principal returned was equal to the cost basis, so no tax was owed on the "sales" of the partial amounts. The computers didn't know that, of course, and sent me a "we have changed your tax" letter.

So there are things they can fix.

Best wishes, Chris
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