15. If I want to buy a bond as a gift and don't know the social security number of the recipient, what should I do?

Your social security number is placed on the bond, along with the recipient's name and address. However, purchasers of gift bonds are encouraged to obtain the social security number of the registered owner before purchasing the bond. (Also see question 17.)

16. Can a minor (under age 18) buy bonds in his or her own name?

Yes, provided he or she has a social security number, can sign his or her own name, and is of sufficient competency to understand the transaction.

17. Can a parent, other relative, or friend buy a bond for a minor who does not have a social security number?

Yes. To do so, the purchaser is required to provide his or her social security number. (This alone does not incur tax liability.) Such bonds can also be registered in coownership form, providing the purchaser is not one of the coowners. If the purchaser is registered as coowner of such a bond, the purchaser's name will be listed first on the bond, and it will be considered the purchaser's property for tax purposes. IRS regulations require all children aged one and older to have social security numbers. The social security number of the registered owner, minor or adult, should be used whenever possible.

18. Can financial institutions charge customers a fee to issue or redeem bonds?

No. The Treasury Department pays a fee to financial institutions to process purchases and redemptions.

19. If a bond is lost, stolen, or otherwise destroyed, what should I do?

Bonds that are lost, stolen, mutilated or destroyed, can be replaced free of charge as long as it can be established by the Bureau of the Public Debt that the bonds are still outstanding. To assure that bonds can be traced, owners should keep records of bond serial numbers, issue dates (month and year found in the upper right hand corner of a bond), registration (names and addresses) and the social security or taxpayer identification numbers in a safe place separate from the bonds. Bond owners should send details of the loss, along with partially destroyed bonds if burned or mutilated, to the Bureau of the Public Debt, Savings Bond Operations Office (SBOO), Parkersburg, WV 26106- 1328. Filling out the replacement application form PD F 1048 will help speed replacement. These forms are often available from local banks or from the Federal Reserve (see question 45). Replacement bonds bear the original issue date.

A brochure "Record of Ownership" to help you keep track of your bonds by serial number and issue date is available from Public Debt's Savings Bonds Marketing Office.

20. If a woman bought bonds in her maiden name and later marries, must the bonds be reissued in her married name?

No. When she cashes her bonds, she need only sign her maiden and married names on the bond; for example, "Mary L. Smith, changed by marriage to Mary L. Jones."

21. If I move, should the Treasury Department be notified?

No, for E or EE Bond owners. Yes, for owners of Series H or HH Bonds receiving interest checks. Semiannual interest checks are mailed to the owner's current address. Send the new address, along with a complete description of your bonds, to the Bureau of the Public Debt, Savings Bond Operations Office, Parkersburg, WV 26106-1328. The change of address form printed on the back of the interest check envelope should be used, if available. Owners having their interest payments deposited electronically to a designated account should notify the above office only if that account is to be changed.

22. How can I add, remove, or change the name of the beneficiary on my bonds?

Complete form PD F 4000, available from Federal Reserve Banks and Branches, or from many local savings bond agents. If a living beneficiary is being removed, his or her signature is necessary for Series E or H Bonds; the consent of the beneficiary is not necessary for Series EE or HH Bonds. (A death certificate is required in order to remove a deceased beneficiary's name from a Series E/H Bond.)

23. Can I sell my savings bonds to another person or use them as collateral?

No. Savings bonds are non-marketable registered securities that cannot be transferred, negotiated, or pledged as collateral.

Redemption & Exchange of Savings Bonds

24. How and where can I redeem (cash in) my savings bonds?

Series E and EE Bonds can be redeemed at most financial institutions. However, agents cannot redeem bonds issued to a guardian or trustee, a corporation or other type of company or institution, or bonds where documentary evidence-such as a power of attorney-is required to cash them. Such bonds must be redeemed by Federal Reserve Banks or Branches, or by the Bureau of the Public Debt, Savings Bond Operations Office.

(Agents are permitted-but not required-to redeem bonds in some cases where documentary evidence is required. Savings bond agents can, for example, redeem bonds for registered beneficiaries in deceased owner cases when the beneficiary presents a certified copy of the owner's death certificate.)

Most agents will forward bonds they are not authorized to redeem to their Federal Reserve Bank. There are limits on the amount of bonds agents can redeem for persons other than established customers. Satisfactory proof of identity is required in all cases.

All Series HH Bonds are obtained from and redeemed by Federal Reserve Banks or Branches or the Bureau of the Public Debt, Savings Bond Operations Office. Most local financial institutions will help in these transactions.

25. What identification do I need to cash my Series E and EE Bonds?

The Treasury Department requires financial institutions to ask for one of three types of identification:

• Customer identification - if you are a customer whose name has been on an account at least six months.
  
  
• Personal identification - by a person known to the cashing agent who can satisfactorily identify the presenter.
  
  
• Documentary identification - such as a permanent driver's license, a counter-signed employee card with a photo, etc. No more than $1,000 worth of bonds can be redeemed based on documentary identification alone.

26. How long must I hold a bond before I can redeem it?

Six months from the issue date inscribed on the bond.

27. Can a minor cash a bond if he or she is the owner?

Yes, provided the bank where the minor cashes it has established that the minor is sufficiently competent to understand the transaction, sign the request for payment, and has the required identification.

28. Can a parent redeem a bond on behalf of a minor?

Only under conditions specified by regulation.

29. If both coowners have died, who owns the bond?

The estate of the coowner who died last.

30. Can a bond be partially redeemed; for example, a $1,000 bond be changed to a $500 bond and cash?

Yes, for any EE Bond $100 denomination or greater, E Bond $50 denomination or greater, and H or HH Bond $1,000 denomination or greater. These transactions can be completed only by the Federal Reserve and the Bureau of the Public Debt, Savings Bond Operations Office, Parkersburg, WV 26106-1328 (see question 45).

31. What exchange involving U.S. Savings Bonds are permitted?

The only exchange permitted under the regulations is E and/or EE Bonds and/or Savings Notes for HH Bonds. Persons interested in making an exchange should remember that an exchange is not the same as an outright redemption. Improper processing of an exchange can result in the loss of the tax-deferral privilege and consequent Federal tax liability. (Also see questions 10 and 34.)

32. Can I exchange H Bonds for HH Bonds?

No. But the proceeds of matured H Bonds may be reinvested in HH Bonds. Tax deferral does not continue in the case of such transactions.

33. Why do some people chose to exchange their E or EE Bonds or Savings Notes for HH Bonds?

Some investors prefer to receive current income twice yearly through HH Bonds. People who make this exchange can continue to defer taxes on the interest already earned on their former E/EE Bonds or Savings Notes until the HH Bonds are redeemed. Exchanges become particularly advantageous as E Bonds near final maturity. (See question 35.)

34. Please explain the tax-deferral privilege for exchanging bonds.

When you exchange E or EE Bonds or Savings Notes for HH Bonds, the old bonds-principal and interest-become part of the new HH Bond principal and you have the option of continuing to postpone reporting the accrued interest earned on the E or EE Bonds applied in the exchange for Federal income tax purposes. If you choose this option, the taxable interest is noted on the face of the new HH Bonds. When the HH Bonds are cashed, disposed of, or reach final maturity, you must-for that tax year-report this deferred interest amount on your Federal income tax form.

To retain the tax-deferral privilege, E/EE Bonds and savings notes must be exchanged for HH Bonds no later than one calendar year after the bonds or notes reach final maturity. For example,

E Bonds purchased on any day in the month of December 1949 reached final maturity on December 1, 1989. To retain tax deferral, the E Bonds must have been exchanged for HH Bonds no later than December 31, 1990.

The semiannual interest earned by the HH Bonds must be reported annually for Federal income tax purposes. (For more information on tax treatment of savings bonds, see questions 38 through 44.)

35. Where can I exchange E and/or EE Bonds and/or savings notes for HH Bonds?

At Federal Reserve Banks or Branches. It can be done by mail or in person. Issuing and paying agents cannot exchange these bonds, but they can process exchange applications. Ask for Form PD F 3253.

36. Is there a limit on the amount of bonds and/or notes I can exchange for HH Bonds?

No. (See question 18.)

37. Can I add cash to make Series E and/or Series EE Bonds and/or Savings Notes add up to the right amount for an HH Bond?

Yes, as long as the total value of the Series E and/or EE Bonds and/or Savings Notes being exchanged is at least $500. If the value of the securities to be exchanged is more than $500, but not enough for the next larger size HH Bond, enough cash may be added to purchase a Bond of the next higher $500 multiple. For example, an investor with $1,380 worth of bonds may add $120 in cash to obtain $1,500 worth of HH Bonds.

If the total value of the bonds being exchanged is greater than the denomination(s) of the HH Bonds desired, the investor may receive the excess in cash. However, in situations involving tax-deferred interest income, the excess refunded is considered interest income, for Federal tax purposes, up to the total amount of accrued interest on the bonds being exchanged. For example, if $1,600 worth of E Bonds are being exchanged for $1,500 in HH Bonds, and the E Bonds have $253 in accrued interest included in their value, only $153 will be deferred. The $100 cash returned to the owner is interest income that must be reported for the year of the exchange.

Taxes

38. What taxes am I liable for on my savings bond interest?

Savings bonds are exempt from state and local income and personal property taxes but bonds are subject to Federal income, gift, and estate taxes; state inheritance or estate taxes.

39. When bonds are registered in coownership form, who pays the income tax due on the interest?

Each coowner is liable in proportion to the amount he or she contributed to pay for the bonds. If the bonds were received as a gift, the interest is split equally between the coowners.

40. Is there a tax break for savings bond investors?

Yes. First, you never pay state or local income taxes on savings bond interest earnings. In addition, by waiting to report the interest on Series E and EE Bonds and Savings Notes until you decide to cash your bonds, or until they reach final maturity, you will be earning interest on principal plus the full untaxed interest previously earned.

Beginning with bonds purchased in 1990 and cashed in a year when qualified educational expenses are paid, interest may be free from Federal income tax as well. Income and other restrictions apply. (See question 42.)

41. When should I report interest income for Federal income tax purposes?

For E and EE Bond holders, this is a matter of individual preference. Some owners report their interest every year as it accrues; others prefer to report it at the time of redemption.

You may choose to report interest income in a lump sum when you redeem the bonds (or at maturity).

Interest on Series H and HH Bonds must be reported annually for Federal income tax purposes.

42. I want to use savings bonds to build a college fund for my child. I've heard I may not have to pay Federal income tax on these bonds? Is this true?

Under some circumstances, the interest on savings bonds purchased after December 31, 1989, may be completely or partially excluded for tax purposes if the bonds are cashed during a year when tuition and fees at a qualified post-secondary educational institution are paid for the bond owner, the owner's spouse, or a dependent. For full details on this offering get IRS Publication

550, "Investment Income and Expenses," and IRS Form 8815, "Exclusion of Interest from Series EE U.S. Savings Bonds Issued After 1989."

In order to be eligible for the income tax exclusion, bonds must be registered in the name of a person who is 24 years of age or older on the first day of the month in which the bonds are issued. Any other individual can be listed on the bonds as a beneficiary, but only a spouse can be a coowner if the bonds are to qualify for the exclusion. The bonds must be redeemed in the same calendar year that tuition and fees are paid. The tax exclusion can be claimed for the interest on bonds whose redemption value equals or exceeds the total cost of tuition and fees. (If the value of the bonds redeemed exceeds the amount spent, only a proportional amount of the interest income may be excluded from Federal income tax.) In the year of redemption, a bond owner's modified adjusted gross income must meet certain income limits. See IRS Publications for current limits. Married couples must file jointly. Modified adjusted gross income includes the accumulated interest on bonds redeemed during the year before exclusion.

For additional details request "Question and Answers about Savings Bonds for Education," from Public Debt's Savings Bonds Marketing Office, Washington, DC 20226.

43. Is there another way to receive tax advantages while saving for a child?

Yes. The second method allows individuals with modified adjusted gross incomes that are likely to exceed the limits of the interest exclusion program (see question 42) to receive tax advantages when saving for a child's future education. It also offers all individuals a way to save for any future need a child might have. To secure this tax advantage:

• Buy bonds in the child's name alone, or with a parent, relative or any other person as beneficiary (not coowner).
  
  
• After the first year in which bond purchases have been made (or later), parents may choose to file a Federal income tax return in the child's name (the child will need to have a Social Security number) reporting the entire accumulated accrued interest on all bonds registered to the child. Show on the return that it is being filed with the intent of reporting savings bonds interest annually. Save a copy of the return. In some cases tax deferral may be more advantageous than this annual reporting method. If bonds are cashed after a child reaches 14 years of age all deferred interest income will be taxable to the child.
  
  
• Under the annual reporting method, no tax will be due until the child has unearned income (interest and dividends) of $600 or more in a single year, and no further returns need be filed until that annual level has been reached.
  
  
• Under the annual reporting method, you will need to file an income tax return for any year in which the child's unearned income exceeds $600. For children under the age of 14, taxes will be paid at the parent's rate if the unearned income exceeds $1,200. Once a child has reached 14 years of age, all taxes will be paid at the child's rate.
  
  
• When the bonds are redeemed, only the most recent year's accrual will have to be reported for tax purposes if the annual reporting method was used. In most cases, little or no tax will have been due over the life of the bonds. It is essential to keep good records.