7636 / How is the donor of a corporate bond taxed on interest that has accrued prior to the date of the gift?
Interest accrued, but not yet due, on corporate bonds (and Treasury bonds and notes) before the date of a gift is includable as ordinary income in the donor’s income for the taxable year during which the bond interest is actually or constructively received by the donee. Therefore, the donor will not necessarily be taxed on such income in the year in which the gift is made. Amounts received from interest accruing after the transfer date are includable in the gross income of the donee.1
For treatment of accrued market discount in a disposition by gift, see Q 7646. See Q 7679 regarding gifts of Series E and EE bonds.