Rev. Rul. 55-274

For Federal income tax purposes, no gain is realized or loss sustained upon the redemption, prior to maturity, of 2 1/2 percent Treasury Bonds, Investment Series A-1965. Interest on such bonds is includible in gross income when received or accrued, depending on the taxpayer's method of accounting, and such interest accrues when it becomes payable and not until then. The difference between the amount received upon the redemption of such bonds prior to maturity and their face value constitutes a refund of a portion of the interest previously received and reported as gross income by the bondholder, and therefore it is deductible by him in the taxable year of redemption as an ordinary loss. Compare I.T. 3504, C.B. 1941-2, 93