August 2, 2004 --  Series E and EE savings bonds allow the holder to defer tax on the accumulated interest until the bonds are redeemed or when they mature. Bonds mature 30 years after issue (40 years for bonds issued before 1965).

On redemption, the full amount of accumulated interest becomes taxable. For those wishing to continue to defer tax on the accumulated income, exchanging your Series E or EE bonds for HH bonds will accomplish your goal.

Series HH bonds pay interest currently, but the accumulated income on the Series E or EE bonds can be deferred until the HH bonds are redeemed. Series HH bonds pay a modest interest of 1.5% for the first 10 years, so this strategy may be of value only if you have a large amount of interest to defer, are in a high tax bracket, and are willing to accept the low current interest rate.

However, only a short window of opportunity exists to utilize this strategy. The government will no longer be issuing Series HH bonds as of September 1, 2004 . If you would like to convert your Series E or EE bonds in order to defer tax on your accumulated earnings, your local bank can assist you in the process. You must act before August 31.

If you have any questions regarding the above information, contact Madeline Janowski at 215-241-8961 or mjanowski@asherco.com.

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