Bearer bonds are a type of negotiable security that originated in the United States probably during the Reconstruction era following the Civil War. Most bonds are registered to a specific owner. The ownership of a bearer bond is not registered with the bond issuer, so the person in possession of the bond is presumed to be the owner.
Because there is no owner of record, a bearer bond is a handy way to evade taxes. For this reason, Congress banned the issuance of bearer bonds in the United States in 1982. Since some bearer bonds issued prior to the ban had maturities of 30 years or more, a few are still around. As with registered bonds, once bearer bonds have matured or been called for early redemption, they no longer pay interest. However, unpaid interest coupons dated on or before a maturity or call date may be redeemed along with the bond itself.
To redeem bearer bonds, mail the bond certificates to the bond agent who handles redemption on behalf of the bond issuer. You must include a completed Internal Revenue Service Form W-9 and a letter of instruction. The letter tells the bond agent who is to be paid and the address where the payment is to be sent. Sign both the W-9 and the letter of instruction. Use insured registered or certified mail.
Treasury Bearer Bonds
Bearer bonds issued by the Treasury Department are redeemed in the manner described above. The last callable bearer bonds were called as of 2009. If you want to redeem any of these called Treasury bonds, include coupons 51 to 60. The address to send the bonds and accompanying documents as of 2012 is Customer Service Branch 3, Definitives Section of the U.S. Bureau of the Public Debt. The mailing address is P.O. Box 426, Parkersburg, WV, 26106-0426.
Other Bearer Bonds
The ban on issuing bearer bonds does not apply to state and municipal governments, although only Nevada and Wyoming still permit new bearer bonds. Purchasers of these bonds must report them to the appropriate state agency. Some foreign governments still allow bearer bonds, and both the Treasury Department and some corporations have issued foreign-targeted bearer bonds since 1982. The income from these bonds must be paid outside the United States and may not fall under federal income tax jurisdiction. Redemption procedures vary because they must comply with the laws o the country where the bonds are issued and redeemed.