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That's a reasonable interpretation from the Treasury's perspective. But if you ask the IRS, I've realized all $70 as interest income ($50 as OID, which they consider a form of interest).

(And yes, coupons pay 2x yearly, but they are quoted on an annual basis; I would receive two $10 payments.)

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For IRS, would the person who sold you it at loss of 50 be able to harvest loss of that 50? Thus well overall there was only 20 of profit?

Yes, secondary sellers can claim capital losses. But they typically go for a discount even at the primary Treasury auction, so there's still more than $20 of total profit after netting across holders.

Whoops, I haven't worked with bonds directly in a bit and forgot the coupon rate was split across payments.

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