Can I convert savings bonds to a Roth IRA?

Q:  I have about $10,000 in savings bonds stretching from 1986 to about 1999, half in parents' names and half in childrens (both 17). Would like to convert into Roth IRA contributions. What are the tax ramifications of cashing in the bonds or can I convert them?

A: No conversions allowed. If the bonds are cashed, the owner will owe income tax on the accrued interest. For students the extra income may have a negative impact on financial aid eligibility if they will be going to college in 2009. If the bonds held in the parents' name are cashed when the children are in college, the interest income may be tax-free. See details on page 55 of this document.