Which of the following interest amounts, reported on the Form 1040 Schedule B ("Interest and Ordinary Dividends"), should be excluded in the global cash flow formula?

Accrued interest on discounted bonds should be excluded from the global cash flow formula because it does not represent cash flow that is currently available to the taxpayer. Discounts on bonds are recognized for tax purposes even if the cash has not yet been received, creating an apparent interest income that may inflate perceived cash flows. This amount is essentially a paper gain, and until the bond is sold or matures, the taxpayer has not actually received this interest in a form that can be used for expenses or other cash flow needs.

In contrast, the other options reflect forms of interest that generate actual cash income for the taxpayer. Interest from partnerships or other pass-through entities is typically real cash that can be accessed by the taxpayer. Interest received from one's own financial institution represents actual cash received from investments, as does verified interest from private mortgages. These amounts contribute to the cash flows available for evaluating financial health, while accrued interest does not.