If interest on U.S. savings bonds, series EE or I, hasn’t been reported annually, then the accrued interest becomes fully taxable when the bonds are redeemed. This income is ordinary interest income; it is not a capital gain. The financial institution at which you cash in the bonds will issue Form 1099-INT to report the interest income to you (and to the IRS).
Rules that limit the deduction of losses from passive activities to income from other passive activities. Passive activities include investment rental operations or businesses in which you do not materially participate.