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I thought you report tax exempt interest on schedule B.
I also thought there was a possibility of being taxed on a gain resulting in the calling of a muni. My understanding was that the interest is possibly tax free from the Feds and your state (some states exempt all muni interest), but the proceeds from sale is taxable. Do zero coupon munis remain exempt from capital gains tax, because all of the difference between your cost and the proceeds (even when called) represents the discount and is therefore considered interest? Thanks for your time.
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