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Thanks for the correction. I've only gotten rid of one muni so far, and did that in an asset swap with a family member. I'm working from memory here, but I thought my accountant handled it as, if memory served, a capital loss, since we got cash that was somewhat less than our cost basis for the bond, held onto our accrued interest, and booked the transaction as a loss against the best estimates we could present on market value at the time of the trade.

Then again, since I stopped doing my own taxes a few years ago, I haven't always examined every single line or questioned his way of doing things and I don't follow tax code changes very closely at all, except when changes come up due to new twists in our personal/professional finances and I'm asking him how to best keep the necessary records.

I'll definitely have to talk to him about this, as it appears I was working under a misconception, and did buy the lonely little muni in my port at a slight premium to par, though frankly I bought it *mainly* because the tax-equivalent yield was attractive (about 8.8% counting presumed Federal and NJ rates).
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