Just found additional guidance for Massachusetts. See the section entitled "Massachusetts Treatment of Interest from Bonds and Obligations" in the mass.gov link below where the following is stated:
"Additionally, Massachusetts gross income doesn't include interest on obligations of the United States to the extent such interest is included in federal gross income. These excluded amounts also are reported on Schedule B, Line 1 and subtracted out on Schedule B, Line 6."
As the Accrued Market Discount is included as federal gross interest income on federal Schedule B, it should be excluded from taxation in Massachusetts. This adjustment can be made by editing the Schedule B "Massachusetts Interest Income Worksheet" and moving amounts from the "Regular Interest" column to the "U.S. Government Interest" column. As discussed elsewhere in this topic, capital gain from the sale of a treasury before maturity should be taxable.
https://www.mass.gov/info-details/learn-about-the-filing-requirements-for-dividends-and-interest
Obligatory Disclaimer: The above is only my opinion and not tax advice
