If I sell a US treasury bill prior to its maturity, does this trigger a capital gain that is taxable at both the federal and state level? I know that if the t-bill is held until maturity, and redeemed for its face value, the gain would be treated as interest that is free from state/local taxes. Does selling the t-bill prior to its maturity result in my forfeiting the exemption from state/local taxes on any gains?
TurboTax appears to only be adjusting my income/taxes for income earned on treasury bills if they were held fully until maturity. On any treasury bills sold prior to maturity that resulted in gains, TurboTax appears to be treating these as regular capital gains that are taxed at both federal/state levels.
