That's actually what I'm (and many others) are asking. IS it exempt for state taxes? If its treated like interest, then it should be. If it's not interest, then why is it transferred to Part I of Schedule B, with all the other interest? I've also got a call in to Charles Schwab asking how to identify US Treasuries that are going to produce an Accrued Market Discount so I can make sure this never happens again.
Thanks for your posts, hopefully we can zero in on solution.
