Thanks TaxLady. That makes sense and TT is doing that for my Federal return. However, when TT prepares my NJ state return (based on information in the Federal return), the accrued market discount is not being included in the "Taxable Interest Income"line and the accrued market discount is still being subtracted from my Schedule B gain on sale line. So, it seems like I'm under-reporting taxable income for my NJ state return. It seems like this is a TT error!
Thanks,
Robert
