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pls confirm accrued interest was "NOT included on any 1099-Int as interest income." which does not make sense to me ... if you purchased the bond on 1/28/25 and sold it on 11/17/25 there must have been two coupon payments in that time reported to you on 1099-INT which would have included the accrued interest you paid when you bought it which is not taxable to you.   So on your 1099-INT you should have something in Box 3 for this bond.  After the 1099-INT input boxes on the interview you would check the box that you need to make an adjustment, and enter the 349.62 (positive) as an accrued interest adjustment.  This 349.62 will be reflected as a negative "Accrued Interest" adjustment on your Schedule B.   Issue #1 - if this 1099-INT has other boxes (1 or 8 ) then you need to split up the 1099-INT and enter the Treasury boxes (3 & 12) separately, otherwise Turbotax will pro rata the accrued interest adjustment across all the boxes with income which may affect your Fed or State taxes.   For the 1099-B enter the boxes as provided, it's easier to enter these sales as "one by one" in Turbotax not as a sales summary as the AMD adjustment is easier to follow, and it avoids providing further details to the IRS (if you have other sales without wash sale or AMD adjustments you can split the 1099-B and enter the rest without adjustments as a simple sales summary).  Your cost basis on the principal was 73,842.75 this is correct, it should not include the $349.62 accrued interest.  If you have AMD = Gain/Loss = Purchase Discount = 1157.25 to be the same I think it would have matured rather than you sold it.   Turbotax will enter the sale onto Form 8949 with an adjustment which will zero out the gain/loss on Form 8949 and Schedule D, and transfer the AMD as ordinary income to Schedule B (AMD is taxed as ordinary income to the extent of the gain/loss - see IRS Pub 550).  You will see it as a line item on Schedule B with the description and "Accrued Market Discount".   Issue #2 - if you have state tax, the net amount of your 1099-INT Box 3 less Box 12 less accrued interest adjustments will be state tax exempt (along with any US Gov Obligations amount entered with your 1099-DIVs) - cross check the subtractions from income on your state tax return.  However AMD from Treasury Notes is not automatically transferred to your state return as exempt, there are various interpretations and ambiguities state by state whether it is exempt or not.  If you think it is exempt for your state you will need to adjust for it manually.