Does the tax basis of a municipal bond include accrued interest?

If you take a deduction for a bond premium, you must reduce the basis of the bond by this amount. If you sell the bond before maturity, you’ll have a capital gain if the selling price exceeds your bond’s basis. However, if you hold the bond to maturity, then the entire bond premium will have been amortized so that you have neither a gain nor loss on the redemption of the bond.