While the interest on municipal bonds is tax free, this doesn’t mean gain or loss on the sale of bonds is excludable from gross income. Gain or loss on the sale of municipal bonds is figured in the same way as for any other asset. What’s more, municipal bonds are includible in a decedent’s gross estate for estate tax purposes.
Test for determining deductibility of IRA deductions. Active participants in employer retirement plans are subject to IRA deduction phase-out rules if adjusted gross income exceeds certain threshold.