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.
A business method of accounting requiring income to be reported when earned and expenses to be deducted when incurred. However, deductions generally may not be claimed until economic performance has occurred.