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.
Gifts in excess of an $12,000-per-donee annual exclusion are subject to gift tax, but the tax may be offset by a gift tax credit.