Tax Facts

7666 / Is premium paid on call of a tax-exempt bond before maturity tax-exempt interest?

Updated: October 20, 2026 at 03:00 PM
No, it is a capital payment taxable as capital gain.1 See Q 7663 if the bond was originally issued at a discount. For the treatment of capital gains and losses, see Q 702.




1.   Rev. Rul. 72-587, 1972-2 CB 74; GCM 39309 (11-28-84); see also Rev. Rul. 74-172, 1974-1 CB 178; District Bond Co. v. Comm., 1 TC 837 (1943); Bryant v. Comm., 2 TC 789 (1943), acq. 1944 CB 4.


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