Tax implications of selling Muni bond early

[GenRadPP]

I am thinking of selling a zero coupon tax-exempt municipal bond my grandfather has held in my name for 20 years and wanted to know the tax implications. Inital yield was 5.3%. I can sell them at a premium right now for around $93,000. How do I calculate the adjusted issue price to know what my cost basis is in order to calculate what amount I would have to pay capital gains on?
Thanks in advance!

[VagabondMD]

You would have to know what he paid for the bond when he purchased it. I am assuming that since it is a zero, no interest has been reinvested along the way.

[East coast]

Isn't zero coupon and 5.3% yield an oxymoron? Is there a mechanism for a bond to pay interest and then not (zero coupon) without that being in 'default'?

[jz-]

5.3% tax-exempt. Wow! are you sure you want to sell it?

[East coast]

5.3% tax-exempt. Wow! are you sure you want to sell it?

i suspect OP is probably not totally using the right wording on what the situation is. My guess is that the Zero coupon bond was sold at a discount (which would be the point of a zero coupon bond) of annualized 5.3% - meaning that's what they would get at the end of the duration since it's a zero coupon bond (which would mean no periodic coupon/no interest).

[Random1]

I may be wrong

Long Term Captial Gains = selling price - purchase price - commission

The purchase price is the par value - the discounted value (your interest which in theory was already paid and taxed to you but you did not receive it yet)