There is a special circumstance where a capital gain can arise: when the sale of thestrip bond is at a price that exceeds the initial investment cost plus accrued interest todate. that excess amount would be taxed as a capital gain. but for the most part, stripbonds are considered taxable as regular income.to add to this, if you buy a strip bond in year 1 and then sell it in year 3, the higherprice you receive from a buyer should be approximately equivalent to the accrued gainon the bond to date. since this gain is considered to be interest income and taxed assuch (unless the special circumstance mentioned above arises), then the incomeconsidered interest income would be taxed at your regular income tax rate.
