Final answer:
Treasury notes and Treasury bonds are subject to federal income tax, while the treatment for state income tax varies depending on the state.
Step-by-step explanation:
Treasury notes and Treasury bonds are treated differently for federal and state income tax purposes.
In terms of federal income tax, the interest earned on both Treasury notes and Treasury bonds is subject to federal income tax. The interest income is reported on the individual's federal tax return and is taxed at the individual's applicable tax rate.
For state income tax purposes, the treatment may vary depending on the state. Some states exempt the interest earned on Treasury notes and Treasury bonds from state income tax, while others may tax the interest income. It is important for individuals to consult the specific tax laws and regulations of their state to determine the treatment of Treasury notes and Treasury bonds for state income tax purposes.