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Has anybody seen a BIE like this before?
I agree with the others that this is damage. We very often see this sort of letter flattening/movement on cents from the 1950s and often attribute it to damage from the coin mechanism on bubblegum machines. However, every one of these that I can recall affected either the L of LIBERTY or else the last digit of the date. I don't recall seeing a letter further from the rim having this same sort of damage though. Just damage, but interesting nonetheless.
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