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When dealing with a direct quote that is a complete sentence, you must capitalize the first letter, no matter where the quotation is placed inside the sentence:
Ricardo noted, "If it rains today, then tennis practice is cancelled."
Notice that before the quoted material I set up a framework--I provided background/contextual information. Next, I offset my framework from the quote with a comma, although I could also use a colon. If I want to begin my sentence with the same quotation to add variety to my writing, then my punctuation and capitalization still stay the same:
"If it rains today, then tennis practice is cancelled." Ricardo noted.
Now for the fun stuff! If I wanted to only quote a word or a dependent clause (aka a fragment), then I could also do it several ways:
The term O.K. was originally a facetious spelling of the phrase "oll korrect."
No capitalization needed there! Now, if I want to start my sentence with the same quotation--which is not a complete sentence and not capitalized originally--I must capitalize:
"Oll korrect" is a facetious phrase from which the term O.K. is derived.
Whenever beginning a sentence, even if it is with a piece of quoted material, always use a capital letter as a courtesy to your readers so that they know you're beginning a new thought.
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