Municipal Bond Forum

On Court to Hear Landmark Case on Out-of-state Bonds

Jul 11, 2007

If the Supreme Court rules in favor of the investors, and a state then decides to tax all bonds including its own in-state issued bonds purchased by residents of that same state, how will that effect tax-free interest currently being received from that state’s previously purchased tax-free bonds? Will that state’s previously purchased tax-free bonds then be subject to tax by that state? Will currently tax-free interest then be taxed? Or would the tax go into effect only on bonds/interest purchased after a decision to tax them is announced?

S.G.

On Court to Hear Landmark Case on Out-of-state Bonds cont’d #2:

Jul 11, 2007

Does this mean we would have to pay state income tax on income from municipal bonds that we own from out of state? We live in Florida.

E.S., Florida

Taxes and zeros

Jul 11, 2007

I’ve been reading up on zeros and taxes and such and have a question: With tax-exempt municipal zeros, are taxes due annually as zeros accrete, even though they are tax exempt? There seems to be some differing opinions about this.

T.C., New York

No loss when premium bonds mature

Jul 11, 2007

In your discussion of investment yields on premium bonds, you do not mention the loss in principal from purchase price to par value when the bond is called or matures, i.e. a premium bond purchased for, say, 115.00 today will pay par, 100.00, when called or at maturity. Would this not reduce the overall return and, under certain circumstances, negate the additional yield on the premium bond?

J.G.

Tobacco bonds real winners

Jul 11, 2007

Am I missing something? By purchasing tobacco bonds as an individual investor, you say that I am helping the states, not the tobacco industry. Wouldn’t it be more accurate to say that I am helping the investment banks that bought the stream-of-payments from the states, so that those banks spread their risk of loss to individuals like me? If no individual bought a bond, wouldn’t the investment banks get all the income, but also incur all the risk of default?

K.K., West Virginia

On Stakes are High as Congress Wrestles with AMT Reforms

Jul 11, 2007

I could not derive from your article the impact on municipal bondholders. It almost seems as though the article was written more for those who are substantial wage earners, not bondholders. As one who will not currently buy an AMT bond, is there anything in the proposed legislation that would affect me? It seems that your article comes up a little bit short on what the proposed legislation would do to either those that buy AMT bonds, or those that don’t.

K.G., Washington

On Laddering When Rates are Flat

May 31, 2007

In your laddering article, you wrote: “The fact is, laddering doesn’t work for municipal bonds. A more prudent approach to tax-free investing, whose wisdom has been borne out over time, is to maximize cash flow with every purchase.” Does that mean it’s better to buy higher interest, long-term tax-free bonds at a premium to maximize cash flow? Or is it better to buy lower interest tax-free bonds at par or a discount whose taxable equivalent yield is higher? That is to say, should I go for the bonds paying the highest interest (which are at a premium) or go for the bonds with the highest taxable equivalent yield?

On Lessons in Laddering

May 31, 2007

I read your article on laddering and the example you gave, which stated that if the $100 bond (paying 6%, or $6/100) value dropped to $50, then you could sell the bond for $50 and buy a similar bond paying 6% for $50. However, would this not yield 6% of the $50, or $3 per 100, and so the income would be halved?

M.F., New York

Loss from sale of tax-free bonds

May 31, 2007

I was under the impression that a loss from the sale of tax-free bonds is not deductible for tax purposes.

S.F., Connecticut

AMT outrage

May 31, 2007

Would you explain the criteria for applying Alternative Minimum Tax (AMT) and how it’s applied? Also, now that the IRS requires that you must add tax-free income to your gross and adjusted income and figure taxes both ways, “tax free” isn’t going to be “tax free” and people will no longer buy tax-free bonds. Am I, and millions of others, missing something? No one seems to be concerned – at least few, if any are talking about it – including your own organization! How are state, county, etc. governments planning to fund their tax-free shortfall? Your response would be sincerely appreciated – not only by me, but by the millions of others who also read and admire your balanced commentaries.

D.D.

1-800-367-2663

1-800-367-2663

On Court to Hear Landmark Case on Out-of-state Bonds

On Court to Hear Landmark Case on Out-of-state Bonds cont’d #2:

Taxes and zeros

No loss when premium bonds mature

Tobacco bonds real winners

On Stakes are High as Congress Wrestles with AMT Reforms

On Laddering When Rates are Flat

On Lessons in Laddering

Loss from sale of tax-free bonds

AMT outrage

Start here.