Series 50: OID Municipal Bonds

Taken from our Series 50 Online Guide

OID Municipal Bonds

Original issue discount municipals, however, are not subject to federal income tax. The bondholder will pay no taxes on the accreted value of her investment, as she would if she held a corporate bond. If the investor holds the bond until it matures, she will have no capital gains to report. If the investor sells the bond in the secondary market at above the accreted value, however, she will be subject to a tax on her capital gains.

Example Question

Sophie sells her 20-year municipal bond for $700, whi

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