[[I bought $50000 of muncipal bonds nine years ago for a price of 104 per bond. They were called-in in November at par or 100. Although I have received tax free interest on these bonds that exceeds the difference between purchase price and sale price, can I still deduct a $4.00 loss per bond on the sale of these bonds?]]What REALLY happened is that you bot the bonds at a PREMIUM. This bond premium can be delt with in one of two ways:1. You can amortize the bond premium, and reduce the current income of the bond by a portion of the premium each year (not a good idea for tax free muni bonds); or2. You can elect NOT to amortize the premium and potentially take a capital loss deduction when the bonds are sold, cancelled, or mature. In your case, (since I assume that you didn't amortize the premium), you are allowed to claim a capital loss on Schedule D for the permium that you initially paid.TMF TaxesRoySPECIAL NOTE: Remember that this response is not the "last word" on your situation. It is really only a starting point. Make sure to review the "Read This First" post(http://www.fool.com/School/Taxes/TaxesDisclaimer.htm) for additional information. In addition, many of your questions may already be referenced in the Taxes Frequently Asked Questions area. In order to visit the Taxes FAQ area, go to the Fool's School area (http://www.fool.com/school.htm) and check out "Other Features" in the list box, OR you can jump directly to the Taxes FAQ area (http://www.fool.com/school/taxes/taxes.htm). Additionally, if any references were made to the IRS Web Site, you can get there by pointing your web browser to (http://www.irs.ustreas.gov).
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