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Author: Prophet43M One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35365  
Subject: Muni Bond Cap Gain or Loss Date: 7/15/2010 9:34 PM
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I understand corporate bonds well but I'm not particularly familar with the ins and outs of muni bonds.

So...I'm studying and learning muni bonds so that when the pricing become attractive again I can hopefully make some good purchases.

I think I remember it being stated here a few months back that capital gains on muni bonds are taxable (even if the interest is non-taxable). Correct?

If so, would the converse be true? Can muni bond capital losses be used to offset capital gains elsewhere? I ask because in todays market there are tons of even long dated muni bonds selling well above par.

Thanks in advance for your help.
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Author: TMFGalagan Big gold star, 5000 posts CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 31079 of 35365
Subject: Re: Muni Bond Cap Gain or Loss Date: 7/15/2010 10:28 PM
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I think I remember it being stated here a few months back that capital gains on muni bonds are taxable (even if the interest is non-taxable). Correct?

If so, would the converse be true? Can muni bond capital losses be used to offset capital gains elsewhere? I ask because in todays market there are tons of even long dated muni bonds selling well above par.


In general, gains are taxable and losses are deductible. But as with many tax issues, it isn't that simple -- in fact, it can get really complicated. Here's a good description of all the ins and outs:

http://www.investinginbonds.com/learnmore.asp?catid=8&su...

You'll want to look especially at the "Bond Premium" section since the bonds you want to buy are above par.

best,
dan

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Author: jackcrow Big gold star, 5000 posts Feste Award Nominee! Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 31081 of 35365
Subject: Re: Muni Bond Cap Gain or Loss Date: 7/16/2010 3:23 PM
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For my two cents I believe it is more important to pick good muni's then to worry about the tax quirks. I'm not saying those things don't matter only that well prior to the tax issues is buying good assets.

The reason I point this out is that I would rather have my monthly house payment going to savings rather than "benefiting" come tax time from the write off. The first is significantly larger that the later. Or put another way worrying about taxes prior to figuring out how to profit is putting the cart before the horse.

If you have this already figured out then ignore the above.

Researching individual muni's can be a real pain in the tail. They don't report filings like many corporates do. It takes leg work on our part to perform quality DD, simple google searches are not likely to cut it. Revenues matter, a significant shift in the local political landscape can alter prospects. Economic prospects for the area matter. Some communities are very flat through economic ups and downs others swing more radically then national numbers would suggest.

I think Cali compares well to Greece. Neither can print their own money and inflate their way out of their problems. Both are dependent on the generosity or fear of other entities to keep them solvent. Greece seems to have made significant strides in "austerity measures" I can't say the same for Cali. Both are currently capable of making the minimum payment on their debt. Both are one more slip from an ugly spill. How will it all turn out? I don't know.

jack

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Author: blacktreechaser Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 31082 of 35365
Subject: Re: Muni Bond Cap Gain or Loss Date: 7/17/2010 4:06 PM
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yes and yes

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Author: Prophet43M One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 31086 of 35365
Subject: Re: Muni Bond Cap Gain or Loss Date: 7/18/2010 10:00 PM
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Dan:

Many thanks for the hyperlink to the excellent primer on muni bond taxation. I downloaded that article for long term safe keeping.

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