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I have a muni bond newbie question here.

2010 was the first year I bought individual muni bonds. I stepped up the volume of my muni bond purchases after Meredith Whitney created some buying opportunities with her 60 minutes interview.

This afternoon I started entering some of my brokerage data in Turbotax. While entering my 1099INT information for one of my bond brokerage accounts, Turbotax gave me an interesting message which seems incorrect to me.

My 1099INT includes taxable corporate bond and non-taxable muni bond interest (Line 1 - Interest Income/Corp Bond Interest, Line 8 - Tax Exempt Interest/Muni Bonds, Line 9 - Specified Private Activity Bond Interest/a Portion of the Muni Bond Interest on Line 8).

No surprise....all my purchases had accrued interest (both corporate bond and muni bonds). When I proceeded to enter the adjustments, I received the following message.....

"Since you have more than one kind of interest listed on this interest statement, the amount of your adjustment will be prorated between the different types of interest income. If you want this adjustment to apply to only one type of interest income, create a separate 1099-INT for each type of interest income and enter an adjustment for the appropriate type of interest income."

Is this proration method legitimate? If so, that would seem to be the most advantageous approach for me because I bought dramatically more muni bond interest than corporate bond interest in 2010. The Turbotax statement leads me to believe this is an acceptable approach.

Thanks for your thoughts/comments.
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