- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 2. Fixed-Income Cash Flows and Types
- Subject 3. Legal, Regulatory and Tax Considerations
CFA Practice Question
Which type of bond is exempt from federal income tax?
II. City general obligation bonds
III. State revenue bonds
I. Municipal bonds
II. City general obligation bonds
III. State revenue bonds
Correct Answer: I, II and III
"Tax-exempt" means that interest income is exempt from federal income taxation. Capital gains are still subject to federal income taxation.
User Contributed Comments 7
| User | Comment |
|---|---|
| Gina | with respect to interest; but still subject to federal income tax on capital gains. |
| katybo | I thought they were "generally" exempt not always. |
| Done | Captial gains tax is not federal income tax |
| steved333 | Done is right, although, as the tax code stands today, if those gains are earned in a year or less, cap gains tax is at your marginal bracket. 366+ days= 15%, just like dividends... |
| joywind | So taxable municipal bonds which is subject to federal income tax is not part of municipal bonds? |
| jonan203 | typically, if you buy a bond from the state you live in, they will be triple tax free (federal, state & local) however, if a CA resident purchased a CT muni, he'd have to pay CA income taxes on the interest he receives from the CT muni. |
| dbedford | One form of govt can't tax another |