CFA Practice Question

There are 490 practice questions for this study session.

CFA Practice Question

Which type of bond is exempt from federal income tax?

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
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