Tax-exempt bond question? ? ?


R

Ray Jenkins

This is a dumb question, but I must ask it anyhow:

If I sell a tax-exempt bond fund at a gain, will the gain be
taxable as it would with any other gain?

Or would the gain be tax-exempt also?

I'm guessing the gain will be reportable, but would prefer
to have a more expert opinion than my guess.
 
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P

Paul A. Thomas

Ray Jenkins said:
This is a dumb question, but I must ask it anyhow:

If I sell a tax-exempt bond fund at a gain, will the
gain be taxable as it would with any other gain?
Yes.

Or would the gain be tax-exempt also?
Only the income (interest) is tax exempt,
 
B

Bill

Ray Jenkins posted:
This is a dumb question, but I must ask it anyhow:

If I sell a tax-exempt bond fund at a gain, will the
gain be taxable as it would with any other gain?
Or would the gain be tax-exempt also?
I'm guessing the gain will be reportable, but
would prefer to have a more expert opinion
than my guess.
As the old saying goes, there are no dumb questions -- or,
only the dumb ask no questions.

And the answer is: Reportable and Taxable.

Your sale of a bond is a reportable event -- regardless of
whether the bond is tax-exempt or taxable [which
characterization flows from the treatment of interest
payments derived therefrom] -- so you should receive a 1099
from the broker through which you executed the trade.

Use Schedule D, and fill in the blanks. You should always
keep purchase records on all investments -- whether taxable
or tax-exempt -- so you will have information available to
complete the Schedule D.

Bill
 
R

Rich Carreiro

Ray Jenkins said:
This is a dumb question, but I must ask it anyhow:

If I sell a tax-exempt bond fund at a gain, will the gain be
taxable as it would with any other gain?
Absolutely.

Or would the gain be tax-exempt also?
Nope.

The only thing tax-exempt from a tax-exempt bond
is the interest it throws off.
 
B

BMS

Ray Jenkins said:
This is a dumb question, but I must ask it anyhow:

If I sell a tax-exempt bond fund at a gain, will the gain be
taxable as it would with any other gain?

Or would the gain be tax-exempt also?

I'm guessing the gain will be reportable, but would prefer
to have a more expert opinion than my guess.
Only the interest is tax exempt, the capital gain is taxable.
 
D

Don Rosenberg, E.A.

Ray Jenkins said:
This is a dumb question, but I must ask it anyhow:

If I sell a tax-exempt bond fund at a gain, will the gain be
taxable as it would with any other gain?

Or would the gain be tax-exempt also?

I'm guessing the gain will be reportable, but would prefer
to have a more expert opinion than my guess.
Your guess is correct. Only the earnings on the bond are
tax exempt.

Don Rosenberg, EA
 
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A

Arthur Kamlet

Ray Jenkins said:
This is a dumb question, but I must ask it anyhow:

If I sell a tax-exempt bond fund at a gain, will the gain be
taxable as it would with any other gain?

Or would the gain be tax-exempt also?

I'm guessing the gain will be reportable, but would prefer
to have a more expert opinion than my guess.
Good guess.

The tax exempt interest is reportable on Line 8b, even if
the fund calls it a dividend.

The sale is also reportable and can result in a capital gain
or loss.

__
Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH
 
J

Joel Berry, CPA

Ray Jenkins said:
This is a dumb question, but I must ask it anyhow:

If I sell a tax-exempt bond fund at a gain, will the gain be
taxable as it would with any other gain?

Or would the gain be tax-exempt also?

I'm guessing the gain will be reportable, but would prefer
to have a more expert opinion than my guess.
Your guess is correct. The gain is reportable and taxable
as capital gain, either log-term or short-term.

Joel Berry, CPA
Sugar Land, Texas
 
S

Shagnasty

Ray Jenkins said:
This is a dumb question, but I must ask it anyhow:

If I sell a tax-exempt bond fund at a gain, will the gain be
taxable as it would with any other gain?

Or would the gain be tax-exempt also?

I'm guessing the gain will be reportable, but would prefer
to have a more expert opinion than my guess.
It would be a capital gain. Only the interest is tax
exempt--not gains from sales. Capital losses are
deductible also on tax exempt bonds.
 
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J

Jay

In reply to:
... Capital losses are
deductible also on tax exempt bonds.
But be alert if you buy a tax-exempt bond at a premium and
either (a) sell it at a loss or (b) hold it until it matures
or is called.

The "loss" for tax purposes probably isn't what you think it
is, because the basis gets reduced below the purchase price.

For details, see the section in IRS Publication 550 on "Bond
Premium Amortization."

(I realize that the original question was about a bond fund,
not an individual bond, but the response appeared to cover
individual bonds, too.)
 

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