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Tax-Exempt Bond
(redirected from Tax-Exempt Bonds)

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Tax-exempt bond
A bond usually issued by municipal, county, or state governments whose interest payments are not subject to federal and, in some cases, state and local income tax.

Tax-Exempt Bond
A bond issued by a local or state government. Municipal bonds are usually used to raise capital for improvements in infrastructure or other aspects of the municipality. For example, a city or school district may issue a tax-exempt bond to build a new school or a new playground. They are called tax-exempt bonds because they are exempt from federal income taxes and sometimes from state and local taxes as well. Tax-exempt bonds usually pay lower coupons than corporate bonds, but because the yield is tax-free, the after-tax basis may be higher for the tax-exempt bond. Risk varies according to the municipality and the particular type of bond.

tax-exempt bond


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Since the interest income from tax-exempt bonds is not taxable, the market price of these Bonds is generally higher than bonds without this tax preference.
The fund, which will acquire newly-issued tax-exempt bonds used to finance the acquisition and rehabilitation of affordable multifamily housing, will also acquire and restructure existing tax-exempt bonds on stabilized properties.
Therefore, IRC [section] 265(b) requires financial institutions to allocate such interest based on their average basis of tax-exempt bonds and other obligations as a proportion of their average basis of all assets.
 
 
 
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