A certain investor buys a a Municipal bond for $10,000. He then collects $3000 of tax free interest from the bond and after some time sells the bond for $8000. Does he have a capital loss for tax purposes? and if so, how much?

Note: The investor lives in the United States and is a citizen of the United States.



The investor has $2000 capital loss. The dividends were recognized as income already, and as such are not affecting the basis. They're just not taxed.

  • It's tax-free "Interest" income, not "dividend" income.
    – michael
    Jan 14 '16 at 14:16
  • @michael same thing.
    – littleadv
    Jan 14 '16 at 22:04
  • If you believe them to be the same thing, pls explain.
    – michael
    Jan 15 '16 at 23:40
  • @michael it doesn't matter in this context. Depending on the type of the investment it is either dividends or interest, but it is entirely irrelevant.
    – littleadv
    Jan 16 '16 at 3:17
  • @litleadv... got it... "context is everything"
    – michael
    Jan 17 '16 at 14:08

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.