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62 votes
Accepted

Opportunity to buy Illinois bonds that can never default?

"Can't declare bankruptcy" isn't the same as "can't default". Bankruptcy is a specific legal process for discharging or restructuring debts. If Illinois can't declare bankruptcy, that means it will ...
Nate Eldredge's user avatar
36 votes

Opportunity to buy Illinois bonds that can never default?

If Illinois cannot go bankruptcy This is missing a few, very important words, "...under current law." The United States changed the law so as to allow Puerto Rico to go into a form of bankruptcy. ...
Brythan's user avatar
  • 21k
19 votes
Accepted

Yield on municipal bonds versus treasury

In a lot of situations municipal bond returns are "triple tax free." No federal or state income tax and no AMT (Alternative Minimum Tax -- which is largely irrelevant at this point) liability. This ...
quid's user avatar
  • 49k
14 votes

Opportunity to buy Illinois bonds that can never default?

If you give money to a person or entity, and they don't have the ability to pay you back, it doesn't matter if they are legally required to pay you.
Peter's user avatar
  • 2,113
11 votes

Opportunity to buy Illinois bonds that can never default?

Sovereign immunity is the state's ultimate "get out of bankruptcy free" card. After all, the state has a hand in defining what bankruptcy even is in their state. Federal law is a framework, states ...
Harper - Reinstate Monica's user avatar
5 votes

Are there any downside in investing in a municipal money fund instead of purchasing municipal bonds assuming the money fund's yield > muni bond yield?

The 7-day yield of the fund is likely a taxable yield, whereas the 2.81% of the bond you highlighted is probably tax free, giving you a tax-equivalent yield of 3.75% (assuming a 25% tax rate). Either ...
0xFEE1DEAD's user avatar
  • 8,498
4 votes

For someone who already has enough cash to buy a home, isn't it better to wait and take mortgage when interest rates are high?

No. The hole in the plan is that not only is there some small risk in bonds (Orange County 1994?), but also bond issuers can and do refinance just like mortgage holders can when interest rates drop. ...
Rupert Morrish's user avatar
4 votes

If a US tax resident buys some shares in a municipal money fund and sells them shortly after, do they incur any taxes?

In the US, taxes are usually on income, property or sale of goods or services. There are no taxes on transactions. So no, selling them doesn't incur any taxes. . . . Recognizing income does. PS: ...
littleadv's user avatar
  • 177k
3 votes

For someone who already has enough cash to buy a home, isn't it better to wait and take mortgage when interest rates are high?

Anything else that I may be missing? I can't speak to municipal bond arbitrage, but this piece caught my eye: outgoing interest payments from mortgage pre-tax would be $10,000. Since mortgage is ...
Hart CO's user avatar
  • 70.5k
3 votes
Accepted

What happens when I buy Continuously-Callable bonds

The state of Illinois will likely call the bond if interest rates go down and they can sell a bond for, for example, 4 1/2% and use the proceeds to call or retire your bond. This has the benefit of ...
chili555's user avatar
  • 1,667
3 votes

How can one compare the yield of a municipal money fund with the yield of a municipal bond?

You can't directly compare fund yields to bond yields because they don't measure the same things. Fund yield measures the average interest income paid over the last 7 days. In your example it was 3.04%...
littleadv's user avatar
  • 177k
3 votes
Accepted

What's the benefit of buying municipal bonds on the secondary market?

Yes, capital gains from the sale or redemption of municipal bonds is taxable; it's just the interest that is tax-free. Even then it's typically only state-tax-free in your own state. States often ...
D Stanley's user avatar
  • 137k
3 votes
Accepted

Why is YTW (Yield-to-Worst) not available for some callable bonds?

FWIW, Fidelity shows a YTW that's identical to the YTM. It also doesn't show a call schedule/dates, other than "extraordinary redemption", so there's no YTW to be calculated. Looking at the ...
0xFEE1DEAD's user avatar
  • 8,498
2 votes

Why is YTW (Yield-to-Worst) not available for some callable bonds?

As usual, my first advice to you is to buy a dictionary. Most, if not all of your questions, stem from just not understanding the terms. Here's the basics on callable bonds. The bond can be called ...
littleadv's user avatar
  • 177k
2 votes

Tax Free Zero Coupon Bonds and Taxes

A zero-coupon bond does not accrue, or pay, interest. Muni bond exemption only applies to interest, so if there is no interest there is no exemption. Are you perhaps thinking of Original Issue ...
dave_thompson_085's user avatar
2 votes
Accepted

Zero Coupon Tax Free Bonds

Zero-coupon bonds that have a maturity date more than a year later are assumed to have earned interest anyway, and this imputed interest must be declared annually if the bond is held in a non-tax-...
Dilip Sarwate's user avatar
2 votes

Mutual Fund or Municipal Bond

I am not sure which one is a good investment like state or federal bonds? They're both safe. Is it worth to Invest now? If for the long term, then yes, putting a portion (say 20%) of your ...
RonJohn's user avatar
  • 50.7k
1 vote

Does the CUSIP on a bond ever change?

I spoke to the broker about this issue and he says that the CUSIP changes when the bond is called and the bond was called.
Bob's user avatar
  • 1,673
1 vote

Calculating the cost basis on a tax free Zero Coupon Bond

Yield to maturity is a derived value based on price, and vice versa. In calculating calculating capital gain for tax purposes, your cost basis is 50 (50 cents on the dollar), your exit price is 80 (80 ...
Thomas Boyd's user avatar
1 vote
Accepted

Do dividends from securities held on margin lose their tax advantage?

If you buy a stock, you are entitled to the dividend whether you bought it for cash or you bought it on margin. You're the owner. There is no loss of tax advantage. The IRS is not notified if you ...
Bob Baerker's user avatar
  • 76.7k
1 vote
Accepted

municipal bond shares the same across different states and funds

Municipal bonds have relatively low risk of default, since they are often backed by tax revenue or revenue from specific projects (e.g. a toll road), so their yield is usually similar regardless of ...
D Stanley's user avatar
  • 137k
1 vote

What is the actual growth of investment for a municipal bond fund?

If an investor sells a fund for a higher price than the purchase price, the sale may result capital gains taxes. The graph excludes this effect. Instead it assumes the investment is purchased and ...
Charles Fox's user avatar
  • 2,779
1 vote

Are Muni REVENUE bonds secured or can the local gov. use the revenues for other purposes not paying the bond holders if its going bankrupt?

From Wikipedia: A revenue bond is a special type of municipal bond distinguished by its guarantee of repayment solely from revenues generated by a specified revenue-generating entity associated ...
D Stanley's user avatar
  • 137k
1 vote

Amending a Tax Return

There is no line on the 1040X for changing 8b because it isn't taxed directly. It's tax free. The only thing it is used for is determining the taxability of social security benefits. Rework the ...
farnsy's user avatar
  • 15.1k

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