Which one of the following statements concerning the tax treatment of municipal bonds is correct?
A) The interest income on municipal bonds is subject to federal income tax.
B) The capital gain realized on the sale of a municipal bond is tax-free income.
C) Interest income on a municipal bond is usually exempt from state and local income taxes if the bond is issued by the state or locality in which the investor resides.
D) Municipal bonds receive no special income tax treatment.

Question

Quizplus · Accepted Answer

Interest income on municipal bonds is often exempt from state and local income taxes if the bonds are issued within the state or locality where the investor resides. This makes them attractive to investors in high-tax states or localities.

Which One of the Following Statements Concerning the Tax Treatment