Tax Rules

Question 1

Muni Bonds

Answer 1

non-taxable (federally, sometimes state and locally non tax)
considered interest income
MUST amortize
if held to maturity, there is no cap gain/loss since it is amortized

Question 2

OID (zero coupon)

Answer 2

MUST accrete, taxed annually at normal income rate, sold at a discount, not taxed federally if municipal

Question 3

corporate bonds

Answer 3

federal and local tax, can accrete/amortize
-if held to maturity, cost basis is increased/decreased by accretion/amortization. cost basis is reduced to par value

Question 4

treasury bonds

Answer 4

federally taxed, can accrete

Question 5

Qualified dividends

Answer 5

held more than 60 days, unhedged
-max tax rate of 20%

Question 6

REIT dividends

Answer 6

taxed as ordinary income since REIT doesn’t pay corporate income tax if 90% of income is distributed

Question 7

dividends earned by a corporation owning 25% of the outstanding shares of the distributing corporation

Answer 7

exempt from taxes on 65% of dividends, only taxed on 35% of dividends

Question 8

When inheriting an annuity after the owner dies, what gets taxed?

Answer 8

Any gains are taxed