A tax risk associated with investing in municipal bonds is that a tax-exempt issue may be eventually declared by the Internal Revenue Service to be taxable.

Question

Quizplus · Accepted Answer

Municipal bond investors rely on the tax-exempt status of their investments and if the IRS declares a tax-exempt issue to be taxable, the investor may be subject to unexpected taxes and penalties. This risk highlights the importance of thorough research and due diligence before investing in municipal bonds.

A Tax Risk Associated with Investing in Municipal Bonds Is