Which of the following statements is true?
A) Interest payments paid to U.S. Treasury bondholders are not taxed at the federal level.
B) Interest payments paid to corporate bondholders are not taxed at the federal level.
C) Interest payments paid to corporate bondholders are not taxed at the state level.
D) Interest payments paid to municipal bondholders are not taxed at the federal level, or by the state for which the bond is issued.

Question

Quizplus · Accepted Answer

Interest payments paid to municipal bondholders are generally not taxed at the federal level, and if the bondholder resides in the state where the bond was issued, those payments are often not taxed at the state level either. This makes municipal bonds a tax-advantaged investment, especially for investors in higher tax brackets.

Which of the Following Statements Is True