Use this button to switch between dark and light mode.

A Rose by Any other Color. Municipal Bond Interest Can Be Taxable

May 14, 2024 (3 min read)

Under IRC § 103(b)(2), interest which would otherwise be excluded from gross income under IRC § 103(a) is instead subject to federal income taxation if the obligation is classified as an arbitrage bond. Arbitrage bonds are one of several exceptions to the federal income tax exemption for interest on obligations issued by governmental entities. These bonds are obligations that are reasonably expected to be used to acquire obligations that yield "materially higher" returns than the original obligation during the original obligation's term of issue. 

Read now »

Related Content

  • Municipal Bond Purchasing Agreement Drafting
    Learn the requirements and best practices for drafting municipal bond purchase agreements. The bond purchase agreement provides the terms and conditions under which an underwriting syndicate purchase bonds from an issuer for resale to the public.

Practical Guidance Updates 
Featuring the latest updates from your Practical Guidance account.   

  •  Tax Key Legal Developments Tracker (Federal)—keep up to date with key legal developments!
    • Business Entities. IRS provides additional guidance to clarify and amplify the procedures for the allocation of credits under IRC § 48C pursuant to the qualifying advanced energy project credit program under IRC § 48C(e)and announces the 2024 allocation round of the IRC § 48C(e) program (Round 2). Notice 2024-36.
    • Business Entities. IRS and Treasury propose regulations providing guidance on reporting and paying the new excise tax on repurchases of corporate stock made after December 31, 2022, that would impact certain publicly traded corporations that repurchase their shares or whose shares are acquired by specified affiliates. 89 Fed. Reg. 25829 (Apr. 12, 2024).
    • Business Entities. IRS provides a limited waiver of the addition to tax under IRC § 6655for underpaying estimated corporate income tax to the extent any underpayment is attributable to a portion of a corporation's corporate alternative minimum tax (CAMT) liability. IRS Notice 2024-33.
  • Document alerts allow you to stay current on legal developments that affect your practice. Find out how to set up your document alerts.
  • For related Practical Guidance content on important recent trends, please review these easy-to-use Resource Kits on a variety of emerging topics:
  • Explore the Practical Guidance Journal Spring 2024 Edition, featuring guidance on protecting attorney-client privilege and work product in a generative AI world, using AI to manage the attorney client relationship, an overview of privacy regulations in the United States, and a primer on the new Corporate Transparency Act requirements.
  • Learn about the 2000+ leading attorney authors contributing to our 26 practice areas in the Practical Guidance Author Center. Interested in becoming a Practical Guidance author? Click here for details. Practical Guidance is committed to amplifying diverse voices of attorneys across all differences, including gender and race.  
  • Legal Developments provide the latest updates and analyses of emerging topics impacting your practice area. Visit the Legal Developments page to see the latest topics, which also include breaking legal news and related Practical Guidance content. 

PRACTICAL GUIDANCE CUSTOMER EMAIL EDITION ON THE WEB

Experience results today with practical guidance, legal research, and data-driven insights—all in one place.

Experience Lexis+

Tags: