SIE Exam Question 353: Answer and Explanation

Question: 353

What tax benefit do municipal bonds offer to individual U.S. investors?

• A. Investment tax credits
• B. Low tax rates on capital gains
• C. Avoidance of Alternative Minimum Tax
• D. Tax-exempt interest

Correct Answer: D

Explanation:

D - Interest income received by holders of municipal bonds is generally exempt from federal income tax and from state and local income taxes for residents of the state in which debt is issued.