SIE Exam Question 596: Answer and Explanation

Question: 596

Which of the following is correct regarding the taxation of TIPS?

• A. TIPS are taxed at the federal level only.
• B. TIPS are taxed at the state level only.
• C. TIPS are taxed at the state and federal level.
• D. TIPS are tax-free at both the state and federal level.

Correct Answer: A

Explanation:

TIPS (Treasury inflation-protected securities) are taxed at the federal level only.