Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Income Taxes and Record Keeping ( tax ) -- Ignore unavailable to you. Want to Upgrade?

To: Brendan W who wrote (2334)	10/18/1999 11:58:00 PM
From: Colin Cody	Read Replies (1) \| Respond to of 5810

Brendan, For the State that issued the Bond the loss may not be fully deductible, check with your State Tax dept. On the Federal form 1040, Sch D it likely IS recognized for tax purposes. Lots of special rules: zero coupon bonds, for one example. See your broker for details on your particular bonds. Colin

To: Brendan W who wrote (2334)	10/20/1999 1:16:00 PM
From: Kaye Thomas	Read Replies (1) \| Respond to of 5810

I'm thinking Colin may not have noticed that you were asking about a bond fund, rather than a bond. The general answer is still the same: the loss is deductible. There is a special rule that makes the loss partly or completely nondeductible if (1) you held your mutual fund shares less than six months, and (2) you received a tax-free dividend from the fund during that time. The point of this rule is to prevent an easy tax arbitrage by purchasing exempt bond funds just before the pay exempt dividends and selling them at a loss immediately afterward, when the loss really reflects nothing more than the decline in value that results from the dividend payout. There's a guide to mutual fund taxation on my web site, and in that guide a page describing this rule. Kaye Thomas, author Fairmark Press Tax Guide for Investors fairmark.com