Tax Facts

7667 / Is interest on a tax-exempt municipal bond paid by a private insurer because of default by the state or political subdivision tax-exempt?

Yes, interest that would have been tax-exempt if paid by the issuer will be tax-exempt if paid by a private insurer on the issuer’s default.1 It makes no difference whether the issuer or the underwriter pays the premium on insurance obtained by the issuer covering payment of the principal and interest or whether the individual investors obt...

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