Expert: Doug Ingram - 3/12/2008

Question
Is the acquisition price of municipal bonds the same as their par value?  If I sell 15,00 dollars of municipal bonds , do I have to pay income tax on the sale? How do I determine the tax? How is appreciation determined?

Answer
Bonds can be bought at discounts or premiums depending on prevailing interest rates, so there is no way to guess at what was paid at acquisition.  Many ARE bought at 100 or par.

However, the face amount or par value is what they are worth at maturity.  (However, sometimes bonds are "called" early for a premium - like 101 or 102 cents on the Dollar.)

The questions on tax are better fielded by an accountant.
Interest payments on most munis are not taxable.
Depending on certain factors, some of the income from buying at a discount may also be non-taxable.

Check with a dealer and see if they have matured.  If you inherited the bonds, you would most likely have inherited them at "fair value".  If so, there shouldn't be much additional tax.