SIE Exam Question 21: Answer and Explanation

Question: 21

What is the tax advantage of owning municipal bonds?

• A. No federal taxes
• B. No state taxes regardless of your state of residence
• C. No state taxes if the municipality is in your state of residence
• D. Both A and C

Correct Answer: D

Explanation:

The tax advantage of owning municipal bonds is that they are not subject to federal taxes and also avoid state taxes if the municipality is in the investor's state of residence.