Re: IRS Inquisition
The posts on this thread seem to have gone way off topic. It started out with a news story about the IRS investigating the bond practices and questioning whether they are indeed 'tax-free municipal bonds.' Why 'inquisition,' though, just because the IRS is doing what the IRS does? But now the thread seems to have boiled down to bickering and 'personalities before principles.'
Villages07 is correct in explaining how municipal bonds work, followed by Niels' summary. We homeowners are not the bondholders (i.e., investors) that potentially can lose the plus of tax-exempt interest on the bonds; it is those individuals who invested in these bonds via the municipal bond market. And if the IRS does determine that the interest on these bonds should be taxable, then indeed the bonds will cost more because the interest rate will be less attractive.
It will then be up to the bond market to find its own level, which will not affect current homeowners. Future homeowners will have to decide for themselves how much they are willing to spend on their homes which, at least for all new construction, will include a more costly bond.
Nothing personal here; it's all business.
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