Question

How is interest received from a state or local qualified private activity bond treated for AMT purposes

Answer 1

=> AMT is a separate tax computation under the Internal Revenue Code that, in effect, eliminates many deductions and credits and creates a tax liability for an individual who would otherwise pay little or no tax. In recent years, more and more people have found themselves subject to the AMT.

** “Private Activity” municipal bonds apart from all other capital market securities is that the interest earned on them is exempt from federal income taxes. Also called “tax exempts” the interest on bonds issued in one state is also usually exempt from that state's income taxes, and in some cases from local income taxes.

**  municipal bonds are subject to the federal alternative minimum tax. In 1986, the Tax Reform Act required that interest on private activity bonds (other than 501(c)(3) obligations) issued after August 7, 1986 be included in the calculation of AMT income for federal tax purposes.

This is How is interest received from a state or local qualified private activity bond treated for AMT purposes ** Determining if an individual bond is subject to AMT is fairly simple, and there are several places to find this information. When you purchase a bond, a confirmation is sent to you, which includes many identifying details about the security, including the name, maturity and whether the income is subject to the AMT. If the bond was purchased in the primary market, an official statement was sent to you. The front cover of the official statement will tell you if the bond is subject to the AMT. If you maintain an account at a securities firm, you should be able to find out that information from your account representative. If you know the CUSIP number, you can also access the AMT information