California bond income

 
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Bruce's Avatar (by Gravatar)Bruce posted on
May 9, 2007, 3:54 pm
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I have been told that the capital gain income from certain
California bonds is exempt from California state income tax.
(Generally, it is just the interest income that is exempt.)
 
They cite Cal. Gov. Code Sec. 99016 that provides that bonds
issued pursuant to the California Fiscal Recovery Financing
Act are exempt. That code section says that "Any and all
bonds issued by the Authority, their transfer, and the
income therefrom, shall at all times be free from taxation
of every kind by the state."
 
Is this true? Does anyone have any rulings or decisions or
other documentation that supports this position? Thanks.
 
--Bruce

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Dan Lanciani's Avatar (by Gravatar)Dan Lanciani posted on
May 10, 2007, 11:34 pm
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Re: California bond income

bnelson@sptaxlaw.com (Bruce) writes:


Occasionally I get a Massachusetts municipal bond whose
prospectus claims (explicitly--not as "all taxes") that
profit on the sale or other disposition is exempt from state
capital gain tax.  Also, each year my muni bond fund reports
a fraction of its capital gain distributions as (they added
"possibly" in recent years) exempt from state tax.  I
haven't been able to identify a characteristic of the bond
that correlates with the statement in the prospectus and the
fund folks can't tell me where they get the number (though I
never pushed too hard).  The thing that bothers be is that I
typically get a prospectus only when I purchase the bond at
or near issue, so I'm likely missing out on any exemption
from secondary market purchases.  It would be nice to
understand what is going on.
 
Dan Lanciani
ddl@danlan.*com

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