Puerto Rico bondas -- tax-free?

Interest on obligations issued by the Commonwealth of Puerto Rico is exempt for both federal and California income tax purposes. Note that for California corporate franchise tax purposes, there is no exempt interest income. Katie in San Diego

They are triple tax-exempt (Federal, any US State & Local).

Thanks. (Thank you Katie also.)

The Puerto Rico Conservation Trust is a private non-profit organization, created by acts of Congress and by the Commonwealth. I also believe the bonds are tax-exempt, but if there's a cite for this I'd be happier. Steve

I don't have a cite, but there are a bunch of closed end funds called the Puerto Rico Fixed Income Fund, Inc. I, II, III etc. Take a look at the annual report for fund III. It lists the holdings and identifies which of the PR holdings are tax-exempt. The trust bonds are listed as tax-exempt.

Ah. So would I.

The exemption is for bonds issued by the Government of Puerto Rico. These bonds may not qualify. It has to be an obligation of the Puerto Rican government, IOW, backed by the "full faith and credit" of the government. See IRC Sec.

103(c)(1) and (2). I think you will have to look a little deeper. If the bonds are not a direct obligation of the PR government, but are guaranteed by the PR or US federal government, I believe the interest would not be exempt (similar to FNMAs or GNMAs for state income tax purposes). I think you need to look at the terms of the bonds themselves, and maybe also the legislation authorizing their issuance. Katie in San Diego

These are in no way guaranteed by anyone, except by an outfit called Doral Financial Group whose stock is in serious decline. I observed the same thing A. G. Kalman did -- that the bonds are included in many "tax free" mutual funds. In one such fund they are called "exempt". Also one bond trader at Schwab mumbled something about "these are tax free". On the other hand, they are traded on the NASD bond system and not the municipal bond system.

Yes, I have been looking for such data without results so far. I also may have more of a clue in Januaray when I get the 1099. Thanks again. Steve