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Federally taxable and AMT exempt?
Q
I recently learned about some California munis that are represented as federally taxable, but AMT exempt. Is this combination possible?
A
James A. Klotz responds:
Taxable municipal bonds have become an important segment of the municipal bond market. These taxable bonds, if issued within the state of California, would be free from California state tax but would be included in the formula used to determine if an individual is subject to the Alternative Minimum Tax (AMT).
To our knowledge, the only way these securities could be AMT exempt is if the taxpayer pays taxes by the conventional method and is not subject to AMT at all.
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