Municipal Bond Forum
Puerto Rico muni bonds
Q
Why are Puerto Rico’s muni bonds in the secondary market so highly priced? I understand they are tax exempt from federal and any state’s taxes, but will they be subject to estate taxes upon the death of the holder? Isn’t this true for any state muni bond?
A
James A. Klotz responds:
Puerto Rico bonds trade at higher prices for the reason that you state: They are exempt from taxes in every state. This factor creates unusual demand for Puerto Rico bonds, which consequently raises their price.
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