Swap muni bonds in time to salvage tax benefits in 2011 — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily
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Swap muni bonds in time to salvage tax benefits in 2011

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in Small Business Tax,Small Business Tax Deduction Strategies

As the year draws to a close, you can still salvage tax benefits if you own underperforming municipal bonds (“munis”).

Strategy: Exchange the munis for other munis in the secondary market. Then you can use the loss from the swap to offset capital gain income (plus up to $3,000 of ordinary income). If you handle things right, you could walk away with a higher-yielding bond.

Although corporate bonds may also be swapped in this manner, the marketplace for municipals is usually more active.

Here’s the whole story: A bond swap is actually a simultaneous sale and acquisition. This means you sell a bond that’s showing a paper loss and, at the same time, buy a different bond with similar investment characteristics (e.g., the same face value). When the swap is complete, you’re essentially in the same investment position as before the swap, except now you’re showing a current tax loss. Icing on the cake: The bond acquired in the swap ...(register to read more)

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