Series 7 practice questionmediumTax Implications — AMT
Which of the following municipal bond types would NOT create an AMT preference item?
- AIndustrial development revenue bonds
- BGeneral obligation bonds issued to build a public school✓ Correct answer
- CPrivate activity bonds for a sports stadium
- DBonds issued to finance a privately owned airport terminal
Explanation
Why B — General obligation bonds issued to build a public school
General obligation bonds issued for public purposes (like building schools, roads, and government buildings) are not AMT preference items. Only private activity bonds — those issued to benefit private entities (industrial development, sports stadiums, private airports) — generate interest that is an AMT preference item. Essential-purpose governmental bonds are exempt from AMT.
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