Part 1. Does restricting "private-activity" bonds, the solution set forth by the Federal tax reform act of 1986, make sense if applied by the state on local governments? What are the arguments for state restriction of these bonds?
Part 2. Do the arguments for restricting these private activity bonds by the state on local governments change in any way if a state has low debt and the local government has high debt?© BrainMass Inc. brainmass.com October 16, 2018, 4:15 pm ad1c9bdddf
The answer to this question is very similar to what I answered previously. The principals are the same. There are also qualified private-activity bonds, which still can be treated as tax-exempt. We will assume that is not the case for this question.
Part 1 The interest from private activity bonds are not federal tax-exempt. So, they act like most private corporate bonds, exept there is the assumption that there is a tax base that would be able to pay off bonds if the local government had troubles. They would just raise taxes in their jurisdictions. However, there are still limits as local governments have limited geographic ...
Restricting private activity bonds is assessed.
Bond Investments for Gary and Gladys
Gary and Gladys invest in bonds. In the current year, they received the following interest:
California general revenue bonds: $800
New York City sanitation fund bonds: $1,000
Seattle School District bonds: $400
AT&T 20-year bonds: $600
The state and local bonds are neither private activity bonds nor arbitrage bonds. How much interest may Gary and Gladys exclude from gross income on their joint return?
Ivan Turner, a truck driver, was injured in an accident in the course of his employment in the current year. As a result of injuries sustained, he received the following payments in the current year:
Damages for physical injuries: $5,000
Workers' compensation: $500
Reimbursement from his employer's accident and health plan for medical expenses paid by Turner in the current year (the employer's contribution to the plan was $475 in the current year): $750
The amount to be included in Turner's gross income for the current year should be
Rudy retired on disability in July of the current year. He had earned wages of $20,000 before his retirement and received $10,000 in disability benefits after his retirement. The disability benefits were received from an accident and health insurance plan that was paid for by Rudy's employer. He also received a lump-sum payment for accrued annual leave of $5,000, which was paid in the current year due to his disability retirement in that year. How much income should Rudy report in the current year?