Tax Implications of Taxable Debt Securities

What this video covers

• Which bonds are state and local tax exempt (U.S. Treasuries, Farm Credit, Federal Home Loan Bank) versus fully taxable (corporates, Fannie Mae, Freddie Mac, Ginnie Mae)
• Why original issue discount (OID) creates phantom income taxed annually as ordinary income, even with zero cash received
• Why zero-coupon bonds belong in tax-deferred accounts like individual retirement accounts (IRAs), not taxable accounts
• How market discount differs from OID: secondary market origin, elective annual recognition, and ordinary income treatment at maturity
• The premium amortization split: elective for taxable corporate bonds, mandatory for tax-exempt municipal bonds, and why the IRS forces the muni rule
• The one-year holding period line between short-term and long-term capital gains on bond sales
• Why you must use the accreted adjusted basis, not the original purchase price, when calculating gain on an early sale of an OID bond