On September 17, 2008, $140 billion was drawn out of money market accounts by investors who were transferring their funds to U.S. Treasuries. And on September 18, 2008, the FDIC, realizing that money market accounts were being drawn down in record amounts, pumped over $100 billion into the system.

But after realizing that an influx of cash wouldn’t be enough to prevent a collapse, the Treasury stepped in with a $250,000 guarantee per money market account. If the Treasury hadn’t taken this action, $5.5 trillion could have been drawn out of the market, which could have collapsed the entire U.S. economy.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of money market accounts in Advisor’s Journal, see How to Increase the FDIC $250,000 Permanent Guarantee (CC 10-67).

For in-depth analysis of the Dodd-Frank Act, see Advisor’s Main Library: The Dodd-Frank Wall Street Reform and Consumer Protection Act: An Analysis.

Why is This Topic Important to Wealth Managers? This blogticle discusses the debt limit debate. We present discussion directly from the Administration including the Department of the Treasury. Wealth managers who are following the debt debate discussion will likely be interested in our presentation of insider comments.

As almost the entire world knows at this point, the U.S. reached the debt limit on May 16, 2011. To plug the gap, the Treasury Department has employed three measures to temporarily extend our ability to meet the nation’s obligations.  Those measures, in order taken, are (1) suspending issuance of State and Local Government Series (SLGS) Treasury securities; (2) declaring a “debt issuance suspension period” of the Civil Service Retirement and Disability Fund (CSRDF); and (3) suspending reinvestment of the Government Securities Investment Fund (G Fund).

It is said that these four extraordinary measures allow the Treasury to extend borrowing authority until August 2, 2011. Here’s what Treasury has said about the debt limit over the past few weeks:

7/12 Mary Miller, Assistant Secretary for Financial Markets at the U.S. Department of the Treasury, issued the following statement reaffirming the projected date on which the United States will exhaust borrowing authority under the statutory debt limit.

“The Treasury Department continues to project that the United States will exhaust its borrowing authority under the debt limit on August 2, 2011.  Secretary Geithner urges Congress to avoid the catastrophic economic and market consequences of a default crisis by raising the statutory debt limit in a timely manner.”

7/13 Treasury Secretary Tim Geithner made a brief statement to the press:

There is unanimity in that room that we are a country that meets its obligation, we are a country that pays our bills and that we’ll act and do what’s necessary to make sure that we can maintain that commitment. As the Majority Leader said, we have looked at all available options and we have no way to give Congress more time to solve this problem and we are running out of time.

And the eyes of the country are on us, and the eyes of the world are on us and we need to make sure we stand together and send a definitive signal that we are going to take the steps necessary to avoid default and also take advantage of this opportunity to make some progress in dealing with our long-term fiscal problems. We don’t have much time; it’s time we move.

7/14 The U.S. Department of the Treasury released the following statement from Under Secretary for Domestic Finance Jeffrey Goldstein on the Standard and Poor’s (S&P) downgrade:

“[This} action by S&P restates what the Obama Administration has said for some time: that Congress must act expeditiously to avoid defaulting on the country's obligations and to enact a credible deficit reduction plan that commands bipartisan support.”​

7/15 U.S. Department of the Treasury releases the following statement from Jeffrey Goldstein, Under Secretary for Domestic Finance, regarding the use of the last of the previously mentioned measures available to keep our nation under the statutory debt limit, suspension of reinvestment of the Exchange Stabilization Fund.

“Today, as previously announced, the Treasury Department will suspend reinvestment of the Exchange Stabilization Fund, the last of the measures available to keep the nation under the statutory debt limit.  In order to prevent a default on the nation’s obligations, Congress must enact a timely increase of the debt ceiling.”

Finally, to quote President Obama from his address earlier this week:

“[American workers] are fed up with a town where compromise has become a dirty word.  They work all day long, many of them scraping by, just to put food on the table.  And when these Americans come home at night, bone-tired, and turn on the news, all they see is the same partisan three-ring circus here in Washington.  They see leaders who can’t seem to come together and do what it takes to make life just a little bit better for ordinary Americans.  They’re offended by that.  And they should be.”

Tomorrow’s blogticle would ideally present the terms of the debt agreement, but if not, we’ll discuss life insurance.

We invite your opinions and comments by posting them below, or by calling the Panel of Experts.

Why is this Topic Important to Wealth Managers? Today we discuss foreign investment in the U.S. both private and public. The data shows a growth in the U.S. investment sector. The evaluation provides wealth managers information regarding global economic investment in the U.S.

This Treasury and Federal Reserve recently presented data and analysis regarding the latest annual survey of foreign portfolio holdings of U.S. securities. The survey measured positions as of June 30, 2010.

The annual survey measured foreign holdings of U.S. securities as of June 2010 at $10,691 billion. Of the over $10 trillion of foreign holdings $9,736 billion were holdings of U.S. long-term securities (original term-to-maturity greater than one year) and $956 billion were holdings of U.S. short-term securities.

In the previous survey as of June 30, 2009, total foreign holdings amounted to $9,641 billion.  The increase over the 12-month period from June 2009 to June 2010 – $1,050 billion – more than reversed the decline in total foreign holdings of U.S. securities in the 2009 survey.  Foreign holdings of equity rose $562 billion to $2,814 billion.  The increase in part reflected the rebound in stock prices between the 2009 and 2010 survey dates, but even so, foreign holdings of U.S. equity remained below the level recorded in 2008 (value of holdings is determined at fair market).  Foreign holdings of U.S. long-term debt securities rose $681 billion over the same period.  This increase was more than accounted for by a record increase in holdings of long-term Treasury securities, which rose $739 billion to reach a level just above $3.3 trillion.

In contrast, foreign holdings of long-term agency securities decreased further from the peak recorded in June 2008.  Foreign holdings of long-term corporate securities edged up slightly over the 12-month period.  Foreign holdings of U.S. short-term securities decreased $193 billion to $956 billion.  Foreign holdings of U.S. Treasury bills and certificates, short-term U.S. agency securities and short-term corporate debt securities all declined.

At $9,736 billion, foreign holdings of U.S. long-term securities continue to be considerably larger than U.S. holdings of foreign securities, estimated at $5,175 billion as of end-June 2010.  Moreover, foreign holdings of U.S. long-term securities increased $1,244 billion during the 12-month interval between the 2009 and 2010 surveys, more than the $560 billion that U.S. holdings.

Foreign securities are estimated to have increased over the same period.  As a result, the ratio of U.S. holdings to foreign holdings decreased to 0.53 and the net position in long-term securities holdings widened further to -$4.6 trillion.  In June 2010, foreign holdings of U.S. long-term securities exceeded the previous peak recorded in June 2008, but U.S. holdings of foreign securities were estimated to be still below the peak recorded in June 2007.

The data show that at $1,611 billion, total holdings attributed to mainland China exceeded those attributed to any other country, surpassing holdings by Japan ($1,393 billion) for a second year.  Holdings attributed to residents of the United Kingdom were third at $798 billion.  The United Kingdom had been one of the top two investing countries in U.S. securities since country-level data became available (1978), but the United Kingdom fell into the third position behind the rapidly growing stock of holdings of China in the 2006 survey.  The United Kingdom remained the largest holder of U.S. equity in 2010, while China remained the largest holder of debt securities.

Long-term U.S. Treasury securities held by China amounted to $1,108 billion, up from $757 billion a year ago.  In addition, $4 billion of the $5 billion in short-term securities held by China were U.S. Treasury bills and certificates, bringing China’s total holdings of U.S. Treasury securities to $1,112 billion.  Notably, China has reduced its holdings of short-term debt since June 2009 by $155 billion but has increased its holdings of long-term Treasuries.  Japan was the second largest holder of U.S. Treasury securities, with total holdings of $799 billion, of which $737 billion were long-term Treasury securities and $62 billion were short-term securities.

Since the 2004 survey, China’s holdings of U.S. securities have more than quadrupled.

Tomorrow’s blogticle will continue to discuss tax and market issues relating to wealth management.

We invite your questions and comments by posting them below, or by calling the Panel of Experts.

Why is this Topic Important to Wealth Managers? Today we continue our series on “Wealth Management in Today’s Economic Environment”. The series is designed to address the specific question many wealth managers are currently asking: “what are the best investment, retirement and financial planning tools given the current global financial position?” We explore alternatives from “safe” to “risky” from “traditional” to “emerging” to discover and discuss the most relevant wealth management tools and techniques available today. We look forward to presenting this discussion and think you will find the information quite valuable. Please note that this series is presented in continuation. That being said each blogticle resumes discussion from the previous day.

As was discussed yesterday, one option investors may currently consider seeking is U.S. government debt. However, ten-year note yields bottomed out at 3.05 percent last week.[1] Clients are being advised that they “should think twice” about treasures, that’s because consumer inflation continues to outpace those yield figures.” [2] Treasury yields are stupidly low,” says Robert Auwaerter, head of the fixed-income group at Vanguard Group. [3]

Are there any other U.S. government options that provide reasonable rates of return? Given the national debt issues and current low Fed rate will inflation play a part? Presented below is one option that may help clients hedge against inflation.

Treasury Inflation-Protection Securities

Treasury Inflation-Protected Securities, or TIPS, provide protection against inflation. The principal of a TIPS increases with inflation and decreases with deflation, as measured by the Consumer Price Index. When a TIPS matures, clients are paid the adjusted principal or original principal, whichever is greater. This provision protects clients against deflation.

TIPS pay interest twice a year, at a fixed rate. The rate is applied to the adjusted principal; so, like the principal, interest payments rise with inflation and fall with deflation.

TIPS are marketable securities whose principal is adjusted by changes in the Consumer Price Index. With inflation (a rise in the index), the principal increases. With a deflation (a drop in the index), the principal decreases.

The relationship between TIPS and the Consumer Price Index affects both the sum clients are paid when the TIPS matures and the amount of interest that a TIPS pays every six months. As stated above, TIPS pay interest at a fixed rate. Because the rate is applied to the adjusted principal, however, interest payments can vary in amount from one period to the next. Thus otherwise stated, if inflation occurs, the interest payment increases. In the event of deflation, the interest payment decreases.

But according to the returns on TIPS they may not offer investors growth relative to the security they desire. For example the TIPS due February 2041 are currently yielding only 1.774%. [4] Moreover, interest on tips is generally subject to federal tax unlike some other government issued debt.

For more in-depth discussion on treasuries, see AdvisorFX: U.S. Treasury and Government Agency Securities.

Our series continues next week with a discussion of municipal bonds, cash accounts, commodities, international investment and more.

We invite your questions and comments by posting them below, or by calling the Panel of Experts.

Series Author: Benjamin Terner

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[1] Reuters. “Treasuries-Gov debt prices fall on profit taking”. May 27, 2011.  http://www.reuters.com/article/2011/05/27/markets-bonds-idUSN274758020110527. Last Accessed 5/30/2011.

[2] Chris Farrell. Safe Investing in a Troubled Economy. Bloomberg Businessweek. September 25, 2008.

[3] Id.

[4] Wall Street Journal. Friday, May 27, 2011. Market Data Center- Treasury Inflation-Protected Securities. http://online.wsj.com/mdc/public/page/2_3020-tips.html.

Why is this Topic Important to Wealth Managers? Today we continue our series on “Wealth Management in Today’s Economic Environment”. The series is designed to address the specific question many wealth managers are currently asking: “what are the best investment, retirement and financial planning tools given the current global financial position?” We explore alternatives from “safe” to “risky” from “traditional” to “emerging” to discover and discuss the most relevant wealth management tools and techniques available today. We look forward to presenting this discussion and think you will find the information quite valuable. Please note that this series is presented in continuation. That being said each blogticle resumes discussion from the previous day.

Warren Buffett’s mentor, “legendary investor” Benjamin Graham, once “wrote that when challenged ‘to distill the secret of sound investment into three words, we venture the motto, Margin of Safety.’ Those are wise words for all seasons, but especially at a time like this.” [1]

Are government backed investments one way in which clients can find some safety?

Generally United States “securities are debt instruments issued by the U.S. Treasury to raise money needed to operate the federal government and to pay off maturing obligations.” [2] The “paper” is backed by the “full faith and credit of the United States government guarantees that interest and principal payments will be paid on time, and thus, these securities are considered very safe investments.” [3] But has the financial position in Washington changed the traditional view of these obligations?

Treasury bills, or T-bills, “are short-term government securities with maturities ranging from a few days to 52 weeks.” [4] The Bills are generally sold at a discount from the par value or face amount of the bill.  An example, an investor may pay $990 for a $1,000 bill.  When the bill matures, the investor is paid the full $1,000.  The discount or difference between the purchase price and the redemption price is interest.

Treasury notes, or T-notes, are “issued in terms of 2, 3, 5, 7, and 10 years, and pay interest every six months until they mature.”  [5] Further, the notes may be sold at a discount (for less than face value), at a premium (for more than face value) or for face value.  When the note matures, the investor is paid full face value, in addition to the interest payments received.

A few of the key features of T-notes include:

• The yield on a note is determined at auction.
• Notes are sold in increments of $100. The minimum purchase is $100.
• Notes are issued in electronic form.
• An Investor can hold a note until it matures or sell it before it matures. [6]

Treasury bonds are issued for terms of 30 years and pay interest every six months until maturity. When a Treasury bond matures, the investor is paid its face value.

“The price and yield of a Treasury bond are determined at auction.” [7] Like a T-note, a T-bond, may be issued at a discount, premium or face value.  T-bonds “exist in either of two formats: as paper certificates (these are older bonds) or as electronic entries in accounts.”   Today, Treasury bonds are issued exclusively in electronic form.

Total current outstanding debt issued by the Treasury in bills, notes, bonds and other evidence of indebtedness is approximately 13.8 Trillion dollars, as of the end of November 2010. [8]

Tomorrow we continue our series with additional U.S. government investments.

We invite your questions and comments by posting them below, or by calling the Panel of Experts.

Series Author: Benjamin Terner

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[1] Chris Farrell. Safe Investing in a Troubled Economy. Bloomberg Businessweek. September 25, 2008.

[2] AdvisorFX.  AUS Main Libraries ,  Section 22.2  Investment Vehicles, B—U.S. Treasury and Government Agency Securities. http://www.advisorfx.com/articles/f22-2_1_13_3760.aspx?action=13.  Last Accessed 11/29/2010.

[3] AdvisorFX. U.S. Treasury and Government Agency Securities.

[4] Untied States Department of the Treasury.  Treasury Direct-Treasury Bills.  http://www.treasurydirect.gov/indiv/products/prod_tbills_glance.htm.  Last Accessed 11/29/2010.

[5] Untied States Department of the Treasury.  Treasury Direct-Treasury Notes.  http://www.treasurydirect.gov/indiv/research/indepth/tnotes/res_tnote.htm.  Last Accessed 11/29/2010.

[6] Untied States Department of the Treasury.  Treasury Direct-Treasury Notes.

[7] Untied States Department of the Treasury.  Treasury Direct-Treasury Bonds.  http://www.treasurydirect.gov/indiv/products/prod_tbonds_glance.htm.  Last Accessed 11/29/2010.

[8] Damian Paletta.  The Wall Street Journal. Debt-Panel Chairmen Work to Gain Support.  November 29, 2010.  http://online.wsj.com/article/SB10001424052748703785704575643111128016590.html.  Last accessed 11/29/2010.; see also Untied States Department of the Treasury.  Treasury Direct.    http://www.treasurydirect.gov/NP/BPDLogin?application=np.  Last Accessed 11/29/2010.

The Federal Reserve may consider downsizing its original plan to purchase $600 billion in Treasury bonds over fear that inflation could be driven to dangerous levels by the revitalized economy. Quantitative easing—the purchase of Treasuries by the central bank—is intended to raise the price of Treasuries, which should lower long-term interest rates and provide banks with cash to lend to their customers. The expectation is that lower long-term rates will encourage home refis and boost corporate investments and expansion, which, it is hoped, will created new jobs.  Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of quantitative easing in Advisor’s Journal, see Fed to Purchase $600 Billion in Treasuries in Move to Stimulate Economy (CC 10-94).

Why is this Topic Important to Wealth Managers? Presents discussion on a common financial product that investor clients can incorporate into planning strategies, if not already.

Today’s blogticle takes a look at one topic of international intrigue and high finance—debt issued by the United States Federal Government.  Generally United States “securities are debt instruments issued by the U.S. Treasury to raise money needed to operate the federal government and to pay off maturing obligations.” [1] The “paper” is backed by the “full faith and credit of the United States government guarantees that interest and principal payments will be paid on time, and thus, these securities are considered very safe investments.” [2]

Treasury bills, or T-bills, “are short-term government securities with maturities ranging from a few days to 52 weeks.” [3] The Bills are generally sold at a discount from the par value or face amount of the bill.  An example, an investor may pay $990 for a $1,000 bill.  When the bill matures, the investor is paid the full $1,000.  The discount or difference between the purchase price and the redemption price is interest.   T-Bills are sold direct by the Treasury department, or can be purchased through banks and brokers.

Treasury notes, or T-notes, are “issued in terms of 2, 3, 5, 7, and 10 years, and pay interest every six months until they mature.”  [4] Further, the notes may be sold at a discount (for less than face value), at a premium (for more than face value) or for face value.  When the note matures, the investor is paid full face value, in addition to the interest payments received.

A few of the key features of T-notes include:

• The yield on a note is determined at auction.
  • Notes are sold in increments of $100. The minimum purchase is $100.
  • Notes are issued in electronic form.
  • An Investor can hold a note until it matures or sell it before it matures. [5]

Treasury bonds are issued for terms of 30 years and pay interest every six months until maturity. When a Treasury bond matures, the investor is paid its face value.

“The price and yield of a Treasury bond are determined at auction.” [6] Like a T-note, a T-bond, may be issued at a discount, premium or face value.  T-bonds “exist in either of two formats: as paper certificates (these are older bonds) or as electronic entries in accounts.”   Today, Treasury bonds are issued exclusively in electronic form.

Total current outstanding debt issued by the Treasury in bills, notes, bonds and other evidence of indebtedness is approximately 13.8 Trillion dollars, as of the end of November 2010. [7]

For more in-depth discussion on T-bills, notes and bonds, see AdvisorFX: U.S. Treasury and Government Agency Securities.

Clients can purchase T-bills, notes, and bonds from the Treasury Department at the following link: http://www.treasurydirect.gov/indiv/products/products.htm. 

Tomorrow’s blogticle will present some interesting new topics.

We invite your questions and comments by posting them below, or by calling the Panel of Experts.

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[1] AdvisorFX.  AUS Main Libraries ,  Section 22.2  Investment Vehicles, B—U.S. Treasury and Government Agency Securities. http://www.advisorfx.com/articles/f22-2_1_13_3760.aspx?action=13.  Last Accessed 11/29/2010.

[2] AdvisorFX. U.S. Treasury and Government Agency Securities.

[3] Untied States Department of the Treasury.  Treasury Direct-Treasury Bills.  http://www.treasurydirect.gov/indiv/products/prod_tbills_glance.htm.  Last Accessed 11/29/2010.

[4] Untied States Department of the Treasury.  Treasury Direct-Treasury Notes.  http://www.treasurydirect.gov/indiv/research/indepth/tnotes/res_tnote.htm.  Last Accessed 11/29/2010.

[5] Untied States Department of the Treasury.  Treasury Direct-Treasury Notes.

[6] Untied States Department of the Treasury.  Treasury Direct-Treasury Bonds.  http://www.treasurydirect.gov/indiv/products/prod_tbonds_glance.htm.  Last Accessed 11/29/2010.

[7] Damian Paletta.  The Wall Street Journal.

Debt-Panel Chairmen Work to Gain Support.  November 29, 2010.  http://online.wsj.com/article/SB10001424052748703785704575643111128016590.html.  Last accessed 11/29/2010.; see also Untied States Department of the Treasury.  Treasury Direct.    http://www.treasurydirect.gov/NP/BPDLogin?application=np.  Last Accessed 11/29/2010.

Tectonic forces are pulling the U.S. economy in opposing directions: Republicans, who won the House and a majority of state governor seats in November elections, promise to cut spending and taxes and rein in government excess. But following the Republican victory, the Federal Reserve is launching a fresh round of its own brand of stimulus, announcing a plan to purchase $600 billion in Treasury securities. Will the forces of Congressional fiscal policy and Fed monetary policy remedy the sluggish economy, or will they stress it beyond repair?

The Fed purchase is intended to raise the price of Treasuries, which should lower long-term interest rates and provide banks with cash to lend to their customers. The expectation is that lower long-term rates will encourage home refi’s and boost corporate investments and expansion, which, it is hoped, will created new jobs.  But there is no guarantee that banks will lend from any cash infusion resulting from the Fed purchase. Banks could choose, instead, to increase their cash reserves against expected defaults. And U.S. corporations are not showing any signs of going on a hiring spree—instead, they are sitting on record amounts of cash.  Read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

We invite your questions and comments by posting them below, or by calling the Panel of Experts.

Why is this Topic Important to Wealth Managers?   Discuses one alternative investment wealth managers are continuing to explore in consideration of uncertain tax law changes.  Provides general background as well as analysis and comparison to show the benefits available through the purchase of tax-exempt bonds.     

Interest received from bonds is generally taxed at ordinary income rates.  This includes both government and corporate bonds unless otherwise excluded by the tax code.[1]  Dividends though are taxed at capital gains rates, which for the meanwhile can provide significant tax benefits.  See our previous AdvisorFYI blogticle of September 13^th Bush Tax Cuts Set to Expire. 

However, some state and local municipal bonds often called “muni” bonds, produce tax—exempt interest income under Internal Revenue Code § 103. The general obligation interest on state or local bonds fall into this category[2] as distinguished from private activity bonds. [3] 

A detailed discussion of private activity bonds in comparison to general obligation bonds can be found at Tax Facts: Q 1123. Is interest on obligations issued by state and local governments taxable? This blogticle deals with general obligation bonds.  A comparison between tax-exempt and taxable income bonds is illustrated with rates of return below: 

“A 4% yield on a muni is the equivalent of a 5.6% payout on a taxable bond if you’re in the 28% tax bracket and 6% if you’re in the 33% bracket.” [4]  The advantage of municipal bonds over corporate bonds is that income from the latter is not specifically excluded from gross income.  Another example adapted from AdvisorFX: [5]

Individual A can chose to purchase, a $1,000 corporate bond with an annual interest rate 7.5%, or a $1,000 state/local bond at 5.5%.  The first option will yield interest income of $750 with a tax of $210 (28% bracket), therefore a net return of $540. The state/local bond will yield $550 and the income is specifically excluded from gross income.  Even though the corporate bond has a higher stated return the muni bond is most likely a better overall investment.  But why are the muni rates lower? 

This tax preferential return allows municipalities to raise money from the investment market at a cheaper interest rate cost.  The “exclusion is intended to benefit state and local governmental units” because the cost of borrowing to these institutions becomes less and in turn “enabling them to market bond issues to investors at lower rates of interest than ordinary private sector bonds.”  Additionally, because “the interest on these bonds is tax-free, investors are generally willing to purchase them at prices that provide a lower rate of return than regular bonds.” [6]

Let’s take a look at another example [7]:

Investor X has $10,000 to invest.  His first option is a triple-A-rated, ten-year muni, which yields 3.43%, and his second option is ten-year Treasury notes, which yields 3.83%.

In all tax brackets, the muni will yield $343.  In the 28% bracket, the after tax income from the T-bills is $276, in the 33% bracket it is $257, and in the 35% bracket it is $249.  Thus, the higher the bracket the more efficient tax-exempt bonds become to an investor in relation to other taxable investments.  In this case the 28% bracket taxpayer saw an greater return on investment of $67, the 33% bracket saw the amount to be $86, and the 35% saw a $94 benefit over the Treasury notes, even though the interest rate yield was a higher stated amount.  In other words, the benefit of purchasing the tax-exempt bonds produced almost 1% (.94%) higher yield over the Treasury notes

Tomorrow’s blogticle will discuss the taxation of life settlement agreements. 

We invite your questions and comments by posting them below, or by calling the Panel of Experts.

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[1] 26 U.S.C. § 61(a)(4).  

[2] 26 U.S.C. § 103 (a).   

[3] Municipal Securities Rulemaking Board.  http://www.msrb.org/msrb1/glossary/view_def.asp?param=PRIVATEACTIVITYBOND.  2010.  Last Accessed 10/9/10.

[4] “Tax-Free Bonds”.  Kiplinger’s Personal Finance Magazine.  March 2008.  Jeffrey R. Kosnett and David Landis.  http://www.kiplinger.com/magazine/archives/2008/03/maximize-returns-with-bonds.html#ixzz11tDv5mBV.  Last Accessed 10/9/10. 

[5] AUS Main Libraries.  Section 19. Income Taxes.  Subheading 3-“Interest On State And Local (“Muni”) Bonds—I.R.C. §103.”  http://www.advisorfx.com/articles/f19_1_8_3240.aspx?action=13.  Last Accessed 10/9/10.  

[6] Id. 

[7] Adapted from Kiplinger’s Personal Finance, March 2008.