Making Cents: Gain a Little, Lose a Little

Municipal bond investors are often anxious to avoid paying taxes. Thus, some get upset when they discover they do have to pay taxes when their muni bond is sold at a profit (or their bond fund sells at a profit) and thus have capital gains--even though they profit from that sale. Such gains mean that in addition to that tax-free income, the bond or bonds have also increased in value--usually because of declining interest rates.