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Yield Spreads on Municipal Bonds Subject to the Alternative Minimum Tax  


Author:  Ginette  McManus.; Rajneesh  Sharma.; Ahmet  Tezel.


Source: Volume 28, Number 04, Summer 2011 , pp.21-34(14)




Journal of Taxation of Investments

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Abstract: 

The effects of individual taxes on securities yields can be examined by looking at AMT-free versus AMT bonds. Investors overestimate the likelihood that they will fall under the alternative tax regime, and thus demand a measurable premium on AMT bond investments. Bond issuers as well as tax professionals and financial advisors to individuals can benefit from understanding how investor expectations/fears impact yield spreads.

Keywords: alternative minimum taxes, AMT vs. AMT-free bonds, private activity bonds, yield spreads, implicit marginal tax rates

Affiliations:  1: Saint Joseph’s University, Haub School of Business; 2: Saint Joseph’s University, Haub School of Business; 3: Saint Joseph’s University, Haub School of Business.

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