Melinda invests $200,000 in a City of Heflin bond that pays 6 percent interest. Alternatively, Melinda could have invested the $200,000 in a bond recently issued by Surething Inc., that pays 8 percent interest and has risk and other nontax characteristics similar to the City of Heflin bond.
Jorge and Anita, married taxpayers, earn $149,000 in taxable income and $63,000 in interest from an investment in City of Heflin bonds. (Use the U.S. tax rate schedule for married filing jointly).