In the case of interest income from state and Federal bonds:
a. Interest on United States government bonds received by a state resident can be subject to that state's income tax.
b. Interest on United States government bonds is subject to Federal income tax.
c. Interest on bonds issued by State A received by a resident of State B cannot be subject to income tax in State B.
d. All of these are correct.
e. None of these are correct.
b
RATIONALE: Federal statute prohibits the states from taxing interest on United States government bonds (just as state bond interest is not subject to Federal income tax) (Choice a.). The Federal government does tax its own bonds (Choice b.), and there is no statutory or Constitutional limitation on the states taxing each other's obligations (Choice c.).
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