Raptors,

I am updating guidance on NIO.  NIO is now a HOLD as there is a better closed end municipal bond fund on offer.  This one is from the same issuer.  It pays the same yield.  But it has a small tweak in that all of the distribution is immune to Alternative Minimum Tax (AMT.)

This will save a few dollars at tax time.  But there is another reason to prefer NEA over NIO.  NIO is currently trading for a 7.75% discount to Net Asset Value (NAV).  NEA on the other hand trades for a 8.70% discount to NAV.  We get the same income, a slight edge in tax efficiency, and it is cheaper.

This is not guidance to sell NIO and reallocate.  The original municipal bond fund would kick off capital gains (and related taxes) that would be in excess of the small potential savings from the AMT.

Safety: NEA is well diversified with a total of 437 holdings.  No individual bond makes up more than 2.1% of holdings.  The top five holdings are:

Louisiana State: Gasoline Tax Revenue B – 2.10%
Catholic Health Initi: Tax Exempt Bonds – 2.10%
Massachusetts Stat: Massachusetts Scho – 2.00%
New Jersey State: Transportation Trust – 2.00%
Tobacco Settlement: Tobacco Settlement – 1.70%

Income: NEA pays out $0.0685 per share on a monthly basis or 5.92% annually against today’s price of 13.87.  Assuming a 25% margin tax bracket, that is an equivalent yield of 7.41%: tasty!

Devour your prey raptors!

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Hold NIO Buy Nuveen AMT-Free Municipal Incom (NEA)

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3 thoughts on “Hold NIO Buy Nuveen AMT-Free Municipal Incom (NEA)

  • April 10, 2015 at 4:08 pm
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    Dear Velociraptor
    Have you done a blog post about how you do your taxes? I can imagine you might have a thousand line items on your 1099B, including difficult to understand concepts for the IRS like expiring options etc. I’m just thinking if I get into this, Turbotax is not going to be happy with this. So how do you do your taxes regarding your trading account?
    Thanks,
    Kenneth

    Reply
    • April 10, 2015 at 10:12 pm
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      Kenneth,

      My broker provides supplemental form 8498 because I always have transactions where basis was not reported to the IRS (usually short sales.) I enter the summary of each section such as: FORM 8498 PART IA (PROCEEDS) (BASIS) (ADJUSTMENTS) (GAIN/LOSS). I have four lines (short term/reported, short term/not reported, long term/reported, long term/not reported) to enter this way and its done. I also mail a hard copy and include a copy of 8498. They have never questioned this approach.

      Reply
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