Resumen de Tax-Efficient Trading of Municipal Bonds
The author proposes a dynamic strategy to optimize the after-tax performance of a municipal bond portfolio. This study extends previous work on one-time tax-loss selling. He considers a potential tax-driven trading opportunity as an option with quantifiable value, acquired automatically and without cost in a taxable account. Within this formulation, selling a bond and reinvesting in another also entails the swap of the associated tax options. When considering the value of the tax option acquired upon reinvestment, the time to optimum execution is drastically reduced in comparison to one-time selling. The author assumes that the choice of reinvestment bonds maintains the same interest rate exposure as that from before the sale.
