Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/100872
Authors: 
Hein, Scott E.
Mercer, Jeffrey M.
Year of Publication: 
2003
Series/Report no.: 
Working Paper, Federal Reserve Bank of Atlanta 2003-9a
Abstract: 
In 1997 the U.S. Treasury introduced Inflation Indexed (or Protected) Securities with substantial promotional fanfare. Yet, due in part to what some in the finance profession have described as a "tax disadvantage" placed upon TIPS, many are questioning whether they should appeal to a wide audience. Some, in fact, advise holding TIPS only in tax-deferred accounts. In this paper, the authors develop a framework that allows us to demonstrate that the tax treatment of TIPS is trivially different from that of conventional Treasury securities. Utilizing an after-tax valuation approach, they further show that under relatively conservative projections for inflation, TIPS generally have after-tax yields comparable to, if not exceeding, conventional fixed-rate Treasury securities.
Subjects: 
Investments
Taxation
Securities
Interest rates
Income tax
Document Type: 
Working Paper

Files in This Item:
File
Size
178.73 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.