private purpose bond definition

Private Purpose Bond

A type of municipal bond that is used to finance private rather than public facilities and projects. For example, the construction of a new airport could be financed through a private purpose bond.

Investopedia Commentary

The Tax Reform Act of 1986 separated munipal bonds into two types: public purpose bonds, and private issue bonds. Public purpose bonds are exempt from federal taxation. On the other hand, private purpose bonds are subject to tax unless they are specifcially exempted.

See also: Bond, Municipal Bond

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