Final answer:
The interest earned from municipal bonds issued by the state of Missouri for Missouri residents like Tom and Jill is usually not subject to federal or state income taxes, so the correct answer is E. None of these.
Step-by-step explanation:
Tom and Jill, both now Missouri residents, have decided to invest in municipal bonds issued by the state of Missouri. The bond interest they earn will be subject to certain taxes. Generally, interest on municipal bonds is exempt from federal income taxes if the bonds are issued within the state in which the taxpayer resides. Furthermore, many states also exempt interest on bonds issued by municipalities within that state from state income taxes for residents.
As Tom and Jill are residents of Missouri and the bonds were issued by the state of Missouri, the interest they earn on these bonds will usually be exempt from both federal and Missouri state income taxes. Consequently, the correct answer to the question is E. None of these, meaning that the bond interest will not be subject to any of the listed tax types.