Final answer:
In a municipal bond mutual fund, the investment company may have no tax liability depending on the tax status of the fund.
Step-by-step explanation:
In a municipal bond mutual fund, the investment company may have no tax liability depending on the tax status of the fund.
If the municipal bond mutual fund invests in tax-exempt municipal bonds, the investment company may not have any tax liability because the income generated from these bonds is typically exempt from federal income tax, and potentially exempt from state and local taxes as well.
However, it's important to note that this tax advantage only applies to individuals who invest in the fund, not the investment company itself.