How will the liquidation affect the funds' NAV and what are the tax implications for investors?

Impact on NAV

When a closed‑end fund liquidates, the “final” net asset value (NAV) is frozen on the liquidation date (22 Aug 2025). The board calculates each shareholder’s proportionate interest in the fund’s assets and distributes that amount in cash (or, in rare cases, in residual securities). Because the distribution is based on the actual market value of the portfolio at the cut‑off, the final NAV can differ from the last quoted price on the NYSE. If the fund’s market price had been trading at a discount to the underlying municipal‑bond portfolio, the liquidation will usually raise the NAV for shareholders – the discount disappears and investors receive the full asset value. Conversely, if the fund had been trading at a premium, the final NAV will be lower than the pre‑liquidation market price, resulting in a “down‑side” for those who bought at the premium. In short, the liquidation replaces the market‑driven price with the true, proportionate share of the fund’s assets.

Tax implications for investors

A liquidation is treated as a sale of the fund shares for tax purposes. The cash distribution is the amount realized; the difference between this amount and the investor’s adjusted cost basis generates a capital gain or loss. Because the funds hold municipal bonds, the capital gain is generally subject to federal (and possibly state) capital‑gains tax at the applicable long‑term or short‑term rates, depending on the holding period. Any portion of the distribution that represents accrued interest on the underlying municipal securities is taxed as ordinary income (i.e., at the investor’s marginal tax rate) rather than as capital gains.

Practical take‑aways for investors:

1. Calculate the gain/loss by comparing the liquidation proceeds to the original purchase price (including any reinvested dividends).
   
2. Determine the character of the income – most of the payout will be capital‑gain, but a small segment may be ordinary‑income interest.
   
3. Plan for tax‑loss harvesting or offsetting the capital gain with other losses in the portfolio, and be mindful of wash‑sale rules if you intend to re‑enter a similar municipal‑bond position after the liquidation.
   

Overall, the liquidation locks in the NAV at the fund’s true asset value and triggers a taxable event that should be reflected on the investor’s 2025 tax return. Adjusting your cost‑basis records now and consulting a tax adviser before filing can help you manage the post‑liquidation tax impact efficiently.