Harbor Bancorp & Subsidiaries - Page 24

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               Section 148(f) was enacted by the Tax Reform Act of 1986,              
          and it is applicable to bonds issued after December 31, 1985.               
          Tax Reform Act of 1986, Pub. L. 99-514, sec. 1314(d), 100 Stat.             
          2664.7  Thus, our initial determination must be whether the Bonds           
          were issued on December 31, 1985, as petitioners contend, or on             
          February 20, 1986, as respondent contends.  This is a mixed                 
          question of fact and law, and we adopt the following analysis and           
          findings of the trial judge regarding the date on which the Bonds           
          were issued.                                                                
               "Date of issue" is defined in section 1.103-13(b)(6), Income           
          Tax Regs., as                                                               

               the date on which there is a physical delivery of the                  
               evidences of indebtedness in exchange for the amount of                
               the issue price.  For example, obligations are issued                  
               when the issuer physically exchanges the obligations                   
               for the underwriter's (or other purchaser's) check.[8]                 

               7TRA sec. 1314(d), 100 Stat. 2664, provides:                           

               Except as otherwise provided in this subsection, in the                
               case of a bond issued after December 31, 1985, section                 
               103 of the 1954 Code shall be treated as including the                 
               requirements of section 148(f) of the 1986 Code in                     
               order for section 103(a) of the 1954 Code to apply.                    
               8Respondent insists that the proper definition of "issue               
          date" for the Bonds involved here is that contained in sec.                 
          1.150-1(c)(2), 57 Fed. Reg. 21032 (May 10, 1994), which provides:           

                    (2)  Date of Issue.  The date of issue of a bond                  
               is the first day on which there is physical delivery of                
               the written evidence of the bond in exchange for the                   
               purchase price.  Such day shall not be earlier than the                
               first day on which interest begins to accrue on the                    
                                                             (continued...)           



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