- 29 -
not provide such an exclusion. Section 148(f)(6)(A) defines a
nonpurpose investment broadly to include any investment property
that is acquired with the gross proceeds of an issue, and is not
acquired to carry out the governmental purpose of the issue.11
While the Housing Authority did not directly purchase the GIC's
(...continued)
148(f)(6)(A) defines "nonpurpose investment" as any investment
property that is acquired with the gross proceeds of an issue and
is not acquired to carry out the governmental purpose of the
issue. Sec. 1.148-8(e)(9), Income Tax Regs., defines "nonpurpose
investment" as any investment that is not a purpose investment.
"Purpose investment" is defined as any investment that is
allocated to the gross proceeds of an issue and that is acquired
to carry out the governmental purpose of the issue. Sec. 1.148-
8(e)(10), Income Tax Regs. In any event, we have relied upon the
statutory definition for purposes of our holding.
11Sec. 148(f)(6) provides:
(6) Definitions.--For purposes of this subsection and
subsections (c) and (d)--
(A) Nonpurpose Investment.--The term "nonpurpose
investment" means any investment property which--
(i) is acquired with the gross proceeds
of an issue, and
(ii) is not acquired in order to carry
out the governmental purpose of the issue.
(B) Gross proceeds.--Except as otherwise provided
by the Secretary, the gross proceeds of an issue
include--
(i) amounts received (including
repayments of principal) as a result of
investing the original proceeds of the issue,
and
(ii) amounts to be used to pay debt
service on the issue.
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