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and, presumably, did not intend that the Bond proceeds be used to
purchase the GIC's, the GIC's were in fact purchased with the
proceeds of the Bonds and committed to provide funds for the
repayment of principal and interest on the Bonds rather than for
the governmental purpose of constructing multifamily housing.
Thus, the GIC's fall within the statutory definition of
nonpurpose investments.
Next, we must determine whether there was an amount earned
on the nonpurpose investments that exceeded the amount that would
have been earned if the nonpurpose investments had been invested
at a rate equal to the yield on the Bond issues (hereinafter
sometimes referred to as the excess amount). Sec. 148(f)(2).12
An amount earned within the meaning of section 148(f)(2) is an
amount actually or constructively received by the bond issuer
from the nonpurpose investment. See secs. 1.148-2(b)(2)(i),
1.148-8(d)(5), Income Tax Regs.13 Here, the amounts earned on
12Sec. 148(f)(4) contains special rules for applying par.
(2). Petitioners make no claim that these special rules require
any modification to the computation of the excess amount defined
in sec. 148(f)(2), and we find nothing in par. (4) that would
modify the literal application of par. (2) to the facts in this
case.
13Sec. 1.148-2(b)(2)(i), Income Tax Regs., provides:
The term "receipt" means, with respect to an investment
allocated to an issue, any amount actually or
constructively received with respect to the investment.
Except as provided in � 1.148-4(c)(3), receipts are not
reduced by selling commissions, administrative
expenses, or similar expenses. * * *
(continued...)
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