Harbor Bancorp & Subsidiaries - Page 30

                                       - 30 -                                         
          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...)           



Page:  Previous  20  21  22  23  24  25  26  27  28  29  30  31  32  33  34  35  36  37  38  39  Next

Last modified: May 25, 2011