Harbor Bancorp & Subsidiaries - Page 32

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          investment of a given sum at the rate of the higher yielding                
          GIC's would substantially exceed amounts earned upon investment             
          of that same sum at the yield rate of the Bonds.                            
               The regulations calculate the excess amount to be paid to              
          the United States as the future value of all nonpurpose receipts            
          over the future value of all nonpurpose payments.  Sec. 1.148-              
          2(a)(1) and (2), Income Tax Regs.  "Receipts" are defined to                
          include any amount actually or constructively received with                 
          respect to the investment (but not reduced by administrative or             
          similar expenses).  Sec. 1.148-2(b)(2)(i), Income Tax Regs.15               
          "Payments" are defined to include the amount of gross proceeds of           
          the bond issue to which the investment is allocated (not                    
          including administrative or similar expenses), whether or not the           
          investment was directly purchased with such gross proceeds.  Sec.           
          1.148-2(b)(3)(i) and (ii), Income Tax Regs.                                 
               The parties have stipulated the schedule of payments for and           
          receipts pursuant to the Whitewater GIC as follows:                         

          Date                  Payment                Receipt                        
          2/20/86             $16,110,817.98                                          
          5/27/86                                      $678,125                       
          11/26/86                                       678,125                      
          5/27/87                                       678,125                       
          11/25/87                                       678,125                      
          5/27/88                                       678,125                       
          11/25/88                                       678,125                      

               15For an investment held at the end of a computation period,           
          the term "receipt" includes the fair market value of the                    
          investment at the end of that period.  Sec. 1.148-2(b)(2)(iii),             
          Income Tax Regs.                                                            



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Last modified: May 25, 2011