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section 103(b)(2) of the 1954 Code, on the ground that the
proceeds of both issues were "to be used directly . . . in any
trade or business carried on by any person who is not an exempt
person." The only dispute on this issue is whether the bonds
qualified under section 103(b)(4)(A), which provides that an
industrial development bond will not be taxable under section
103(b)(1) if it is part of an issue "substantially all of the
proceeds of which are to be used to provide" (emphasis added)
various exempt facilities. The question is the meaning of the
phrase "are to be used".
Both the Whitewater and the Ironwood issues were industrial
development bonds under section 103(b)(2) because the proceeds
were to be lent to private, for-profit developers for the purpose
of constructing apartment projects to be used in a private trade
or business, and repayment of the bonds was to be secured,
directly or indirectly, by the apartment projects and the income
they produced. Although the documents provided that the
Whitewater bonds and the Ironwood bonds were to fund the
construction of residential rental properties that would meet the
20 percent low-income set-aside requirements of section
103(b)(4)(A)(ii),2 what is in dispute is whether substantially
2Respondent concedes that the Ironwood project met the low-
income set-aside requirements of sec. 103(b)(4)(A)(ii).
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