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requires consideration of the actions of the conduit borrowers,
the Whitewater and Ironwood partnerships.
Construing section 103(b)(4) to require subsequent conduct
in furtherance of the original reasonable expectations is
consistent with the statutory language and furthers the statutory
purpose. Section 103(b)(4) contains set-aside requirements that
must be met throughout the "qualified project period" (a period
that begins on the first day in which 10 percent of the project
units are occupied). If those set-aside requirements are not
met, the interest on the bonds is taxable from the date of
issuance, irrespective of the reasonableness of the issuer's
expectations at the inception of the deal. Sec. 103(b)(4)(A),
(12)(B). Thus, the phrase "are to be used" looks to how the bond
proceeds are actually used, not just to how the proceeds were
expected to be used at the time the bonds were issued.
This conclusion is supported by the contrasting language of
subsections (c) and (b) of section 103. Section 103(c) defines
an "arbitrage bond" as a bond "the proceeds of which are
reasonably expected to be used" (emphasis added) for higher
yielding investments. Compare the clear command of section
103(c) to look only at expectations with the language of section
103(b), which provides how substantially all of the "proceeds of
* * * [the bond issue] are to be used." (Emphasis added.) This
difference in focus strongly suggests that Congress intended two
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