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different tests to apply and that the test in section 103(b) was
intended to be more than a pure expectations test.
This suggested reading of this statutory provision also
prevents bizarre and inappropriate results. If only expectations
on the date of issue are relevant, then an issuer who initially
planned to have residential rental property built, but never took
steps to assure that the housing project was constructed, would
be better off under the statute than an issuer who actually
caused the housing to be constructed but then inadvertently
failed to satisfy the set-aside requirements. Such an anomalous
result would be the product of petitioners' interpretation of the
statute. Thus, substantially all of the Whitewater bond proceeds
were not "to be used" for residential rental property within the
meaning of section 103(b)(4).
While respondent concedes that the Ironwood project was
built and provided housing for low- and moderate-income tenants,
the Ironwood bonds are nevertheless not entitled to tax-exempt
status under section 103(b)(4). Just like the Whitewater bonds,
substantially all of the bond proceeds ($11,047,408.05 of the
$12,190,843.34 or 91 percent of the proceeds) went directly into
a higher yielding GIC that had the same maturity as the bonds.
Because the bond proceeds were tied up in the GIC, another source
of funds had to be found to pay for the project. That source
turned out to be Far West Savings and Loan, which made a
conventional secured construction loan of $10,300,000 to Ironwood
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