City of Columbus, Ohio - Page 15

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               There is no question that petitioner's purpose in prepaying            
          the City Obligation was to profit from the discount offered by              
          the State Fund.5  The fact that it would profit from the discount           
          if the interest on the proposed bonds were taxable does not                 
          negate the fact that such profit would be greater if such                   
          interest was exempt from tax under section 103(a).  Nor does the            
          fact that the issuance of taxable bonds would also be                       
          advantageous turn the purpose of the proposed issue on a                    
          nontaxable basis from a principal to a subsidiary purpose.  Such            
          a view would emasculate the arbitrage restrictions of section 148           
          whenever a financial advantage of a bond issue could be obtained            
          whether the interest on the bonds was taxable or nontaxable.  In            
          this connection, we think it significant that the regulation                
          speaks in terms of "a" and not "the" principal purpose.  Santa Fe           
          Pacific v. Central States Pension Fund, 22 F.3d 725, 727 (7th               
          Cir. 1994).                                                                 


          In its application for the ruling, petitioner stated:                       
               [O]ne of the principal governmental purposes for                       
               issuing the BANs, and for issuing the Proposed Bonds                   
               * * * was to achieve an economic benefit represented by                
               a present value debt service savings with respect to                   
               the City Obligation.  That debt service savings was                    
               made possible in part because of the ability of the                    
               City to pay off the City Obligation at the amount                      
               provided for in the Payoff Agreement, i.e. 65% of the                  
               principal balance of the City's employer's accrued                     
               liability, plus accrued interest through January 31,                   
               1994 at 4.25%.                                                         




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