- 17 - the source to which the prepayment applied was the acquisition of the obligation of the State Fund and controls the character of the transaction. Cf. Woodward v. Commissioner, 397 U.S. 572 (1970) (articulating the "origin of the claim" test). Thus, we conclude that the prepayment was for property and consequently we turn to the question whether it was "investment property". On this point, the parties have locked horns on whether the prepayment falls within the ambit of "investment-type property" within the meaning of section 1.148-1(b), Income Tax Regs., supra p. 12. Petitioner argues that the prepayment is not investment-type property because it satisfies the latter of the two exceptions in the regulations, namely a prepayment is not investment-type property if prepayments on substantially the same terms are made by a substantial percentage of persons who are similarly situated but who are not beneficiaries of tax-exempt financing. The regulation does not define a substantial percentage. As of October 20, 1993, when the State Fund offered the discount for prepayment, there were 224 municipalities with obligations to the State Fund. As of December 14, 1995, 36 municipalities had prepaid at the 35-percent discount. It is represented that none of the 35 municipalities, excluding petitioner, utilized the benefit of tax-exempt financing with respect to their prepayments. In sum, 36 of 224 municipalities,Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Next
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