City of Columbus, Ohio - Page 18

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          or 16.07 percent, made a prepayment on substantially similar                
          terms.                                                                      
               Petitioner cites various instances where the term                      
          "substantial" refers to percentages of 5 to 15 percent, including           
          section 1.103-11(b), Income Tax Regs. (5 percent); section 1.148-           
          2(e)(2)(B), Income Tax Regs. (5 percent); section 6662(d)(1) (10            
          percent); and section 147(c)(2)(E) (15 percent).  Elsewhere, the            
          term refers to percentages as high as 25 percent, section                   
          42(d)(2)(D)(i)(III); section 6229(c)(2), and 33 percent, section            
          382(l)(4)(B)(i).                                                            
               Clearly, the term "substantial" can cover a wide range of              
          values.6  Where Congress meant only to allow customary                      
          prepayments, we do not find that 16.07 percent is a substantial             
          percentage.  Thus, the prepayment herein does not satisfy the               
          exception, and the prepayment of the City Obligation with the               
          proceeds of the BAN's constitutes the acquisition of investment-            
          type property.  Moreover, we are not convinced that Congress                
          intended that the exception should apply where, as is the case              
          herein, the only offerees of the prepayment opportunity were                
          entities who were beneficiaries of tax-exempt financing rather              
          than to a class of offerees that included some of these                     
          beneficiaries.  If this were the standard for the application of            

          See Nabisco Brands, Inc. v. Commissioner, T.C. Memo. 1995-127               
          at n.22.                                                                    




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