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for Florida tax certificates does not serve the purposes of
section 103, inasmuch as that market is not a source of borrowing
for municipalities, which bear no interest costs in the issuance
of tax certificates. Interest on tax certificates is paid only
by the delinquent property owner upon redemption of the
certificate; the municipality incurs no obligation to pay any
amount to the holder of tax certificates. In selling a tax
certificate, the municipality always receives up front the full
amount of outstanding taxes, interest, costs, and other charges
on the respective property.
III. Section 1.103-1(b), Income Tax Regs., and Its Predecessors
Commencing with the first Federal income tax statute
following the 16th Amendment to the Constitution, the regulations
under the statutory predecessors of section 103 had a tortuous
history, as numerous issues bearing on the exclusion for
municipal bond interest were teased out and dealt with by the
Bureau of Internal Revenue (Bureau) and the Board of Tax Appeals.
One area of contention was whether various forms of instruments
issued by municipalities to finance public improvements that
limited the issuer's repayment obligation to the levying and
collection of special assessments were municipal obligations.
Initially, the Bureau treated such instruments as municipal
obligations. See, e.g., O.D. 447, 2 C.B. 93; O.D. 491, 2 C.B.
93; O.D. 999, 5 C.B. 102, 102-103; I.T. 1606, II-1 C.B. 69,
69-70.
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