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and bonds. Shortly thereafter, the language in question in
section 1.103-1, Income Tax Regs., quoted supra p. 3, was added
to the regulations when they were republished under the 1954
Code. See T.D. 6220, 1957-1 C.B. 34, 38.
Our review of the judicial and administrative history of
section 1.103-1(b), Income Tax Regs., impels us to conclude that
the addition of the language at issue was intended to conform
administrative interpretation of section 103 with our holding in
Riverview State Bank v. Commissioner, supra, by recognizing that
special assessment indebtedness, whether labeled bonds, bills, or
otherwise, can be an obligation of a State or a political
subdivision for purposes of section 103. See Independent Gravel
Co. v. Commissioner, 56 T.C. 698 (1971). In Riverview State
Bank, we declined to make any differentiation based upon the form
in which a special assessment obligation was denominated in
determining whether the interest on the obligation was excluded
from gross income. Riverview State Bank v. Commissioner, supra
at 1150. Following Riverview State Bank, we decline to hold that
section 1.103-1(b), Income Tax Regs., applies in this case,
merely because the Pasco County obligations in issue are called
"tax certificates". (Emphasis added.)
Petitioner's effort to apply section 1.103-1(b), Income Tax
Regs., to the case at hand is misconceived and fundamentally
flawed. That regulation requires that special assessment
indebtedness be issued “for public improvements (such as sewers,
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