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of a State or political subdivision and that therefore the
interest on them is not excluded from gross income under section
103(a). Against the background of our opinion in Barrow v.
Commissioner, T.C. Memo. 1983-123, we agree with respondent.
In Barrow v. Commissioner, supra, we considered whether
interest earned on redemption of Florida tax certificates was
excludable from the holder’s gross income under section 103(a).
We held, on a motion for summary judgment, that interest on
Florida tax certificates was not excluded from gross income
because the certificates were neither an exercise of sovereign
borrowing power nor obligations of the State of Florida or a
political subdivision thereof.
Subsections (a) and (c)(1) of section 103, by their literal
terms, exclude from gross income interest on any State or local
bond, defined as an obligation of a State or political
subdivision thereof.10 See Newman v. Commissioner, 68 T.C. 433,
446 (1977) (section 103 obligation must be in writing); Kansas
10 In pertinent part, sec. 103 provides:
SEC. 103(a). Exclusion.-- * * * gross income does
not include interest on any State or local bond.
* * * * * * *
(c) Definitions.--For purposes of this section and
part IV--
(1) State or local bond.--The term "State or
local bond" means an obligation of a state or
political subdivision thereof.
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