Bernard J. Penn and Thelma I. Penn - Page 5




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          the amount of $27,703 from redeemed Escambia County tax                     
          certificates.  Petitioners offered no evidence or argument                  
          disputing respondent’s determination that they received $433 in             
          interest from Bay County, Florida, in 1996, and we accordingly              
          find that they received such interest.4                                     
               Having concluded that petitioners received $28,136 of                  
          interest income in 1996 from Escambia and Bay Counties, Florida,            
          we must decide whether any portion of this amount may be excluded           
          from petitioners’ gross income.  Petitioners argue that the                 
          interest reflected on Forms 1099 from Bay County and Escambia               
          County, Florida, as interest earned on redeemed tax certificates            
          is tax-exempt interest under section 103.  In general,                      
          subsections (a) and (c)(1) of section 103 exclude from gross                
          income the interest earned on specified State or local bonds,               
          provided such bonds represent an obligation of a State or its               
          political subdivisions.                                                     
               This Court has previously held that interest received on               
          account of taxpayers’ holding Florida tax certificates that are             
          redeemed is not excluded from gross income under section 103                
          because the certificates are not obligations of the State of                


               4 As petitioners neither asserted a reasonable dispute nor             
          introduced credible evidence with respect to their receipt of the           
          interest income as determined by respondent, the burden of proof            
          does not shift to respondent in this case.  See secs. 6201(d),              
          (effective for court proceedings on or after July 30, 1996),                
          7491(a)(effective in connection with examinations commencing                
          after July 22, 1998).                                                       




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