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          “returned as income”, and petitioner was not subject to tax on              
          account of the accrued interest.  It follows that under section             
          1.166-6(a)(2), Income Tax Regs., petitioner may not increase its            
          regular adjusted cost basis on account of interest which accrued            
          when it was tax exempt.                                                     
                                                  An appropriate order                
                                             will be issued.                          
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Last modified: May 25, 2011