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P’s sewage system, and it was constructed for the
purpose of disposing of the wastewater generated in P’s
sewage treatment process.
R determined that the bonds will be private
activity bonds under sec. 141(b)(1) and (2), I.R.C.,
and that interest on the bonds will not be exempt from
taxation under sec. 103(a), I.R.C.
Held: Private business use does not exceed 10
percent of the proceeds of the bond issue. The private
business use test of sec. 141(b)(1), I.R.C., is not
met. The proposed bonds are not private activity
bonds, and interest on those bonds will be excludable
under sec. 103(a), I.R.C.
David L. Miller and David A. Walton, for petitioner.
Gary W. Bornholdt and Timothy L. Jones, for respondent.
OPINION
RUWE, Judge: This is an action for declaratory judgment
pursuant to section 7478.1 Petitioner requested a ruling from
respondent that interest on bonds it proposes to issue will be
excludable from gross income under section 103(a), and that the
proposed bonds will not be private activity bonds within the
meaning of section 141(a). Respondent determined that the
proposed bonds will constitute private activity bonds, and any
interest on the proposed bonds will not be excludable from gross
income under section 103(a). The issue for decision is whether
1Unless otherwise indicated, all section references are to
the Internal Revenue Code currently in effect, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
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Last modified: May 25, 2011