§103 — Interest on State and local bonds

947 (1957), overruled by Commissioner v.

-9- Accordingly, we hold that petitioners are not entitled t o exclude from their gross income the amounts designated settlement interest under section 103 . II . Installment Payment Interes t The second prong of petitioners' argument is that the installment payment interest was not required by law because Pa . II Civ . P . 238 does not apply to eminent domain proceedings .

a) provides : -"An inadequate description under the preceding [quoted] sentence shall not invalidate such notice ." Respondent ' s explanation of his deficiency determination informed petitioner that it was required to recognize gain because it'had not established that it had satisfied the .section 1031(f)-special rules applicable to like kind exchanges between related parties . In that respect, Shea v . Commissioner,, 112 T .C . 183 , 192 (1999),-is distinguishable .

103(a), I.R.C., generally provides a tax exemption for interest earned on bonds issued by State and local governments. This exemption does not apply to "arbitrage bonds".

We hold that it does; (2) whether $60,000 paid to petitioners in settlement ofa lawsuit is taxable income to petitioners.

The proceeds they received from the BAC cases were listed on their 1996 Federal income tax returns as being subject to a section 103 3 election .

References to section 103 are to that section of the Internal Revenue Code of 1954, as amended, and references to section 148 are to that section of the Internal Revenue Code of 1986.

to consider the following legal issues: (1) The reduction of tax attributes dictated by section 108(b) is an alternative to taxation and does not mean that excluded COD income is not tax- - 4 - exempt, (2) Congress' intent to treat all shareholders in S corporations similarly under section 108(d)(7), and (3) the dissimilarity in treatment between section 103 (exclusion of State bond interest from gross income) and section 108.

The section 1034 regulations further provided that property used by the taxpayer as his principal residence ma y include'a houseboat, a house trailer, or stock held by a tenant stockholder in a cooperative housing corporation, if the dwelling which.the taxpayer is entitled to, occupy as such stockholder i s used by him as his principal residence . The focal point of the section 1034 regulations was the dwelling unit a taxpayer uses a s his principal residence . The section 1034 regulations reinf

In Hernandez I, we held that interest paid on the redemption of tax certificates sold by Pasco County, Florida, for delinquent taxes owed on real property is not excluded from gross income under section 103 because the tax certificates are not obligations of a 1 In the notice of deficiency, respondent determined that petitioner was not entitled to the itemized deductions he claimed on his 1994 Federal income tax return.

In both cases, we held that the interest is not excluded from gross income under section 103 because the tax certificates are not obligations of a State or political subdivision.

on 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 pr

C. 3. Held, further, tax certificates sold by tax collectors in Florida for delinquent taxes owed on real property are not obligations of a State or political subdivision thereof, and the interest paid thereon is not excluded from gross income under sec. 103, I.R.C. 4. Held, further, interest paid on redemption of tax sale certificates but not reported on P’s joint returns is attributed to P by reason of his dominion and control over amounts received on redemption of the certificates and his fai

local obligations. The ground of decision was that tax certificates are not issued by a State or political subdivision in exercise of its sovereign borrowing power and therefore are not obligations of a State or political subdivision for purposes of I.R.C. sec. 103. On reconsideration, P asserts that the portion of the interest paid on redemption of tax certificates that is attributable to special assessments (in contrast to ad valorem taxes) is excluded from his - 2 - * This opinion supplements

esidential rental property in New York City during 2001 and 2002. Construction was financed by a loan from the New York State Housing Finance Agency (HFA). The HFA funded the loan by raising $110 million in bonds, some of which were tax exempt under I.R.C. § 103. C claimed low-income housing credits (LIHCs) under I.R.C. § 42 for tax years 2003 through at least 2009. In calculating the yearly credit, C included in the property’s “eligible basis” (as defined in I.R.C. § 42(d)) a portion of the var

§§ 103.24, 103.27(c) (2010). Taxpayers not in compliance could face severe criminal and civil penalties, including civil fraud penalties, accuracy-related penalties, failure-to-file FBAR penalties, and failure-to-file and failure-to-pay additions to tax. See OVDI Q&A-5, -6. 4 Although the administrative record refers to a “claim rejection memo” (emp

- 27 - [*27] On the basis of the record the Court concludes that petitioner has failed to meet his burden to prove that respondent’s method of income reconstruction is unfair or inaccurate under the specific deposits method for any of the relevant amounts deposited into petitioner’s bank accounts. The Court concludes that the i

103.22 (1995) (same). He also failed to cooperate with tax authorities when he refused his initial interview and refused to turn over the list of"donors" that he purported to have. Additionally, petitioner's testimony often lacked credibility, was inconsistent, and suggested fraud. His explanation about accidentally transposing his Social Secu

nce" for Federal income tax pur- poses. See sec. 832(e)(6) (specifying rules for computation of"insurance com- pany taxable income" by "a company which writes * * * insurance on obligations the interest on which is excludable from gross income under section 103"). This form ofinsurance protects the bondholder against loss ofprofit on his investment by guaranteeing that he will receive payment ofinterest and repayment ofprin- cipal ifthe issuer fails to pay. As in the case ofresidual value insura

- 5 - [*5] petitioner individually. (Petitioner did not file amended returns forhimselfor for Potter's Pub for 2002.) The IRS assessed additional income tax and additions to tax on the basis ofthe amounts shown on the amended returns for 2003-05. In January 2009 petitionerwas criminally charged with eight counts under section 7

der:of the Settlement Interest and all of the Installment Payment Interest were instead paid pursuant to PENNDOT's voluntary exercise of its -4- borrowing power. Petitioners thus excluded those amounts from gross income as tax-exempt interest under section 103. Respondent issued ,notices of deficiency to each petition.er determining that the excluded interest was not tax exempt. The notices did not, however, dispute petitioners' allocation of the Settlement Amount between principal and interest.

103.22(b) (2) (2010). When a patron exceeds the CTR reporting threshold, he is required to show identification to a casino employee. Chris Dowds, who works in Foxwoods' accounting department, was generally unfamiliar with what forms of identification are acceptable on the casino floor for CTR reporting but stated that it may be possible for a

103.22(b) (1) (.2010). -5- specifics of each of'Griffin's businesses during the years at issue. OPINION Section 162(a)3 allows a deduction for ordinary and necessary business expenses, but taxpayers must substantiate the deductions they claim with adequate supporting records. Sec. 6001; see also, e.g., Menequzzo v. Commissioner, 43 T.C. 824,

y challenge the IRS’s adverse ruling or failure to rule on the organization’s application for recognition of exempt status); sec. 7478 (declaratory remedy by which a State or city that claims that interest on its bonds qualifies for exclusion under sec. 103 may challenge the IRS’s adverse determination or failure to determine). However, certification, when present, will dramatically simplify a taxpayer’s proof of section 893(a)(2) and (3). In form, the State Department’s eventual certification a

Section 5321(a) of Title 31 provides for civil penalties for violations of the reporting requirements of section 5314, and section 5321(b)(1) provides that the Secretary of the Treasury may assess those penalties .

103 .23 and 103 .27 (2000) . "Monetary instruments" includes all negotiable instruments, such as checks . 31 C .F .R . 103.11(u) (2000) . Violation of the reporting requirements applicable to the exportation or importation of monetary instruments can result in criminal penalties consisting of fines, imprisonment, or both . See 31 U .S .C . sec

First, the evidence includes bills from the Los Angeles Police Department for amounts imposed due to violations of section 103.206 of the Los Angeles Municipal Code “for excessive false alarms without the required alarm permit”.

ates” (emphasis added)); TRA 1986 sec. 252, 100 Stat. 2189, 2199, adding Code sec. 42 (Code sec. 42(h)(7)(B): “The term ‘State’ includes a possession of the United States” (emphasis added)); TRA 1986 sec. 1301(a), 100 Stat. 2602, 2603, amending Code sec. 103 (Code sec. 103(c)(2): “The term ‘State’ includes the District of Columbia and any possession of the United States” (emphasis added)). We find support for our understanding of the statute in its legislative history. E.g., S. Rept. 99-313, at

103.22 (2000), as to any nonexempt customer who in a single day transacted business at the Bank involving cash totaling more than $10,000 and (2) an STR as to any other nonexempt customer who the Bank perceived was engaging in a “suspicious activity”. The Bank generally considered exempt customers to be those retail businesses that dealt with

ates” (emphasis added)); TRA 1986 sec. 252, 100 Stat. 2189, 2199, adding Code sec. 42 (Code sec. 42(h)(7)(B): “The term ‘State’ includes a possession of the United States” (emphasis added)); TRA 1986 sec. 1301(a), 100 Stat. 2602, 2603, amending Code sec. 103 (Code sec. 103(c)(2): “The term ‘State’ includes the District of Columbia and any possession of the United States” (emphasis added)). We find support for our understanding of the statute in its legislative history. E.g., S. Rept. 99-313, at

7806(b) (No inference, implication, etc., as to legal effects to be drawn from arrangement, classification, location, grouping, descriptive (continued...) - 36 - There’s a significant difference between COD under section 108, on the one hand, and items such as life insurance proceeds under section 101 and tax-exempt bond interest under section 103, on the other.

There’s a significant difference between COD under section 108, on the one hand, and items such as life insurance proceeds under section 101 and tax-exempt bond interest under section 103, on the other.

plated issuing tax-exempt bonds. After discussions with respondent, and before issuing long-term bonds, petitioner decided to obtain a private letter ruling from respondent on whether interest on the bonds would be excludable from gross income under section 103. On January 31, 1994, the City issued $27,300,000 in 1-year bond anticipation notes (BAN's), due January 31, 1995. The BAN's sold for $27,334,125 and were general obligations of the City. On January 31, 1994, the City transferred $27,304,

DNI includes tax-exempt interest under section 103, reduced by any amounts "which would be deductible in respect of disbursements allocable to such interest but for the provisions of section 265 (relating to disallowance of certain deductions)." Sec.

- 30 - In addition to the items specifically proven by respondent, petitioners conceded numerous adjustments determined by respondent to be unreported income or deductions to which petitioners were not entitled. To the extent no settlement or concession was made regarding any other item determined by respondent, petitioners hav

103.22(a) (1994). - 7 - 1989 59,454 Neither petitioner nor Carlton maintained formal records of Fruitland's financial affairs. Although the partnership owned a cash register, it was not systematically used to reflect Fruitland's sales activity. Reports of daily revenues were not maintained. Invoices reflecting Fruitland's purchases were infor