[9582]
VIA FAX
January 8, 1998
TO: TAX COMMITTEE No. 1-98
RE: IRS NOTIFICATION THAT CERTAIN MUNICIPAL BONDS ARE TAXABLE
______________________________________________________________________________
A municipal bond fund member of the Institute has received from the Internal Revenue
Service’s Houston District a letter informing it that IRS has determined that the interest income
from certain municipal bonds it holds is taxable. The bonds in question are described by IRS as
issued by the Utah School District Finance Cooperative and titled Revenue Bonds, Series 1988
(Capital Improvements Financing Pool), Issued July 14, 1988.
The letter appears to instruct the fund to send IRS Forms 1099 to its shareholders for
1994, 1995 and 1996 treating income from these bonds as taxable and to send originals of these
Forms to the IRS Houston office by January 31, 1998. The fund separately is advised to report
interest on these bonds as taxable for 1997 and subsequent years. The letter notes that failure to
file required Forms 1099 may result in penalties under sections 6721(a) and 6721(e).
ACTION REQUESTED
If you hold any of the Utah School District Finance Cooperative bonds in question,
please call the undersigned at 202-326-5832 at your earliest convenience. We also would like to
know, with respect to 1994, 1995, 1996 and 1997:
(1) the total amount of interest received on the bonds each year;
(2) the number of shareholders who would have received Forms 1099 each year (i.e.,
because they would have received taxable income of $10 or more) had the
interest been treated as taxable; and
(3) the average amount of taxable income attributable to these bonds that would
have been received by the shareholders identified in question 2 (who would
have received a Form 1099 for each year had the bonds been treated as taxable).
Keith D. Lawson
Associate Counsel - Tax