Quote:
Originally Posted by batman911
I believe the persons/entities that purchased the bonds would owe back taxes on any income derived from the bonds. That would probably cause these persons/entities to bring legal action against the original seller of the bonds to recover their losses. The bonds would be recalled and re-issued as taxable bonds (meaning the districts would pay more interest than they did on tax free bonds). It may not be such a bad thing since interest rates are probably much lower now than when to original bonds were issued.
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I think the penalty that the IRS would impose on the issuer of the bonds would more than compensate the IRS for the revenues it lost due to the tax-exempt status of the bonds. I agree, the bonds would have to be purchased back by the issuer. The question is at what value? Based on current interest rates, the value should be much higher than par. That would be very very expensive to the issuer of the bond. Yes, where would the money come from? I'm sure the developer would just eat it. He gets such high praises from the residents.... Which he really deserves even with this issue. He had accountants and attorneys set this up. This is America, need to be a true capitalist.
My guess is as good as anyone elses. It's only a guess.
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