Quote:
Originally Posted by EdV
Although the Internal Revenue Code makes bondholders ultimately responsible for uncollected taxes if a tax-free bond is deemed taxable, the IRS rarely does so.
As stated in Section E of an Introduction to IRS Audits of Tax-Exempt Bonds, it is the stated policy of the (IRS) TEB program to attempt to resolve violations of the Code without taxing bondholders.
This is done for a couple of reasons:
- Trying to track down each bondholder including those that only own a minute fraction that is part of a muni fund would be an enormous task.
- The bond issuers (the two special CDDs) would have to recall or reissue the bonds anyway to cover the taxable status in the coming years until the bonds maturity.
- The negative press as exemplified by Ms. Ritchie’s articles would be detrimental in an already recessed real estate economy.
If the IRS were to prevail through all of the likely appeals processes, a settlement similar to the example outlined in Section E of the above referenced document is most likely. |
Quote:
Originally Posted by bike42
Totally flawed. The bonds were not purchased by residents. They are sold to investors, usually institutional investors. The bonds in question have nothing to do with the bond on your house.
(from Ritchie's article) " . . . the Village Center district won't owe the IRS a nickel — the tax burden falls wholly on the holders and the buyers of the bonds. They would have to pay taxes on the interest they collected as the loans were being repaid."
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According to EdV's post the IRS rarely goes after bondholders for back taxes as it would too laborious a task.
According to Rictchie's article "...the Village Center district won't owe the IRS a nickel -- the tax burden falls wholly on the holders and the buyers of the bonds".
My question is -- the bondholders don't pay, the VC district doesn't pay, the developer doesn't pay...so does the $355 million dollars in loans just magically disappear? What am I missing here?