City of Tucson, Arizona v. Commissioner of Internal Revenue

Implementation of the congressional ban on “arbitrage bonds” embodied in Section 103(a)(1) of the Internal Revenue Code is a complicated and delicate matter, as the length and detail of Judge Robinson’s scholarly opinion demonstrate. For two closely related reasons, I cannot join that opinion.

First, I substantially agree with the reasoning of the Tax Court in this matter. See City of Tucson v. Commissioner, 78 T.C. 767 (1982). The Commissioner’s conclusion that sinking fund financing of municipal bonds effectively allows bond proceeds indirectly to replace funds used to acquire higher yield…