Bond lawyer joins IRS, will help start program for auditing municipals.

WASHINGTON -- The Internal Revenue Service recently added a bond lawyer to its staff, largely to help IRS officials develop their audit program for tax-exempt bonds.

Sunita B. Lough, formerly a lawyer with Kutak Rock in Washington, began work this week as a tax specialist in the IRS's exempt organizations division, according to an agency spokeswoman.

Marcus Owens, the director of the division, said in an interview last week that Lough would be helping to "design the [audit] program and deal with the cases that are underway."

Owens said he envisions Lough "having a major role in how we deal with tax administration in the bond area."

The IRS launched its fledgling bond audit program earlier this year, and to date about 300 issues have been referred to the service for audit. Most of those issues involve four types of potentially abusive deals targeted by the service last January.

The four types are: bond issues with back-loaded debt service payments that may be arbitrage driven; guaranteed investment contracts that may have been purchased at greater than market value; advance refundings in which the escrowed securities may have been purchased at greater than market value; and small-issue industrial development bonds in which the issuers exceeded the $10 million capital expenditure limit.

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