CHICAGO - The Internal Revenue Service on Wednesday stepped into a controversial Columbus, Ohio, bond deal in the midst of its final pricing and raised serious concerns about the tax-exempt status of the bonds, forcing the city to cancel the issue.

Hugh Dorrian, Columbus' auditor, said yesterday that he decided to cancel the $27 million tax-exempt general obligation deal, which had just had its final pricing, late Wednesday after a "lengthy" phone call from IRS officials.

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