WASHINGTON - The Internal Revenue Service has formally declared that the interest earned on the $17.5 million Whitewater Garden black box bond issue is taxable and has begun notifying some bondholders that they owe back taxes on the earnings.

Officials with Harbor Bank of Long Beach, Calif., said yesterday they received a letter from the IRS on, July 30 saying the bank owed $19,763 in back taxes on the interest earned during 1988, l989, and 1990 from $250,000 of Whitewater Garden housing bonds held by the bank.

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