WASHINGTON--The industrial development bonds issued for a Tennessee hotel project in 1984 are not tax-exempt because they violated the $10 million limit on small-issue IDBs, the reasonable expectations requirement, and other tax laws and rules, an International Revenue Service report concludes.

The findings appear in an IRS report the agency made available late last week to a lawyer representing one of a handful of investors who purchased the bonds and whose interest earnings are now being taxed by the IRS.

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