LOS ANGELES -- Lawyers in the test case over the IRS's right to tax bondholders wasted little time this week carving out clearly distinct positions on whether the Whitewater Garden and Ironwood bond sales were properly handled.

Lawyers for Harbor Bancorp & Subsidiaries and Edward and Elena Keith -- the investors who are fighting attempts by the Internal Revenue Service to revoke the tax-exempt status of the bonds and collect back taxes on interest earnings -- used their opening statement and initial witnesses to highlight the review process that was required before a housing project could go forward.

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