The Bond Buyer's Nov. 9, 1994, article ("IRS Field Agents Told Not to Press Issues Involving Reserve Funds of 501(c)(3) Entities") reports that IRS field agents have been instructed not to raise Section 514 questions when auditing "qualified 501(c)(3) bonds" with a reserve fund that has been capitalized with bond proceeds.

We welcome the demonstrated sensitivity toward the potential impact on the market. However, we are concerned that the article may be leaving the public under the impression that the taxability question under sections 512 and 514 could affect the tax status of bond interest under Section 103. We believe this is absolutely not the case.

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