HomeMy WebLinkAbout01-09-1985 Meeting~ •
AGENDA
MEETIRTG OF THE LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION TO BE
HELD JAPIUARY 9, 1985, IN THE COUNCIL CHAMBERS OF THE CITY HALL,
604 WEST FAIRMONT PARKWAY, LA PORTE, TEXAS, BEGINNING AT 7:00 P.M.
1. CALL TO ORDER
2. CONSIDER APPROVING APPLICATION FOR FINANCING FOR
HAMi~1ACK-TCHOKOEV PROJECT
3. ADJOURNMENT
• ~~~s~o
national B~d6S
filbert Q. fields
Executive Vice President
December 11, 1984
Mr. Bruce A. Hammack
832 S. Broadway
La Porte, TX 77571
Dear Bruce:
This letter is to confirm that Bayshore National
Bank is committed in concept to your Industrial
Development Bond issue for the construction of
an office project located on Fairmont Parkway.
Upon receipt of an inducement letter and appli-
cation from you, we will issue a commitment letter
to you with specific details of our commitment.
You should be aware that tax laws relative to
IDB issues are ever changing and could affect
this bank's ability to price this loan as other
historical issues have been.
Sincerely,
~~~~
Albert D. Fields
Executive Vice President
ADF/mc
1001 Hwy. 146 South ~ P. 0. Box 998 ~ La Porte, Texas 77571 ~ 713/471-4400
. If ~ '~ •
`- f'
CITY OF LA PORTS INDLSTRIAL
DEVELOPi`SENT CGRPORATION
(a nonprofit corporation)
APPLICATION FOR FItiA~;CI\'G
The purpose of this application is to present to the City of La Porte
Irdust~ial Development Corporation (the "Corporation") a reasonably
comprehensive outline of the project (the "Project") for which financing
is being requested. Fill in all blant:s, using "None" or "Not
Applicable" where necessary. If additional space is needed, attach
separate sheets as exhibits. The completed application, with supporting
documents, is to be submitted in duplicate to the City Secretary of the
City of La Porte, Texas at the following address: City Secretary, City
of La Porte,~Texas, 604 West Fairmont Pkwy., P. 0. Box 1115, La Porte,
Texas 7771, Re: Application for Industrial Development Revenue Bonds.
In addi~ion, one copy of the completed apolicatior. should be submitted
to counsel to the Corporation, knox W. Askins, J.D., P.C., 702 West
Fairmont Pkwy., P. 0. Box 1218, La Porte, Texas 7771. At the time
this application is submitted, a non-refundable application fee must be
paid to the Corporation as follows: if the amount of financing applied
for is equal to or less than 500,000, then the fee is S500; if the
amount of financing applied for is greater than S500,000, then the fee
is S1,000.
All applications for financing must be submitted to the Corporation for
review and recommendation at least one (1) week prior to a meeting of
the Board of Directors during which action upon said application will be
taken.
1. General Information
a. Legal name, address and telephone number of Applicant.
Hammack-Tchokoev 917 S. Broadway - PH ~~ (713) 471-5747
La Porte, Texas 77571
b. State of incorporation or other form of organization or
association.
General Partnership
c. Registered agent for service or process for the :~ppiicant•.
Bruce A. Hammack, C.P.A., General Partner
ITY OF LA PORT~LDUSTRIAL Page 2 .
DEVELOP"LENT CORIlICATION •
' Application for Financing
d. Person to whom questions and correspondence should be
directed.
Bruce A. Hammack
e. dame, address and telephone number of counsel for Applicant
(this does not mean bond counsel). .
John Armstrong 702 W. Fairmont Pkwy. PH ~~ (713) 471-1886
La Porte, Texas 77571
f. lame, address and telephone number of accounting firm.
Bruce A. Hammack, C.P.A. 917 S. Broadway PH ~~ (713) 471-5747
La Porte, Texas 77571
g. Name, address and telephone number for bond counsel (if one
has been chosen).
Bob Casey S. Tower Pennzoil Place PH ~~ (713) 223-2900
Houston, Texas 77002
2. Descrintior, of Prciect
a. Amount of financing applied for:
f~6-;$69 rjO0,oO0
b. Total cost of Project:
-9~6-;885 1 X000, 000
c. Brief narrative description of the Proiect including whether
land acquisition is included and the major compon~rts of the
Project, the estimated number and type of new jobs to be
created in City of La Porte, Texas by the Project and tre
annual payroll of employees working at the Project.
Two story, 12,000 sq.ft. Office Building
Land aquisition is not included in the amount of financing
applied for.
The major components of the project are:
(1) Construction costs
(2) Land costs
(3) Attorney's & Application fees
(4) Utility fees .
The type of jobs that will be created in the city of La Porte,
Texas are:
(1) Professional '
(2) Office-clerical
The annual salaries of employees at the project will be:
(1) 20,000 - 30,000 for professional
(2) 10,000 - 20,000 for office-clerical
The number of new jobs created in the city of La Porte are
estimated to be 8-10 professional & 10-15 office clerical
. CITY OF LA POR~h'DL'STRIAL ~ Page 3
.,~ DEVELOPMENT COR. RATION
Application for Financing
d. If the Applicant is relying on the "small issue" exemption as
the basis for the interest on the bonds being exempt from
federal income taxes, complete and attach to this application
the Industrial Development Bond Financing Questionnaire
attached to this application as Exhibit A. Any questions in
this regard should be addressed to bond counsel (if known).
• See Completed Application
3. Financial Arrar.;ements
a. Summarize the financing arrangements as planned as of this
date including name and address of the financial institu-
tion(s) (bank, investment banking firm, etc.), if determined,
which may. be interested in purchasing the bonds if and when
such bends may be approved for sale: (It is the responsi-
bility of the Applicant to arrange for the marketing of the
bonds i= the financing is approved, with the Corporation's
concurrence.)
The financing arrangements will be consumated through a bank
pursuant to there purchase of the bonds. The purchasing bank
is Bayshore National Bank, 1001 Hwy. 146 South, P.O. Box 998
La Porte, Texas 77571
b. If the Applicant has credit rating, please state the rating
and agency:
Not applicable
c. Explain how the Project will be financed if all or a Dor*_ion
of the amount of the financing applied for herein is denied:
Throught a lending institution such as in 3(a) above.
4. Financial Statements
a. Attach most recent Form 10-F: to the Securities and exchange
Commission, together with *_he most recent Form 10-Q:
OR
1. A brief description. of the form of organization and
organizational structure, including parent, subsidiaries
and affil ' ates.; and
The partnership interested in obtaining financing is comprised
2 °~f oriel' s'ta~emenDO~S~o~he history and t}pe or business
e:~o~ din; a
The ~`F~ ~. is a local practitioner engaged in audit, tax & bookkeeping
The...Doctor is a general Medical Practitioner.
3. _:.e a3mes anc ages o: execu,. ~ ~-e o_ ,T.3r.aging officers and
cirecters and a brie: account o= all business experience
of each such officer or director, including his principal
Bruce A. Hammack, C.P.A.; Age 33; Experienced in Audit, Tax
and management advisory services; Principal occupation -
Certified Public Accountant: Name of Business Bruce A. Hammack,
C.P.A.
Vassil V. Tchokoev M.D.; Age 46; Experienced 1`iedical Practitioner;
Principal occupation - Medical doctor; Name of Business
*fedical Center La Porte, Inc.
ITY OF LA PORUSTRIAL • Page 4
' DE~LOP"SENT COR ATION
Application for Financing
occupations and employment and the name and principal
business of the corporation or other organization in
which such occupations and employment were carried on;
and,
On previous page
4. Audited financial statements (or if audited financial
statements are not available, unaudited financial
statements) for each of the three preceding fiscal years.
See Attached Schedules 1-7
b. Detail changes or events subsequent to the date of the most
recent financial statements (including. but not limited to
pending or threatened litigation, claims, assessments, commit-
ments, subsequent information regarding uncollectibility of
receivables, valuation of assets, changes in corporate struc-
ture or statements of prior period financial statements) which
may have a material effect on the Applicant's financial
position:
NONE
B. Agreements of Aonlicant
a. Indemnity: By its execution of this Application, the
Applicant agrees that it will at all times indemnify and hold
harmless the Corporation, the Board of Directors of tae Corpo-
ration, City of La Porte, Texas (the "Unit"), the City Council
of the Unit and any of the officers, directors, emoloyees,
agents, servants and anv other party actir.~ for or on behalf
of the Corporation or the Unit (such parties being hereinafter
referred tc as the "Indemnified Parties") .against am and ail
losses, costs, damages, expenses and liabilities (collectively
herein called "Losses") of whatsoever nature (including, but
not limited to, attorneys' fees, li*_igation and court costs,
amounts paid in settlement and amounts paid to discharge
judgments) directly or indirectly resulting from, arising out
of or relating to one or more Claims, as hereinafter defined,
even if such Losses or Claims, or both, directly or indirectly
result from, arise out of or relate to, or are asserted to
have resulted from, arisen out of or related to, ir. ~.•aole or
in part, one or more negligent acts or omissions of the In-
demnified Parties in connection ::ith the issuance of the Bonds
or in connection with the Project. iae te_-m "Claims" as used
herein. shall mean all claims, la~.:suits, causes o; action and
CITY OF LA PORT~~USTRIAL ~ Page S
DEGELOP*iEtiT CORP RATION
' ~ Application for Financing
other legal actions and proceedings of whatsoever nature,
including but not limited to claims, lawsuits, causes of.
action and other legal actions and proceedings, involving
bodily or personal injury or death of any person or damage to
any property (including, but not limited to, persons employed
by the Corporation, the Lnit, the applicant or am other
person and all property evened or claimed by the Corporation,
the Cnit, the Applicant, any affiliate of the Applicant or any
other person) or involving damages relating to the issuance,
offering, sale or delivery of the Corporation's bonds to
finance the Project (the "Bonds") brought against any Indemni-
fied Party or which an}* Indemnified Party is a party, even if
groundless, false or fraudulent, that directly or indirectly
result from, arise out of or relate to the issuance offering,
sale or delivery of the Bonds or the design, construction,
installation, operation, use, occupancy, maintenance or
ownership of the Project or any part thereof .
None of the Indemnified Parties shall be liable to the Appli-
cant for, and the Applicant hereby releases each of them from
all liability to the applicant for all iniuries, damages or
.destruction of all or any part or parts of any propene owned
or claimed by the applicant that directly or indirectly result
from, arise out of or relate to the design, construct-.ion,
operation, use, occupancy, maintenance or ownership of the
Project or any part thereof, even if such injuries, damages or
destruction directly or indirectly result from, arise out of
or relate to, in whole or ir. part, one or more negligent acts
or omissions of the Indemnified Parties in connection with the
issuance of the Bonds or in connection with the Project.
Each Indemnified Party, as appropriate, shall reimburse the
applicant for payments made by the applicant to the extent of
any proceeds, net of all e~pe.^.s es of collection,- actually
received by them from any insurance with respect to the Loss.
sustained. Such Indemnified Party, as appropriate, shall have
the duty to claim any such insurance proceeds and the Indemni-
fied Party, as appropriate, shall assigr. its respective rights
to such proceeds, to the extent of such required reimburse-
ment, to the Applicant. In case any action shall be brought
or to the knowledge of any Indemnified Par~y, threated against
any of them in respect of which indemnity, may be sought
against *_he Applicant, the Indemnified Party shall promptly
notify the applicant in writing and the applicant shall have
the ~ight to assume the investigation and defense thereof,
including the employment of counsel and the payment of all
expenses. The indemnified ?arty shall :,aye the right to
CITY OF LA PORTDL'STRIAL ~ Page 6
'' DEVELOP:SE~1T COR. TION
~. Application for Financing
employ separate counsel in any such action and participate in
the investigation and defense thereof, but the fees and ex-
penses of such counsel shall be paid by the Indemnified Party
unless (aj the employment of such counsel has been specific-
ally authorized by the Applicant, in writing, (b) the Appli-
cant has failed to assume the defense and to employ counsel or
(c) the named parties t0 3ny SllCh action (including any
impleaded parties) include both an Indemnified Party and the
Applicant, and said Indemnified Party shall have been advised
by such counsel that there may be one or more legal,defenses
available to it which are different from or additional to
those available to the Applicant (in which case, if the In-
demnified Party notifies the Applicant in writing that it
elects to employ separate counsel at the _~ppiicant`s exaense,
the Applicant shall not have the nigh*_ to assume Lhe defense
of such action on behalf of such Indemnified Party, it being
understood, however, that the Applicant shall not, in con-
nection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be
liable for the reasonable fees and exoer.ses of more than one
separate firm of attorneys for the Ircemr.ified Party, which
firm shall be designated in writing by said Indemnified
Party). The Indemnified Party, as a condition of such iP.-
demnity, shall use its best e~forts to cooperate wit'r. the
Applicant in the defense of any such actin^. or claim. T'ne
Applicant shall not be liable for any settlement of any such
action without its consent but, if an}- such action. is settled
with the consent-of the Applicant or if there be final judg-
ment for the plaintiff in any such action, the Applicant
agrees to indemnify and hold har;~less the Indemnified Parties
from and against ar_y Loss by reason of such settlement or
judgment.
b. Fees and Expenses: Applicant agrees to pay all reasonable znd
necessary costs, expenses and fees incurred by the Corporation
in connection with the issuance of the bonds or in connection
with the Project, including but not limiter' to the cut-of-
pocket expenses incurred by the Corporation s personnel; fees
for Iegal services and out-of-pocket expenses of the Corpo-
ration s Counsel fees and out-of-pocket expenses for con-
sulting advice of the CorporaLion~s consultir.o engineers; fees
and expenses required ir. connection. with the under~:riting or
placement of the Bonds; fees and out-of-poc~et exae^ses of
Bond Counsel; fees ar.d out-cf-oocb:et espe^ses cf the trustee;
all recording costs; Biue Sky and legal in~•est:rent survey
costs, rat'_no agencies; fees a::d prir.ti::~ costs; a: d ail
ITY OF LA PORTDUSTRIAL ~ Page 7
DEVELOPMENT COR TION
. .~ Application for Financing
incidental expenses, costs and charges relating to the Project
and the issuance of the Bonds not enumerated above. The
Corporation will upon request provide or cause to be provided
to the trustee under the indenture of trust and/or the Ap-
plicant any data or information which may .be reasonably re-
ouired to verify an}• of the costs and expenses and fees
enumerated above. kith respect to the costs, expenses and
fees enumerated above, the Applicant shall at the Corpo-
ration's request advance on a monthly basis the amounts in-
curred by the Corporation pending reimbursement out of the
proceeds from the sale of the Bonds. To the extent that the
costs, expenses and fees enumerated above are not or cannot be
paid or reimbursed from the proceeds of the bonds or if bonds
are not issued, the Applicant shall pay the same.
In addition, at the time the Application
Economic Development Commission, the Applican
to the Texas Economic Development Commission,
lion, a nonrefundable filing fee in an amount
required by the Texas Economic Develo_ment
Revenue Bond Program Rules.
The undersigned verifies that he
foregoing application on behalf of the
information is true and correct to the
submitted on the day of
is forwarded to the Texas
t will be required to pay
on behalf of the Corpora-
not to exceed S1,~00, as
Commission`s Industrial
is duly authorized to
Applicant and that the
best of his knowledge
19
submit the
foregoing
and belief
~~ ~ ~~
Applicant
gy ~Q~ ~ .f, ffitrY~~r,~ CL
Title /z,fi~•if-G r~.~e ~A,•4TX/N-f•
• Exhibit A
.. .
INDUSTRIAL DEJ~LOPtdENT BOND r INANCING
QtJr S T I ONNA I RE.
The purtose of this Questiornai re i s to elicit information
regarding the proposed project (the "Project") which will
enable Bond Counsel to make an initial determination regarding
the availability of tax-exempt industrial development bond
financing for the cost of the Project in accordance with the
provisions of Section 1O3(b)(6) of the Internal Revenue Code
of 1954, as amended. Any uncertainty that arises in answering
any of the following questions should be specifically noted,
regardless.of how you may resolve the issue. The proposed
bonds the proceeds of which would be used to finance the
Pro] ect ar°_ herelrafter Called tale "3onds" .
1. State the r_a.*ne of the co:-poratior., partnership, trust or
individ~.:al erei f'- r " " ) t t
('r. na ~e_ called ~he User to be rea ed
as the owner of t_he Project for federal income tax purposes
and specify (a) the employer identification number of
such person and (b) the add_ess o_ the principal pace of
business of such oerson.
Hammack-Tchokoev (a general partnership); EIN: 76-0120616;
917 S. Broadway
La Porte, Texas 77571
2. Name any tenant, sublessee, or ot~:er occutant
(hereinafter called "Other Principal Users") of the
Project who possess or will possess for any yea: a right
to occupy or other rise use at least 10,; of the Project.
measured in terms of fair rental value. Please furnish
the computations supporting your decision to include or
exclude any lessee or other user of the Project in
response to this cuestion.
Bruce A. Hammack, C.P.A. will occupy ~ of space in building, and is 50%
general partner in user entity
Vasil V. Tchokoev, M.D., will occupy 4 of space in building and is 50%
general partner in user entity (SEE BELOW)
* In t e event ~ :e bcrd issue s_~e _s e:;^ected `o be
/
S1, 000, GCO or less, ~.: est_or.s 17, '_Q, 20_nd
2l ^eed ::c t L,`
ans•~rered.
The other 50% of building space is not committed as of questionaire date.
. . • • ' Y
3. Name any person (hereinafter called the "Manager") other
~~han the User or ore of the Other Princical Users
(including an employee of the User or one of the Other
Principal Users) who wi11 possess any right to manage the
Project or any portion thereof and describe the terms of
such management arrangement.
NONE
4. Identi~y any purchaser of goods or services produced at
the Project ( also referred to herein as "Oth er Principal
Users"), who may or will pure base more than ?0% of such
output or service and descr_he any such contract~.:a1
arrangement with respect to each such punch astir.
NOT APPLICABLE
5. State the name of the common. parent ( if any) of w~.ich the
User, any ot:.er Principal User, or Manacer ( named above )
is a subsidiary (a common parent is determined us'_ng the
rules of Section 15Ca of the Internal Pevenue Cede of
1954 without regard to the exceptions of Sec:.ien 1S0?(b))
and specify (a) the employer identi~icaticn number and
(b) the address of the principal place of basin ess of
such common parent(s).
NONE
6. .Name any other person rot ident:~ied in parasra~hs 1
throu h 5 ~ o ~ ~ ( )
g ( ) , who wi~l possess a: y nigh.. to ie_se, occupy
or other•~rise use any portion of the ?=oject and descr_he
such use.
NONE, as of questionaire date
-~-
i •
7. List the four-digit Star_dard
(SIC) Code(s) of the project
proposed bond issue (for an a
codes, see the introduction
Corporatior. Income Tax Return) .
6511
Industrial Classification
to be financed by the
bbreviated list of those
to corm 1120, U.S.
8. State the address Of the PrOjeCt and the State, CO::n ty.
and incorporated :municipality (if any) in which the
Project is located.
Lots 1-30, Block 1106, Town of La Porte, Harris County, Texas
As here1na~ter used, the term "jL'r~SC1Ct~Cn" r°__°_rS t0
tlhe incorporated municipality (or municipalities} in
which the Project is or will be loca~ed or, i+ the
Project is not and will not be located in -any
incorporated municipality, to ~he unincorporated ar=_a o=
the county (or counties) in which the Project ; s or wi11
be located. Please indicate whether the Project is or
wi11 be located partially in more than one Jurisdic ion.
Whenever reference is made to facilities located i_^_ the
jurisdictions centig+.:ous to the Jurisdiction, only those
facilities which are located wit: ir. one-aal_ .:._1e o_ ~ e
Project should be considered.
9. Identify all persons (hereinafter referred to as "Related
Persons") within any of the following relationships with
any one or more of the User, the Other Principal Users or
the Manager.
a. In the case of broth er-sister corporations, two or
more corporations if five or fewer persons who are
individuals, estates or trusts own, directiv or
i.^.d~=°-ti Y, mo=e t~:an ~Ca. oc o .-.
., th oral co;.,.:,~ned
vot_ng power o~ ail c'_asses o: stoc:c e~~it'ed to
VO.°_ Cr m0re than ~C,°a O` t=-° ~C:.al Ca1L1p O~ _: ar°S
Of all classes C~ S~OCi{ Of e3Ch CC~~Cra.iOn. .Or
'~'L""^CSes O. C°`_°=..^.._:1.^^ -^C__°-C`.. Of.J::°_rs :-~i a '1
S,^.aii :~°_ i.~ ~3 ~~d a5 OW^.~.^.y S"^,C:{ SL':.. ^°_= SO.^. 35 ai.
NONE
• •. ~
option to acquire ar_d stock owned by his estate,
. trust, partnership, or corporation, if such person
owns more than a 5% interest in sucr. estate, trust,
partnership, or corporation., as the case may be. P.n
individual shall also be considered to own stock
owned by his or her spouse and any of his or her
children who have not attained the age of 2I years,
and if `~.he individual 'ras not attained the age of 21
years, stock owned directly or indirectly by or for
his parents.
NONE
b. In the case of parent-subsidiary corporations, one
or more chains of corporations connected through
stock ownership with a common parent corporation if.
such common parent corporation owns, directly or
indirectly, stock possessing :,lore than 50% o~ the
total combined vo~_ng power of all classes of stock
entitled to vote or more t:.an SCio of the total value
or shares of all classes of stock of cne of the
other corporations. For this purpose, it any person.
~^.as an option to ac~.~ire stock, such stock srall be
~~ considered as owned by such person.
NONE
c. In the case of a partnership and a partner, a
partnership and a partner will be treated as Related
Persons if such par~ner owns, directly or
indirectly, more than SC°,; o` the capital interest,
or the profits interest, ir. such partnership.
NONE
d. In the case of two partnerships, such cartners:~ips
shall be treated as Related Persons if the same
persons own, directly or indi rectiy, mo_e th an 50%
Of t:`le Capital interest Cr prOf~tS =nter°s ~ in sL1Cl1
DartnerShipS. 'ln the Case Or ~.ndividuals, members
of a family including broth ens, sisters (whet_^_er by
the whole or half blood), spouse, ancestors, and
lineal descendants.
NONE
e. In the case of an individual and a corporation, any
individual ir. a corporation more than. 5C°; in value
of the outstanding stock which is o~~ned, directly or
indirectly, by or for such individual.
NONE
f. In the case o` t:..sts and __duc~aries a ~_~„c_ary
,...,
of a gust and ( _ ) a gr a_^. nor o_' such _r~~s t, ( _ ~ ) a
fiduciary of anct :er __.:st (__ _::e same oe=son ~is a
gran for of bot:-i ~_~~sts) , ( y_i ) a ben__`ic~ ar./ o: sucz
.' • •
trust, (iv) a beneficiary of another trust (if any
other person is a grantor of both trusts), or (v) a
corporation more than SO°; of value of the
outstanding stock of which is owned, directly or
indirectly, by or for the trust or by or for a
pe=son w:~o is a grantor of the trust.
NONE
g. In the case of tax-exempt organizations, a person
-and an educational and charitable organization
exempt from tax which is controlled directly or
i r:directly by such. persen or ( i f such person is an
individual) by members of the family of such
individual.
NONE
For purposes of subparagraph (c), (i) a partnership
interest owned, directly or indirectly, by or for a
corporation, partnership, estate or trust, shall be
considered as being owned proportionately by or for its
szarehoiders, partners, or beneficiaries and (ii) an
1rdlViCUal Shall be CCr.Sidered aS OWni.^.g a Dartn°_rshl'J
interest owned, directly or indirectly, by or for his
~' family (as described in subparagraph (d) above). For
purposes of subparagraphs (e), (f) and (g), the fcregoing
const=active ownership rule aDDlies and, in adit_or., an
individual owning any stock in a corporation shall be
considered as owning the stock OWned, directly or
indirectly, by or for his partner. Stock constructively
owned by a person t~roug:7 attribution from ris
partners hip, corporation, estate, or trust s:.all be
treated as actually owned by such person for purposes of
further attribution but stock constructively owned by an
individual by reason of applicalior. of tr_e faT,ily or
partr_er attribution rules shall not be treated as owned
by him for purposes of furl: er attribution.
Please furnisin a brief ownership description which
supports your conclusion to include or exclude any person
as a Related Person for purposes of t~:is Ouestiornai re.
Nt~NE
~_
~ •
10. Identify any other issue (hereinafter called the "Other
Issues") of govern.-nental obligations which has been or
will be sold or issued within 31 days of the expected
sale Or lSSUe date Of t~'`~e BOnds and with respect to which
there is common or pooled security for purposes of paying
debt service. Security is common or pooled when tre same
funds are available to, and the same person may, pay debt
service on such obligation, or when such obligations are
or will be guaranteed by the same person (including the
United States of P.merica or an agency or instrumentality
thereof) or pledge of the same assets. Please provide
the. (actual or expected) identity of the issuer, face
amOUnt, date Of 15sue, lntereS~ rate, and purchaser Of
the other issues.
NONE
If there are any Other . ssues, sta ~e w::e =her eac:: Other
Issue and t_he 3onds will be used with respect to two or
• more facilities which have, or will have, as the same
principal user the same person or a Related Person. .or
purposes of the preceding senter_ce, a Principal User
includes any person (or group of related persons) which
(i) guarantees, arranges, participates in or assists with
the issuance (or pays any portion of the cost of
issuance) of any obligation the proceeds of which are to
be used to finance or refinance a facility, and (ii)
provides any property or any franchise, trademark, or
tradename which is to be used in connection with she
facility.
NONE
11. State t':e expected date of issuance of the 3onds. Also,
attach an expected debt service schedule with rescect to
the 3onds. Identify all collateral or security other
than operating assets pledged to the Bondholders ~(eg.,
Letter of Credit, U. S. _reasury obligations, stock) .
Expected date of issuance-December 19, 1984; Debt service - not applicable;
Sercurity - letter of committment from bank to purchase bonds.
-b-
S r • •
12. • Describe the Project (number and size of bui ldings,
equipment, expected use, etc.). ~ .
One, Two-story, 12,000 sq. ft. office building
13 . State (a) whetrer more than 25% of the proceeds of the
Bonds will be used to provide a facility the primary
nurpese of which is one of ti:e following: retail food
and beverage service, automobile sales or se_-vice, or the
n r~ re ; r en~-erya' ° } Or (b) W~`lett'ier
prov~s~o oL _ c_ at on o_ _ _ .. _=.:-~_n~,
ary porn on of t::e proceeds of the 3onds is to be used to
provide the following: private or ccr„mercial golf
course, country club, massage parlor, tennis club,
skating facility (including roller skating, skateboard,
and ice skating), raceuet sports facility (including any
handball or raccuetball court), hot tub facility, suntan
~~ facility, or racetrack. With res^ect to the pro^eryy
described i n clause (a) , if less t::an 25°; of t;^_e proceeds
Of the BOndS Wli1 be used fOr St1Ch prO~erty, deSCr.be the
portion of proceeds so used.
NONE
14. List the items of property (e.g., buildi^g, machinery and
t i p ~" a ~ C r D e e- ~' t 1'1 Y ~' r
ecl.~pm nom, 1 nd, si L... 1mD_ OV m n..S, ~....) , O :.e_ t...an
lr_tereSt durl:7g CO^Str'1C:.lOn and ~SJLa:.C° COStS; th° COSt
of which will be financed out of the proceeds of the.
Bonds. Also provide the completion dates and the
reasonably expected economic life of such property. For
purposes of determining or projecting cem~letion dates,
in the case of .real property, such date i~s the date on
which construction or development work is complete and,
in the case of personal property, sucz date is the date
on which the property is first put in use or i^stalled,
whichever is later. .or purposes of deter..,_n~ng the
expected economic life of such pr ^er-y e " ~'en.. .d
. r ~e_ ~e shou
b°_ made t0 Lh e m~d~C~.,t l_Ve5 rOV_~.°d l:.^.°r t:':e ;:~tZ
S,lStem Of d~pr°_C.'~a'.~J.^ 'd:ti'.°_r°_ a~~'__~ab_°, 3.^. C: -"'O
-, _..
g•.:idel~ne 1_t,-es estabi_s hod by _: e I: cer^al .cove^.ue
Serv_ce for structu.es. If, hewev:r farts a::d
~..
-7-
~ ~ • •
f ~ ~
circumstances (as evidenced by at least one appraisal)
establish that a longer economic useful life is
justified, please so indicate.
COMPL~_ION ECONOMIC
ITEM COST DAT~ LI~^x
Building costs $ -~68;@9~0 c}gt~_ppo 04-01-85 30 yrs.
Tenant Improvements 200,000 06-01-84 20 yrs.
Legal 10,000 N/A 30 yrs.
Utility work 5,000 04-01-85 30 yrs.
City fee
~. 1,000 N/A 30 yrs.
TOT?~L $ .b.~i-~60 7~~000
15. Describe any interim ri..ancing directly related ~o tze
Project. In part=cular, id_ntify the i.^.t_resc pa_d with
respect to such financing subsecuent to com.Tenci:.g tine
Project and prior to the completion, i= completed (see
paragraph 14 above), or issuance of the 3onds, ice. no t yet
completed.
Note for purchase of land, dated 10-10-84, for $ 281,250, lyr. balloon at
14.57. No inter est will be paid until maturity.
User may contact Bond Counsel .or ass, ~anc_ i.. d=~e_...-
eco. .. __-~es o: eprec~abi? p:ope:ty.
- • .
16. Attach a projected schedule of monthly drawdowns of bond
proceeds from the construction fund and based on this
schedule please compute your best estimate of the amount
of investment earrirgs that you expect to be generated by
the invest,~,ent or bond proceeds pending their expenditure
on the Project. Please indi cage the earnings rate used
for purposes of computing `.his estimate.
Bank will buy the bonds, draws on construction loan will be from the bank as needed.
17. Were or will any of the utilities for the site of th e
Project (gas, electricity, water, sewage, t~lephene) be
provided by a public utility or a state or local -
govern:;~ental unit? Flow will th ey be paid for by the
User?
H L & P-Electric, others unknown as of questionaire date.
18. Provide she following _n=oration regard_ng p.evious
tax-exempt financing used to finance any part e ar_y
facility (incl'.:ding tine Project) owned, leased, occ::pied
or ot~:erwise used by any one of the User, the Ot.er
Principal Users, the Manager, or any belated Per so,^^. to
one or more of the foregoing, any part of which is
located within the Jurisdic ion.
AMOUNT OUTST~.~~~i ING
AMOUNT AS OP ESTIP~L:1'c.D DATE
DATE OS' ISSUE OE ISSUE OP ISSUE Or '"='= SONDS
NONE
19. List actual and re=sora~'_y ex:,eCt°d CaDit31 exp°.^.~~L'=_S
(..^.O ~ inCl.:d;ng Cap; gal expen ~ ~1:: eS funded O~ ~O be
C~
fl:.^. ^.°_~ Out Of t. e _ r OC°°_d5 Of the BC:'1dS) :.a1d Or =..^.C:._ . ed
CL:. _ng t:7e :...r°p V°3r :'°_. _Od p~ °_^,°C._ng %}7°_ ?~{ eC ~°_ C3 ~.e
O~ ~SSL:anCe O~ tl':e ~On^..S cy a.^.V071z W=`..:7 =eSCZC~ ~.:~ ..: ° .
_4-
~ r •
.~
•Proiect. Include all capital expenditures whether or r_ot
-made by the user or a Related Person.
T TAM DF:T~ ~MOL'~1T
Land 10-10-84 $ 285,315
'''O~'~L $ 285,315
20. List ac Dual and reasonably e:{pec wed capital ex~enC= t~.:r es
paid or incurred during t:~e three year period preceding
the expected date o issuance of ~:z e Bonds by anve::e with
respect to property other than ti:e Protect , w~l_c ~s (a)
located in whole or in par:. wthn tine jurisdicticr_, and
(b) owned, occupied or otherwise u sed by the user, the
Other Principal Users, the Ma..agers or any Related ~erscn
to any one or more of the ~oregoi:^.g.
NONE $
~,,~„' ~ $
+~1:~:~
. r ~ • .
Expenditures ar°_ capital experd~tures if they are
properly c~argeable to the capital account or may, be
Capitali2°_d under any provision of the Internal Revenue
Code (or example, construction period interest and
research and development experdit~ares). Attached as
Ex:7ibit "A" to this Ouestiorraire is a memorar_dum w'r_ic:~
sets north examples of cap'_tal and norcapital
expenditures.
21. '1~ the User, the Other principal tTserS, the Ma :alter, Or a
Relayed Person is the lessee of any personal property to
be located within the Jurisdiction, please describe such
items and describe the lease ter:^s pursuant to which such
property is leased. Also, please include a copy of the
existing or proposed lease i= available.
NONE
22. Please state tie date or. which t~:e issuer oL the 3onds
adopted its resolution expressing ar. intent to issue th e
2~Oi1dS .
23 . Ide.^.ti`y any tests t::at Nave beer_ pa=d or i nc~~r r ed with
respect to the property listed in paragraph 12 above
prior to the date shown ir_ paragraph 22 above. Please
state to whom such expenditures were made and the purpose
of such expenditures. nor purpose of this guestien, any
down Dayme.^.~s, d°_JOSitS, Cancel 1 ;ti On Den al ties, etc.
should be treated as an amount "paid or incurred" .
NONE
_~~
t ~ .
:~
•
24. Identify the date on which contracts were ent=red into
. fog the fabrication of major components of the Project or
for the cons ruction of the buildings included in the
?rOjeCts. P.ISO, please identify the dates such f3brlca-
ti on, manufacturing or corstructicn ccmmenced.
NONE
25. '='::e user s'rould be aware of the fact that t_he Tax ~c•.:ity
a .~' _iscal Responsibility Act of 1982 has generally
pr~hibi~ed use of the accelerated cost recovery system
w? ~~ resDeCt t0 property fl.^ial'~C°_d With ~~sT~all 1SSLle~~
___ I:Str~al CeVelOpment boridS.
Person Ccmplet~:~g This ~ orm.
Title•
Date•
Teleohore No.:
8/3i/83
~_
E.XH I B i T A
Examples of CaDi tat Exr~enditures
"Capital expenditures" wit:yin the meaning of Section
103(b)(6)(D) of the Internal Revenue Ccde of 1954, as
amended (the "Code"), are defined in Treas. Reg. § 1.103-10
(b)(2)(ii). That regulation provides generally that an
expenditure is a "capital expenditure," (a) if it is
properly chargeable to the capital account without regard to
any rule of the Code which permits the expenditure to be
treated as a current expense or (b) if it is able to be
capitalized under any rule or election under the Code.
however, an expenditure is not counted as a "capital
expenditure" for purposes of the limitaticn in Section
103(b)(6){D) on bond issuance and capital e:tipenditures if it
is financed out of the proceeds (excluding irvest:;ent
earnings thereon) of the applicable bond issue or the
outstanding principal amount of certain prior e:~empt small
issues.
The following are examples of "capital expenditures".
1. Costs allocable to t'Ze accuisition, construction, or
erection of buildings, machinery and equipment, furni-
ture and fixtures, and. similar property having a useful
life substantially beyond the taxable year. See Treas.
Reg. § 1.263(a)-2(a). See also Rev. Rul. 73-~80,
1973-2 C.B. 86 (compensation paid by corporation to
employees to the extent attributable to corporate
acquisitions is chargeable to capital account).
Addressocran_h-ti'Iulticraph Ccrc., 4 T.C.M. 147 0 945)
(legal fees paid to accuire assets in a reorganization
must be capitalized); Mi ssissin~i Va11ev 'T'rL:st Co. v.
U.S., 61 r.Supp. 451 (E.D. Mo. 1945), rev'd on other
issued sub nom. Bleutermann y. U.S., 155 F.2d 597 (8th
Cir. 1946) (appraisal costs must be capitalized);
Southeastern Express Co., 19 B.T.A.-490 (1930), acc. as
to issue 1, X-1 C.B. 61 (1931) (one-half of corporate
general counsel's salary representing time spent in
connection wilt. organization of a corporation must be
capitalized).
2. COSt Of real property 1nC1L:d~ng water -_^htS, ease.^.:entS
(see rcev. Rul. 80-IOC, 1980-1 C. n. 25) , the net cost of
demoi~t~on of a building wizen real grope=~•/ is
purchases with the intenticn of de:~o'_is hi :.g the
.,
building•situated thereon (LTR 802-_079; see Treas. Reg.
§ 1.165-3) and the amount expended for demolition of a
certified historic structure, whether or not the irtert
to demolish existed at the time of tre purchase cf the
real property (see IRC § 2808) .
'3. Interest on a construction loan, interest or. a loan to
purchase real property, interest on a loan to purchase,
transport, or install personal property, and interest
on a mortgage of unimproved and unproductive real
property and other items (including certain taxes and
insurance payments) to the extent permitted to be
capitalized under. Section 266 of the Cede and the
regulations thereunder, even though deducted as
expenses. Rev. Rul. 75-185, 1975-1 C.B. 43; Rev. Rul.
77-262, 1977-2 C.3. 41 (full amount of interest paid on
the bond is a capital expenditure not o_'rset by income
from investing proceeds during the temporary period);
Rev. Rul. 82-117, 1982-24 I.R.3. 4. LTR 8208108
(interest paid by savings and loan. association or.
deposits not interest on a construction loan for the
savings and 1•o an association which may be capitalized
under Section 266 and, thus, not a capital
expenditure); LTR 8318049 (interest, taxes, etc.
allocated between portion of tract already developed
and portion undergoing development). See Rev. Rul.
81-23, 1981-4 I.R.B. 8 (interest or. the bonds between
the issuance date of the bonds and the date of
commencement of construction of a factory or the
purchase of equipment may be capitalized under Section
266). See also Treas. Reg. § 1.266-1(b) (1)(iv)
(taxpayer permitted to capitalize "any other taxes and
carrying charges with respect to property, which in the
opinion of the Commissioner, are, .under sound
accounting principles, chargeable to capital account").
4. Real property construction period, interest and taxes
required to be capitalized under Section 189 of the
Code.
5. Issuance costs including underwri ring fees, legal fees
and printing costs. Rev. Rul. 77-234, 1977-2 C.B. 39.
6. Cost of defending or per`ectirg t~tle to prooerty. See
Treas. Reg. § 1-253(a)-2(c).
-2-
r
7. Amounts expended for architect's services. See Treas.
Reg. § 1.263(a)-2(d).
8. A corporation's acquisition of stock of another
corporation followed by a liquidation of the acquired
corporation to which Sectior. 334(b)(2) of the Code
applies is in substance ar. acquisition of underlying
assets, and, therefore, is a capital expenditure with
respect to the acquired corporation's facilities to the.
extent of the percentage of the corporation's fixed
assets located in the county or incorporated
municipality). LTR 7916021 (amount of capital
expenditure, however, reduced by the amount expended by
the acquired corporation from proceeds of an
outstanding prior small issue for depreciable tangible
assets located in the county or incorporated
municipality); LTR 7946049. This same principle
probably applies to a corporation's dualified stock
purchase with respect to which an election is made
under Section 338 of the Code, as added by the Tax
Equity and E'iscal Responsibility Act of 1982.
9. Commissions paid in purchasing stock as described in
"8." above. See Treas. Reg. § 1.263(a)-2(e).
10. Cost of goodwill or a covenant not to compete in
connection with the acquisition of the assets of a
going concern. Rev. Rul. 81-56, 1981-8 I.R.E. 7; Rev.
Rul. 81-55, 1981-8 I.R.B. 6; LTR 810174 (covenant not
to compete allocated based or. percentage of principal
user's assets in the area covered by the covenant which
are located in county or municipality). See Treas.
Reg. § 1.263(a)-2(h).
11. Cost of other intangible assets with a useful life
substantially beyond the taxable year (e•g•, patents,
copyrights, customer lists). See Treas. Reg. § 1.167
(a)-3.
12. Advertiseng costs which result in the acquisition of an
asset having a useful life substantially beyond the
taxable year. See A.V. Simcr_sor., 5 T.C.M. 718 (1946)
(cost o~ a promotional ~ilm not currently deductible).
13. Cost of trucks based at a trucking terminal _`acility
with respect to the ter^i^.al _`ac~lity. Treas. Reg
§ 1. 103-10(f) , R:{ample ( 11) . Cc:rcar= Rev . Rul. 30-12
-3-
-,
1 • •
1980-I C.B. 23, (expenditures for trucks are not
capital expenditures because they are not allocable to
any specific facility) and LTR 8324053 (expenditures
for truck trailers are not capital expenditures) .
14. Expenditures for equipment or machinery moved into the
county or municipality within three years after the
bonds are issued; however, only if the expenditures for
the equipment or machinery are made within the six-year
period. Treas. Reg. § 1.103-10(f), Example (12); Rev.
Rul. 82-162, 1982-40 I.R.B. 5. See Rev. Rul. 83-18,
1983-4 I.R.B. 11.
15. Cost o° molds used to manufacture custom elastic
products with respect to the manufacturing facility,
regardless of whether the manufacturer or the custorr,ers
take title to the molds, if the molds have a useful
life substantially beyond the end of the taxable year.
Rev. Rul. 77-224, 1977-1 C.B. 25.
16. If the principal user of a facility orders equipment
. for the facility from a manufacturer, expenditures paid
or incurred by the manufacturer are considered to have
been incurred concurrently by the principal user. Tre
amount which must be taken into account as a capital
expenditure is a percentage of the purchase price to be
paid by the principal user for the equipment equal to
the percentage of the manufacturer's total cost for the
equipment paid or incurred by the manufacturer within
three years before or after the ..date of bond issue.
Rev. Rut. 78-347, 1978-2 C.B. 101. See also Rev. Rul.
74-485, 1974-2 C.B. 32 (capital expenditures by con-
struction contractor attributed to prospective owner of
building).
17. Cost of timber incurred under a pay-as-cut timber
contract when the timber is cut. Rev. Rul. 76-132,
1976-1 C.B. 16.
18. Cost of mebile buildings for use as temporary offices
even though the mobile buildings later are sold to
unrelated parties. Rev. Rul. 75-208, 1975-1 C.B. ^-_6.
See Rev. Rul. 80-162, 1980-1 C.B. 26 (same result as to
machinery later transferred out of political jurisdic-
tion).
/ • ~ •
.:
19. Cost of property obtained under -a lease which is
treated as a purchase for federal income tax purposes.
Treas. Reg. § 1.103-10(b)(iii); Treas. Reg.
§ 1.103-10(f), Example (13). Such determination is to
be made without regard to the safe harbor leasing rules
of Section 168(f)(8) of the Code. Temp. Reg.
§ Sc.103-1.
20. Cost of property to lessor in county or municipality in
which used by lessee if Treas. Reg. § 1.103-10(b)(2)
(iv)(b) exception not met. LTR 8325098.
21. Assumption of liabilities in connection with the
purchase of property. See Crane v. Commissioner, 331
U.S. 1 (1947) .
22. Organization expenditures of a corporation or a
partnership even though amortized under Sections 248 or
709, respectively, of the Code. But see LTR 8014111;
LTR 8011070 (organization expenditures not paid or
incurred with respect to facilities in the city in
which the financed facility is located and, therefore,
not capital expenditures).
23. Interest prepayments of a cash (or accrual) basis
taxpayer. See IRC § 461(g).
24. Origination fees in connection with leases ar_d
"rent-up" fees. See .Richard C. .Goodwin, 75 T.C. No. 37
(1981) and Rev. Rut. 81-161, 1981-1 C.B. 313.
25. Loan commitment fees. See Rev. Rul. 81-160, 1981-1
C.B. 312; Rev. Rul. 81-161, 1981-1 C.B. 3I3.
26. Fair market value of property given up in Section 1031
like kind exchange. Rev. Rul. 83-17, 1983-4 I.R.B. 9.
27. Expenditures financed with a prior exempt small issue
to the extent such issue is no longer outstanding on
the date of the applicable bond issue; however, only to
the extent paid or incurred within the six-year period.
Treas. Reg. § 1.103-10(f) Example 10; Rev. Rul. 76-98,
1976-1 C.B. 31. LTR 8037091 and LTR 812308? (FIFO rule
apparently used for de~ermini ng whet::er expe::di lures
paid or incurred within. the six-.year period) .
-5-
r.
• •
28. Expenditures by a ground lessor on the leased ground
are capital expenditures with respect to a bond-financed
facility on the leased ground; but only if the expendi-
tures are made within three years before or after the
date of the bond issue. LTR 783301-_; LTR 7951067; LTR
8011062; LTR 8149042; LTR 81^9049. Furthermore,
expenditures by tenants of a mall for leasehold improve-
ments that are fixtures under local law are capital
expenditures with respect to the mall building; but
only if made within three years before or after the
date of the bond issue. LTR 8149049; LTR 8313074.
Conga LTR 8037075. See also LTR 819042 (not capital
expenditures if tenant improvements will be worth less
than 10% of thei r cost when they revert to the land-
lord). However, expenditures by ter.arts of a mall for
personal property under local law are not capital
expenditures with respect to t'~e mall build; ng. LTR
8037075; LTR 8149049; LTR 8317083. -
29. Cost of option with term of more than one year. LTR
8218057. See Zaninovich v. Comm;ssioner, 61o F.2d 429
(9th Cir. 1980).
30. Certain real property construction period interest and
taxes required to be capitalized under Section i89 of
the Code.
31. Research and experimental expenditures (including
computer software, Rev. Proc. 69-21, 1969-2 C.B. 303)
allocable to facilities where manufacturing will occur
even though deducted as expenses. Rev. Rul. 77-27;
1977-1 C.B. 23; LTR 8052071. See Rev. Rul. 77-253,
1977-2 C.B. 40. See also LTR 8042135 (definition of
research and experimental expenditures).r_owever,
certain in-house research expenditures (if creditable
under Section 44F and deducted under Section 174(a))
made after September 3, 1982, are not capital expendi-
tures. IRC § 103(b)(6)(F)(iv).
32. Certain expenditures to establish, maintain or increase
the circulation of a newspaper, magazine or other
periodical even though d-educt_ble under Section 173 of
the Code.
33. Trademark and tradename extendi-u_es even though
amortizable under Section 177 0_° ~ e Code.
-6-
1~ a>, •
.~
34. Cost of certain depreciable business property even
though deductible under Section 179 of the Code.
35. Expenditures by farmers for fertilizer, lime, etc. even
though deductible under Sectior_ 180 of the Code .
36. Expenditures by~ farmers for clearing land even though
deductible under Section 182 of the Code.
37. Cost of railroad rolling stock even though amortizable
under Section 184 of the Code.
38. Intangible drilling costs even though deductible under
Section 253(c) of the Code.
39. Mining development expenditures even t:7oug deductible
under Section .616 of the Code .
40. Mining exploration expenditures even though deductible
under Section 617 of the Code.
" 41. Expenditures paid or incurred with respect to a
facility that are not otherwise taken into account in
the accruisition cost or as an outstanding prior exempt
small issue. Rev. Rul. 76-427, 1976-2 C.3. 28. 3ut
see LTR 8017077 (expenditures by unrelated party prior
to offer for aco1-uisiti on of lot not ca_oital
expenditures); LTR 8239051 (expenditures by former
principal user of purchased facilities not capital
expenditures); LTR 8304115 (expenditures by purchasing
lessee for leasehold improvements not capital.
expenditures to extent that fair market value of
leasehold improvements reflected in purchase price).
The following are examples of expenditures which should
not be "capital expenditures":
1. Administrative costs, overhead, and wages (unless
allocable to the accruisition, construction, or erection
of property described in "1." above).
2. Cost of incidential repairs or nainterarce. See :teas.
Reg. § 1.263(a)-1(b).
3 . Cost of property which would properly be i :eluded i n
inventory i f on nand at the end o~ t ta:~able near
-7-
r. r~ •
C~
[i.e., direct inventory costs]. LTR 8015024; LTR
8239051. See IRC §§ 1221(1), 1231(b)(1)(A).
4. Purchase of cash, accounts receivable and prepaid
expenses. LTR 8015024; LTR 8239051.
5. Cost of property (including real estate) held primarily
for sale to customers in the ordinary course of a trade
or business if not used in the trade or business or for
the production of inceme until sold. LTR 8147183; LTR
8234037. See IRC §§ 1221(1), 1231(b)(1)(B); Rev. Rul.
62-141, 1962-2 C.B. 1982.
6. Cost of supplies (defined as property which does not
have a useful life substantially beyond the taxable
year when accruired) . E.Q.. , LTR 8206117 ( expenditures
for production and resinking of dies with useful life
of less than one year are net capital expenditures) .
7. Periodic rent payments under a trae lease for federal
income tax purposes (Rev. Rut. 77-353, 1977-2 C.3, aa~
w and LTR 8304115); but lessor's expenditures fcr the
leased item are capital expenditures if made wit`~ir_ the
six-year period unless the leased item is described in
"8." below. LTR 8152123.
8. Cost to the lessor or personal property leased under a
true lease for federal inceme tax purposes (determined
without regard to the safe harbor leasing rules of
Section 168(f)(8) of the Code, Temp. Reg. § 5c.103-1)
either from the manufacturer or from a person in the
trade or business of leasing similar property provided,
pursuant to general business practice, property of this
type ordinarily is the subject of a lease. Treas. Reg.
§ 1.103-10(b)(2)(iv}(b); LTR 7925037; LTR 8317083 (even
if not true lease for federal income tax purposes)..
However, if the principal user of a facility purchases
the personal property within three years of the bond
issue, sells it to a leasing company, and leases it
back, a capital expenditure was incurred on the occa-
sion of the purchase in the amount thereof regardless
of the subsecruent sale and leaseback. Rev. Rul.
79-248, 1979-2 C.S. 41. gut see Rev. Rul. 8C-162,
1980-1 C.3. 26 (no actual pure hase e~.en t?:oug h purchase
order submitted and down pa,r.;~ent :jade) .
-R-
r`. ~•' •
;>
9. Issuance of stock or securities for property in a tax-
free incorporation or other exchange under Section
351(a) of the Code. Treas. Reg. § 1.103-10(b)(2)
(v)(C). If Section 351(a) applies to a transfer during
the six-year period surrounding the date of issue, and
if, with respect to the property transferred, expendi-
tures made within such period would have been Section
103(b)(6)(D) capital expenditures if the transferor and
the transferee corporation had been related persons for
such period, then such expenditures shall be considered
to be Section 103(b)(6)(D) capital expenditures made by
the transferee corporation. In addition, if a trans-
feror and transferee are related persons immediately
following such transfer, suc:~ transferor and transferee
shall also be treated as having been related persons
for the portion of such six-year period preceding the
date of such transfer. Treas. Reg. § 1.103-10(b)(2)-
(v)(d). Furthermore, the purchase by the shareholder
or security holder of such proper~y is a capital
expenditure if made within the six-year period.
.. 10. Exchange of consideration for assets in a tax-free
reorganization or liquidation which auali=ies under
Section 381(a) of the Code (relating to carryover of
tax attributes); but the transferor and transferee are
treated as related throughout the portior_ of the six-
year period preceding the date of exchange. Treas.
Reg. § 1.103-10(b)(2)(v)(a), (b); Treas. Reg. § 1.103-
103-10(f) Example 17 ("A" reorganization with boot).
11. Exchange of stock in a tax-free "3" reorganizatior_; but
the parent and subsidiary are treated as reiateci
throughout the six-year period. Rev. Rul. 75-411,
1975-2 C.B. 41.
12. A corporation's cash purchase of 100 percent of the
stock of another corporation (which later finances a
facility with tax-exempt bonds)- which will not be
liquidated within two years, but which will be operated
as an autonomous subsidiary of the acquiring
corporation. The corporations will, however, be
treated as related par-ties throughout the six-year
period at least if they are related on the date of tr.e
issue. LTR 8008136; LTR 8103031; LTR 810107w; LTR
814117; LTR 8239051.
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13. Issuance of a partnership interest in tax-free exchar_ge
under Section 721 of the Code for property, at least
where the partner purchased the property more than 3
years before the issuance of the bonds. Rev. Rut. 77-
146, 1977-1 C.B. 24.
14. A cash purchase of a partnership interest. LTR 8316023
(9.99% interest in joint venture); LTR 8320025 (49,0
limited partnership interest if r_o plan to licuidate
partrership).
15. If the present owner purchased the facility within the
six-year period, the purcase price is a capital
expenditure but the prior owner's capital expenditures
with respect to the facility may be disregarded to the
extent they are reflected in the purchase price. Rev.
Rul. 70-427, 1976-2 C.B. 28; LTR 79102 1. See LTR
8017077; LTR 8239051.
16. Cost to rep'_ace property damaged or destroyed by fire,
storm, or other casualty to t~.e exte_^.t not in excess of
the fair market value (determined is,.:~ediately before
the casualty) of the property replaced. IRC § 103(b)
(6)(c)(~)(i); Treas. Reg. § 1.103-10(b)(2)(iv)(c); LTR
8124151.
17. Expenditure by a Section 501(c)(3) charitable orcar_iza-
tion for charitable activities are not capital extendi-
tures for purposes of a related person's small issue
financing of an unrelated facility. Rev. Rul. 74-289,
1974-1 C.B. 32. See LTR 8011062.
18. Expenditures by a state or local gover^^ental unit paid
or incurred in carrying out its sta~utory purposes are
not capital expenditures for purposes o_` a small issue
financing of an unrelated facility. LTR 8012090; LTR
8317083 (computer unrelated to building in which it is
used).
19. Expenditures by a public utility which is not the
principal user of the bond-financed facility with
respect to property of such compare or by a State or
local governmen*_al unit wit h respect ~o ..:e prop erty of
such unit, if the following ce^~i;.'_ons are me;.: ( i )
Such property is used to rovi~e cas, wager, sewage
disposal services, elect__c energy, or telechore
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services; (ii) such property, though installed in or
connected to the facility, is not an integral part of
the facility such that the cost of such property is
ordinarily included as part of the acquisition, con-
struction, or reconstruction cost of such facility; and
(iii) such property is of a type normally paid for in
the form of periodic fees based upon time or use.
Treas. Reg. § 1.103-10(b)(2)(iv)(a); LTR 8313074.
20. Cost of moving already owned equipment or machinery
(including removal costs) except for taxes and carrying
charges which may be capitalized under Section 266 of
the Code. See Rev. Rul. 70-392, 1970-2 C.B. 33;
Eastern Shoe Marufacturin Co., 8 B.T.A. 1159 (1927),
acc. , VZ I-1 C.B. 9; Addressogratih-Multicraoin Corn. , 4
T.C.M. 147 (1945); Fowler & Union Horse Nail Co. Irc.,
16 B.T.A. 1071 (1929). But see Clarence E. 3aldwin, 1-_
T.C.M. 794 (1955); Winnett v. Helvering, 68 F.2d 6i4
(9th Cir. 1934}; Darlington Veneer Co., Znc., B.T.A.
Memo. Cf. Rev. Rul. 79-135, 1979-1 C.3. 78 (Section 103
"substantially a11" test - installation cost of mewed
equipment is depreciable property); Rev. Rul. 80-3~6,
1980-2 C.B. 47 (Section 103 "substantially all" test -
moving cost of property purchased from unrelated
corporation is depreciable property).
21. Theoretical interest of a taxpayer using his owr_funds.
See Treas . Reg. § 1.266-1(b) (1) (iv) .
22. Certain in-house research expenditures (if creditable
under Section 44F and deducted under Section 174(a))
made after September 3, 1982. IRC g 103(b)(6)(F)(iv).
23. Research, development and testing services performed
for unrelated party if no patentable or licensable
interests in the technology developed are retained.
LTR 8304115.
24. Expenditures required by circumstances which could not
be reasonably foreseen on the date of issue or arising
out of a mistake or fact (but the aggregate amount of
such exile..^.ditures with respect to any issue stall not
exceed $1,000,000). IRC § 103(b)(6)(F)(iii).
25. Expenditures re~.:ired by a change made after the date
of issue of the issue in cuestion in a Federal or State
law or 'ecal o_di:-:ance of genera'_ application. (or rule
_ii