                          T.C. Memo. 1996-343



                     UNITED STATES TAX COURT



              CITY OF COLUMBUS, OHIO, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent*



     Docket No. 3301-95B.                 Filed July 30, 1996.



     David L. Miller, for petitioner.

     Rebecca L. Caldwell-Harrigal and Richard L. Carlisle, for

respondent.



                 SUPPLEMENTAL MEMORANDUM OPINION


     TANNENWALD, Judge:     Petitioner has filed motions to

reconsider our prior opinion herein (106 T.C. 325, filed May 14,

1996) and to vacate and revise our decision entered in accordance

*
   This opinion supplements our opinion in City of Columbus v.
Commissioner, 106 T.C. 325 (1996).
with that opinion.   Respondent has filed responses thereto as

ordered by the Court.

     The substance of petitioner's motion for reconsideration is

our alleged failure to take into account certain legislative

history which, according to petitioner, should cause us to reach

the opposite conclusion from that articulated in our prior

opinion.   In its reply brief submitted prior to the issuance of

that opinion, petitioner, for the first time, argued that its

proposed issue was entitled to the benefit of the pre-1986 rules,

relying on material in the General Explanation of the Tax Reform

Act of 1986 prepared by the staff of the Joint Committee on

Taxation (the General Explanation) in connection with the

enactment of the Tax Reform Act of 1986, Pub. L. 99-514, 100

Stat. 2085.   The General Explanation stated with respect to new

provisions dealing with arbitrage bonds:

     Congress intended this provision to prohibit issuance
     of refunding bonds (as well as new issues) of pension
     arbitrage bonds after September 25, 1985, regardless of
     whether the proceeds of the refunded bonds used to
     acquire the annuities may have been treated as spent
     proceeds under prior law * * * [Staff of the Joint
     Comm. on Taxation, General Explanation of the Tax
     Reform Act of 1986, at 1202 (J. Comm. Print 1987);
     emphasis added.]

To this statement, the following footnote was added:

     A technical amendment may be necessary for the statute
     to reflect this intent. [Id. at 1202 n.155; emphasis
     added.]

     In its reply brief, petitioner went on to state that,

because "no subsequent technical amendment * * * was ever enacted
                              - 3 -



reflecting such an intent", we should conclude that, without such

technical amendment, the language in the body of the General

Explanation ought not to be taken into account.   We were of the

view, however, that petitioner's argument was far too speculative

to merit consideration and consequently saw no need to refer to

the language in the body of the General Explanation or the

footnote because other materials which we discussed in our prior

opinion furnished more than an adequate foundation for our

conclusion.

     In its motion for reconsideration, petitioner sets forth its

new discovery, namely that Congress in enacting the Technical and

Miscellaneous Revenue Act of 1988 (TAMRA 1988), Pub. L. 100-647,

sec. 1013(d), 102 Stat. 3342, 3548, included the following

addition as section 1314(h) of the Tax Reform Act of 1986:

          (h) Arbitrage Restriction on Investments in
     Investment-Type Property.--In the case of a bond issued
     before August 16, 1986 (September 1, 1986 in the case
     of a bond described in section 1312(c)(2)), section
     103(c) of the 1954 Code shall be applied by treating
     the reference to securities in paragraph (2) thereof as
     including a reference to investment-type property but
     only for purposes of determining whether any bond
     issued after October 16, 1987, to advance refund such
     bond (or a bond which is part of a series of refundings
     of such bond) is an arbitrage bond (within the meaning
     of section 148(a) of the 1986 Code).

     Petitioner asserts that this provision requires us to

determine the tax-exempt status of the bond issue involved herein

under the 1954 Code and not the 1986 Code, which came into being
                              - 4 -



by virtue of the Tax Reform Act of 1986.    It argues that the

definition of investment-type property as defined in the 1986

Code applies only to "advance refund" bonds and that the 1994

BANS and the bonds at issue herein are not such bonds.

     Particularly in the absence of any legislative history,1 we

are unwilling to conclude that the definition of investment-type

property set forth in the transitional section 1314(h) of TAMRA

1988 should apply to an advance refund but not to a prepayment.

Both types of financing accomplish the same objective, namely to

obtain a financial advantage from the interim use of borrowed

funds in the case of an advance refunding in one case or from a

discount by payment in advance of the due date in the other.     We

are reinforced in this view by section 1.148-1(b), Income Tax

Regs., dealing with prepayments, see City of Columbus v.

Commissioner, 106 T.C. at 331-332, and the absence of any

reference therein to any transitional exception.    See also sec.

1.148-11, Income Tax Regs.; sec. 1.148-11T, Temporary Income Tax

Regs., 59 Fed. Reg. 24046 (May 10, 1994).    This regulation, with

its specific recognition of realistically defined exceptions to

its application, is consistent with the clearly expressed

concerns of Congress in 1986, discussed in our prior opinion,

City of Columbus v. Commissioner, 106 T.C. at 331, and again in

1
   Neither petitioner nor our own research has revealed any such
history.
                              - 5 -



1988 at the time the legislation containing the transitional rule

was enacted, discussed in City of Columbus v. Commissioner, 106

T.C. at 332-333.

     In view of the foregoing, petitioner's motions will be

denied.

                                      An appropriate order will

                              be issued.
