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163 <br /> Bond Counsel's opinion will not address issues relating to the treatment of original issue discounts <br /> on Discount Bonds. Owners and prospective purchasers of Discount Bonds should consult their own <br /> tax advisors regarding the calculation of accrued original issue discount for federal income tax <br /> purposes and any North Carolina or other state and local tax consequences in connection with the <br /> ownership or disposition of Discount Bonds. <br /> PREMIUM BONDS <br /> The initial public offering prices of the 2021 Bonds maturing on October 1, 20_through October <br /> 1, 20_, inclusive (collectively, the "Premium Bonds"), are greater than the amounts payable at maturity. <br /> The difference between (a) the initial offering prices to the public (excluding bond houses, brokers or <br /> similar persons or organizations acting in the capacity of underwriters, placement agents, wholesalers or <br /> other intermediaries) at which a substantial amount of each maturity of the Premium Bonds is sold and(b) <br /> the principal amount payable at maturity of such Premium Bonds constitutes original issue premium. In <br /> general, an owner of a Premium Bond must amortize the bond premium over the remaining term of the <br /> Premium Bond based on the owner's yield over the remaining term of the Premium Bond,determined based <br /> on constant yield principles(in certain cases involving a Premium Bond callable prior to its stated maturity <br /> date,the amortization period and yield may be required to be determined on the basis of an earlier call date <br /> that results in the lowest yield on such Premium Bond). An owner of a Premium Bond must amortize the <br /> bond premium by offsetting the qualified stated interest allocable to each interest accrual period under the <br /> owner's regular method of accounting against the bond premium allocable to that period and subtract such <br /> bond premium from the owner's basis in such Premium Bond. If the bond premium allocable to an accrual <br /> period exceeds the qualified stated interest allocable to that accrual period, the excess is a nondeductible <br /> loss. Under certain circumstances, the owner of a Premium Bond may realize a taxable gain upon <br /> disposition of the Premium Bond even though it is sold or redeemed for an amount less than or equal to the <br /> owner's original acquisition cost. <br /> Bond Counsel's opinion will not specifically address any issues relating to the treatment of <br /> premium paid on, or attributable to,Premium Bonds. Owners and prospective purchasers of Premium <br /> Bonds should consult their own tax advisors regarding the treatment of bond premium for federal <br /> income tax purposes and any North Carolina or other state and local tax consequences in connection <br /> with receipt of bond premium or otherwise with respect to the ownership and disposition of Premium <br /> Bonds. <br /> OTHER TAX CONSEQUENCES <br /> Ownership or transfer of, or the accrual or receipt of interest on, the 2021 Bonds may result in <br /> collateral federal, State of North Carolina, and other state or local tax consequences to certain taxpayers, <br /> including, without limitation, financial institutions, property and casualty insurance companies, certain <br /> foreign corporations doing business in the United States,certain S corporations with excess passive income, <br /> individual recipients of Social Security or Railroad Retirement benefits, taxpayers who may be deemed to <br /> have incurred or continued indebtedness to purchase or carry tax-exempt obligations, taxpayers who may <br /> be eligible for the federal earned income tax credit, and taxpayers subject to franchise, estate, inheritance, <br /> gift or capital gains taxes. Owners and prospective purchasers of the 2021 Bonds should consult their tax <br /> advisors as to any such possible tax consequences. Except to the extent covered in its legal opinion,Bond <br /> Counsel expresses no opinion regarding any such collateral tax consequences. <br /> Interest on the 2021 Bonds may or may not be subject to state or local taxation in jurisdictions other <br /> than North Carolina. Owners and prospective purchasers of the 2021 Bonds should consult their own tax <br /> advisors as to the status of interest on the 2021 Bonds under the tax laws of any such jurisdiction other than <br /> North Carolina. Bond Counsel will express no opinion as to any such matters. <br /> 19 <br />