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<br />- 7 - <br />indebtedness incurred or continued to purchase or carry the Bonds or, in the case of a financial institution, <br />that portion of the holder’s interest expense allocated to interest on the Bonds, except with respect to certain <br />financial institutions (within the meaning of Section 265(b) of the Code). <br /> <br />The above is not a comprehensive list of all federal tax consequences that may arise from the receipt of <br />interest on the Bonds. The receipt of interest on the Bonds may otherwise affect the federal or State of <br />Minnesota income tax liability of the recipient based on the particular taxes to which the recipient is subject <br />and the particular tax status of other items or deductions. Bond Counsel expresses no opinion regarding <br />any such consequences. All prospective purchasers of the Bonds are advised to consult their own tax <br />advisors as the tax consequences of, or tax considerations for, purchasing or holding the Bonds. <br /> <br /> <br />Original Issue Premium <br />Certain maturities of the Bonds (collectively, the “Premium Bonds”) may be sold to the public at an amount <br />in excess of the stated redemption price at maturity. Such excess of the purchase price of such Premium <br />Bonds over the stated redemption price at maturity constitutes original issue premium with respect to such <br />Premium Bonds. A purchaser of a Premium Bond must amortize any original issue premium over the term <br />of such Premium Bond using constant yield principles, based on the purchaser’s yield to maturity. As <br />original issue premium is amortized, the purchaser’s basis in such Premium Bond is reduced by a <br />corresponding amount, resulting in an increase in the gain (or a decrease in the loss) to be recognized for <br />federal income tax purposes upon a sale or disposition of such Premium Bond prior to its maturity. Even <br />though the purchaser’s basis is reduced, no federal income tax deduction is allowed. Purchasers of any <br />Premium Bonds at a premium, whether at the time of initial issuance or subsequent thereto, should consult <br />with their own tax advisors with respect to the determination and treatment of premium for federal income <br />tax purposes and with respect to state and local tax consequences of owning such Premium Bonds. <br /> <br />Holders of Premium Bonds should consult their tax advisors with respect to the state and local tax <br />consequences of owning Premium Bonds. <br /> <br /> <br />Original Issue Discount <br />Certain maturities of the Bonds (collectively, the “Discount Bonds”) may be sold at a discount from the <br />principal amount payable on such Discount Bonds at maturity. Under Section 1288 of the Code, original <br />issue discount on tax-exempt bonds accrues on a compound basis. The amount of original issue discount <br />that accrues to an owner of a Discount Bond during any accrual period generally equals (i) the issue price <br />of such Discount Bond plus the amount of original issue discount accrued in all prior accrual periods, <br />multiplied by (ii) the yield to maturity of such Discount Bond (determined on the basis of compounding at <br />the close of each accrual period and properly adjusted for the length of the accrual period), less (iii) any <br />interest payable on such Discount Bond during such accrual period. The amount of original issue discount <br />so accrued in a particular accrual period will be considered to be received ratably on each day of the accrual <br />period, will not be includable in gross income for federal income tax purposes or in taxable net income of <br />individuals, estates or trusts for Minnesota income tax purposes, and will increase the owner’s tax basis in <br />such Discount Bond. Any gain realized by an owner from a sale, exchange, payment or redemption of a <br />Discount Bond will be treated as gain from the sale or exchange of such Discount Bond. <br /> <br />Holders of Discount Bonds should consult with their tax advisors with respect to computation and accrual <br />of original issue discount and with respect to state and local consequences of owning Discount Bonds. <br /> <br /> <br />Legislative Proposals <br />Bond Counsel’s opinion is given as of its date and Bond Counsel assumes no obligation to update, revise, <br />or supplement such opinion to reflect any changes in facts or circumstances or any changes in law that may <br />hereafter occur. Proposals are regularly introduced in both the United States House of Representatives and <br />the United States Senate that, if enacted, could alter or affect the tax-exempt status on municipal bonds.