Their impression at the IRS office was wrong. As Mike9241 indicated, the taxable amount is calculated on Form 8815. If less than the full amount is rolled over, some amount will be taxable. For example, if only half of the proceeds from the bond sale is rolled over, at least half of the interest will be taxable, more than half if your MAGI falls in the phase-out range and all of it will be taxable if your MAGI is above the phase-out range.
The calculation on Form 8815 implements the requirements of section 135 of the tax code:
https://www.law.cornell.edu/uscode/text/26/135
