The funding rule commonly treats a covered debt instrument
as stock to the extent that it is issued by a covered member to a member of its expanded group in exchange for property with the principal purpose of funding certain distributions or acquisitions in one or more of the following situations:
Taxpayer intended to issue a convertible debt instrument
(the convertible note) to Parent in exchange for money.
This new rule applies to a debt instrument
acquired on or after Jan.
A modification of a debt instrument
is defined broadly as any alteration, including any deletion or addition, in whole or in part, of a legal right or obligation of the issuer or a holder, whether evidenced by an express agreement (oral or written), conduct of the parties, or otherwise.
3) The distribution to the owner of a debt instrument
contributed by the owner, and the transfer to the owner of one debt instrument
in exchange for another, are prohibited transactions if within 180 days of receiving the debt instrument
the owner realizes a gain on the disposition of the instrument to any person regardless of whether the realized gain is recognized.
For example, while a highly-rated "Class 1" debt instrument
or preferred stock requires a 0.
Accordingly, when the only modification of a debt instrument
is lowering the interest rate, and the lowered rate is at least equal to the AFR, the restructuring will not result in COD income.
It is usually the first point of call for foreign portfolio investors to either the equities sector or in the debt instruments
," he added.
In late November, the IRS released proposed regulations (REG-102988-11) clarifying how debt instruments
and options will be treated under the new securities basis information reporting regime of Sec.
To defeat the tax agency's argument that the structure is merely a tax gimmick without substance and that the debt owed by Target to Holding should be disregarded, Target and Holding must be able to demonstrate that the debt had the form of a debt instrument
, that the parties intended that it be a debt instrument
, and that economically the instrument was a debt.
A long-term debt instrument
generally has OID when it is issued for a price less than face value.
Competition also applies recording of debt instrument
as a result of refinancing of existing loans (both refinancing of debt instrument
, commercial paper and bonds).
An original issue debt instrument
may be issued in one of three ways: below par with original issue discount (00) (Secs.
The Reserves Bank of India has asked banks to go to debt market for debt instrument
trading, he added.
In general, a debt instrument
that bears no interest, or bears interest at a rate lower than the current market rate, will usually be issued at less than its face amount.