Time Value of Money — Holders of Debt Instruments (Portfolio 181)

Jeff-Maddrey

Jeffrey Maddrey

Principal

PricewaterhouseCoopers LLP

At a glance

I. Introduction
II. Yield on a Debt Instrument
III. Tax Accounting for Yield/Interest
IV. Variable Rate Debt Instruments (VRDIs), Inflation-Indexed, and Short-Term Debt Obligations
V. Contingent Payment Debt Instruments
VI. Premium/Discount
VII. Distressed Debt
VIII. Modifications
IX. Coupon Strips
X. Synthetic Debt Under Reg. §1.1275-6
XI. Additional OID Related Issues

Abstract

Bloomberg Tax Portfolio, Time Value of Money — Holders of Debt Instruments, No. 181, examines the tax treatment of holders of debt instruments under Code §1271 et seq. It examines the original issue discount (OID) rules as well as the rules governing the tax treatment of holders of variable rate instruments, inflation-indexed instruments and short-term obligations. Also considered are the regulatory OID rules applicable to holders of contingent payment debt instruments. The tax treatment of debt instruments acquired by holders at a market premium or at a market discount is analyzed in depth. Other topics addressed include the tax treatment of distressed debt, debt modifications and coupon stripping transactions. The analysis in the Portfolio is supported by numerous computational examples illustrating the application of the Code and regulatory rules to holders of the various types of debt instruments.

A future companion Portfolio will analyze the OID and other time value of money tax rules as they apply to issuers of debt instruments.

Tax Management Portfolios on related topics include:

  •  186 T.M., Financial Instruments: Special Rules
  •  187 T.M., Taxation of Non-Equity Derivatives
  •  188 T.M., Taxation of Equity Derivatives
  •  189 T.M., U.S. Taxation of National Principal Contracts
  •  535 T.M., Time Value of Money: OID and Imputed Interest
  •  536 T.M., Interest Expense Deductions
  •  566 T.M., Tax Consequences of Contingent Payment Transactions

This Portfolio may be cited as Maddrey, 181 T.M., Time Value of Money — Holders of Debt Instruments.

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