IRS Chief Counsel: Exchangeable debentures

IRS Chief Counsel: Exchangeable debentures

The Office of the IRS Chief Counsel publicly released a redacted field advice memorandum* concluding that (1) an issuer created a straddle under section 1092 by issuing debentures and holding the corresponding reference shares, and (2) the interest on the debentures was not deductible but instead was chargeable to the capital account with respect to the personal property to which such amount relates under section 263(g). 20151201F (release date March 20, 2015, and dated December 3, 2014).

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The field advice memo [PDF 206 KB] concludes that the issuer must capitalize interest attributable to the debentures.

*Field advice memo documents are prepared by IRS field attorneys in the Office of Chief Counsel, are reviewed by an Associate Office, and are subsequently issued to IRS field or service center employees. The memo cannot be used or cited as precedent.

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