On September 12, 2012, the US Internal Revenue Service (the "Service") released final regulations (the "Final Regulations") detailing when property is publicly traded for purposes of determining the issue price of a debt instrument. The issue price of a debt instrument has important income tax consequences and is relevant for determining, among other things, original issue discount ("OID") associated with the instrument, cancellation of indebtedness ("COD") income of the issuer and the gain or loss on the sale of the instrument by a holder. The new rules should be of particular interest to borrowers and lenders in a variety of bank finance and capital markets transactions, including consent solicitations, debt-for-debt exchanges, recapitalization transactions, workouts, reopenings and any transaction that involves amendments or modifications to an existing debt obligation (including a bank loan) that results in a deemed reissuance of the debt obligation for US federal income tax purposes. These rules do not change the determination of the issue price of debt issued for cash.
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