26 CFR 1.108(i)-3 - Rules for the deduction of OID.

§ 1.108(i)-3 Rules for the deduction of OID.

(a)Deemed debt-for-debt exchanges -

(1)In general. For purposes of section 108(i)(2) (relating to deferred OID deductions that arise in certain debt-for-debt exchanges involving the reacquisition of an applicable debt instrument), if the proceeds of any debt instrument are used directly or indirectly by the issuer or a person related to the issuer (within the meaning of section 108(i)(5)(A)) to reacquire an applicable debt instrument, the debt instrument shall be treated as issued for the applicable debt instrument being reacquired. Therefore, section 108(i)(2) may apply, for example, to a debt instrument issued by a corporation for cash in which some or all of the proceeds are used directly or indirectly by the corporation's related subsidiary in the reacquisition of the subsidiary's applicable debt instrument.

(2)Directly or indirectly. Whether the proceeds of an issuance of a debt instrument are used directly or indirectly to reacquire an applicable debt instrument depends upon all of the facts and circumstances surrounding the issuance and the reacquisition. The proceeds of an issuance of a debt instrument will be treated as being used indirectly to reacquire an applicable debt instrument if -

(i) At the time of the issuance of the debt instrument, the issuer of the debt instrument anticipated that an applicable debt instrument of the issuer or a person related to the issuer would be reacquired by the issuer, and the debt instrument would not have been issued if the issuer had not so anticipated such reacquisition;

(ii) At the time of the issuance of the debt instrument, the issuer of the debt instrument or a person related to the issuer anticipated that an applicable debt instrument would be reacquired by a related person and the related person receives cash or property that it would not have received unless the reacquisition had been so anticipated; or

(iii) At the time of the reacquisition, the issuer or a person related to the issuer foresaw or reasonably should have foreseen that the issuer or a person related to the issuer would be required to issue a debt instrument, which it would not have otherwise been required to issue if the reacquisition had not occurred, in order to meet its future economic needs.

(b)Proportional rule for accruals of OID. For purposes of section 108(i)(2), if only a portion of the proceeds from the issuance of a debt instrument are used directly or indirectly to reacquire an applicable debt instrument, the rules of section 108(i)(2)(A) will apply to the portion of OID on the debt instrument that is equal to the portion of the proceeds from such instrument used to reacquire the outstanding applicable debt instrument. Except as provided in the last sentence of section 108(i)(2)(A), the amount of deferred OID deduction that is subject to section 108(i)(2)(A) for a taxable year is equal to the product of the amount of OID that accrues in the taxable year under section 1272 or section 1275 (and the regulations under those sections), whichever section is applicable, and a fraction, the numerator of which is the portion of the total proceeds from the issuance of the debt instrument used directly or indirectly to reacquire the applicable debt instrument and the denominator of which is the total proceeds from the issuance of the debt instrument.

(c)No acceleration -

(1)Retirement. Retirement of a debt instrument subject to section 108(i)(2) does not accelerate deferred OID deductions.

(2)Cross-reference. See § 1.108(i)-1 and § 1.108(i)-2 for rules relating to the acceleration of deferred OID deductions.

(d)Examples. The application of this section is illustrated by the following examples. Unless otherwise stated, all taxpayers in the following examples are calendar-year taxpayers, and P and S each file separate returns:

Example 1.
(i)Facts. P, a domestic corporation, owns all of the stock of S, a domestic corporation. S has a debt instrument outstanding that has an adjusted issue price of $100,000. On January 1, 2010, P issues for $160,000 a four-year debt instrument that has an issue price of $160,000 and a stated redemption price at maturity of $200,000, resulting in $40,000 of OID. In P's discussion with potential lenders/holders, and as described in offering materials provided to potential lenders/holders, P disclosed that it planned to use all or a portion of the proceeds from the issuance of the debt instrument to reacquire outstanding debt of P and its affiliates. Following the issuance, P makes a $70,000 capital contribution to S. S then reacquires its debt instrument from X, a person not related to S within the meaning of section 108(i)(5)(A), for $70,000. At the time of the reacquisition, the adjusted issue price of S's debt instrument is $100,000. Under § 1.61-12(c), S realizes $30,000 of COD income. S makes a section 108(i) election for the $30,000 of COD income.

(ii)Analysis. Under the facts, at the time of P's issuance of its $160,000 debt instrument, P anticipated that the loan proceeds would be used to reacquire the debt of S, and P's debt instrument would not have been issued for an amount greater than $90,000 if P had not anticipated that S would use the proceeds to reacquire its debt. Pursuant to paragraph (a) of this section, the proceeds from P's issuance of its debt instrument are treated as being used indirectly to reacquire S's applicable debt instrument. Therefore, section 108(i)(2)(B) applies to P's debt instrument and P's OID deductions on its debt instrument are subject to deferral under section 108(i)(2)(A). However, because only a portion of the proceeds from P's debt instrument are used by S to reacquire its applicable debt instrument, only a portion of P's total OID deductions will be deferred under section 108(i)(2)(A). See section 108(i)(2)(B). Accordingly, a maximum of $17,500 ($40,000 × $70,000/$160,000) of P's $40,000 total OID deductions is subject to deferral under section 108(i)(2)(A). Under paragraph (b) of this section, the amount of P's deferred OID deduction each taxable year under section 108(i)(2)(A) is equal to the product of the amount of OID that accrues in the taxable year under section 1272 for the debt instrument and a fraction ($70,000/$160,000). As a result, P's deferred OID deductions are the following amounts: $4,015.99 for 2010 ($9,179.40 × $70,000/$160,000); $4,246.39 for 2011 ($9,706.04 × $70,000/$160,000); $4,490.01 for 2012 ($10,262.88 × $70,000/$160,000); and $4,747.61 for 2013 ($10,851.68 × $70,000/$160,000).

Example 2.
(i)Facts. The facts are the same as in Example 1, except that S makes a section 108(i) election for only $10,000 of the $30,000 of COD income.

(ii)Analysis. The maximum amount of P's deferred OID deductions under section 108(i)(2)(A) is $10,000 rather than $17,500 because S made a section 108(i) election for only $10,000 of the $30,000 of COD income. Under section 108(i)(2)(A), because the amount of OID that accrues prior to 2014 attributable to the portion of the debt instrument issued to indirectly reacquire S's applicable debt instrument under paragraph (b) of this section ($17,500) exceeds the amount of deferred COD income under section 108(i) ($10,000), P's deferred OID deductions are the following amounts: $4,015.99 for 2010; $4,246.39 for 2011; $1,737.62 for 2012; and $0 for 2013.

Example 3.
(i)Facts. The facts are the same as in Example 1, except that P pays $200,000 in cash to the lenders/holders on December 31, 2012, to retire the debt instrument. P did not directly or indirectly obtain the funds to retire the debt instrument from the issuance of another debt instrument with OID.

(ii)Analysis. Under paragraph (c)(1) of this section, the retirement of P's debt instrument is not an acceleration event for the deferred OID deductions of $4,015.99 for 2010, $4,246.39 for 2011, and $4,490.01 for 2012. Except as provided in § 1.108(i)-1(b)(4), these amounts will be taken into account during the inclusion period. P, however, paid a repurchase premium of $10,851.68 in 2012 ($200,000 minus the adjusted issue price of $189,148.32) to retire the debt instrument. If otherwise allowable, P may deduct this amount in 2012 under § 1.163-7(c).

(e)Effective/applicability dates. For effective/applicability dates, see § 1.108(i)-0(b).

[T.D. 9622, 78 FR 39991, July 3, 2013]

This is a list of United States Code sections, Statutes at Large, Public Laws, and Presidential Documents, which provide rulemaking authority for this CFR Part.

This list is taken from the Parallel Table of Authorities and Rules provided by GPO [Government Printing Office].

It is not guaranteed to be accurate or up-to-date, though we do refresh the database weekly. More limitations on accuracy are described at the GPO site.


United States Code
U.S. Code: Title 26 - INTERNAL REVENUE CODE

§ 1 - Tax imposed

§ 21 - Expenses for household and dependent care services necessary for gainful employment

§ 23 - Adoption expenses

§ 25 - Interest on certain home mortgages

§ 25A - Hope and Lifetime Learning credits

§ 28 - Renumbered § 45C]

§ 30 - Repealed. Pub. L. 113–295, div. A, title II, § 221(a)(2)(A), Dec. 19, 2014, 128 Stat. 4037]

§ 36B - Refundable credit for coverage under a qualified health plan

§ 38 - General business credit

§ 40 - Alcohol, etc., used as fuel

§ 41 - Credit for increasing research activities

§ 42 - Low-income housing credit

§ 43 - Enhanced oil recovery credit

§ 45D - New markets tax credit

§ 46 - Amount of credit

§ 47 - Rehabilitation credit

§ 52 - Special rules

§ 56 - Adjustments in computing alternative minimum taxable income

§ 58 - Denial of certain losses

§ 61 - Gross income defined

§ 62 - Adjusted gross income defined

§ 66 - Treatment of community income

§ 67 - 2-percent floor on miscellaneous itemized deductions

§ 72 - Annuities; certain proceeds of endowment and life insurance contracts

§ 101 - Certain death benefits

§ 103 - Interest on State and local bonds

§ 103A - Repealed. Pub. L. 99–514, title XIII, § 1301(j)(1), Oct. 22, 1986, 100 Stat. 2657]

§ 108 - Income from discharge of indebtedness

§ 110 - Qualified lessee construction allowances for short-term leases

§ 129 - Dependent care assistance programs

§ 132 - Certain fringe benefits

§ 148 - Arbitrage

§ 149 - Bonds must be registered to be tax exempt; other requirements

§ 150 - Definitions and special rules

§ 152 - Dependent defined

§ 162 - Trade or business expenses

§ 163 - Interest

§ 165 - Losses

§ 166 - Bad debts

§ 168 - Accelerated cost recovery system

§ 170 - Charitable, etc., contributions and gifts

§ 171 - Amortizable bond premium

§ 179 - Election to expense certain depreciable business assets

§ 179A - Repealed. Pub. L. 113–295, div. A, title II, § 221(a)(34)(A), Dec. 19, 2014, 128 Stat. 4042]

§ 197 - Amortization of goodwill and certain other intangibles

§ 199 - Income attributable to domestic production activities

§ 216 - Deduction of taxes, interest, and business depreciation by cooperative housing corporation tenant-stockholder

§ 221 - Interest on education loans

§ 263A - Capitalization and inclusion in inventory costs of certain expenses

§ 267 - Losses, expenses, and interest with respect to transactions between related taxpayers

§ 274 - Disallowance of certain entertainment, etc., expenses

§ 280C - Certain expenses for which credits are allowable

§ 280F - Limitation on depreciation for luxury automobiles; limitation where certain property used for personal purposes

§ 280G - Golden parachute payments

§ 301 - Distributions of property

§ 304 - Redemption through use of related corporations

§ 305 - Distributions of stock and stock rights

§ 324

§ 336 - Gain or loss recognized on property distributed in complete liquidation

§ 337 - Nonrecognition for property distributed to parent in complete liquidation of subsidiary

§ 338 - Certain stock purchases treated as asset acquisitions

§ 351 - Transfer to corporation controlled by transferor

§ 355 - Distribution of stock and securities of a controlled corporation

§ 357 - Assumption of liability

§ 358 - Basis to distributees

§ 362 - Basis to corporations

§ 367 - Foreign corporations

§ 382 - Limitation on net operating loss carryforwards and certain built-in losses following ownership change

§ 383 - Special limitations on certain excess credits, etc.

§ 401 - Qualified pension, profit-sharing, and stock bonus plans

§ 401 note - Qualified pension, profit-sharing, and stock bonus plans

§ 402A - Optional treatment of elective deferrals as Roth contributions

§ 403 - Taxation of employee annuities

§ 404 - Deduction for contributions of an employer to an employees’ trust or annuity plan and compensation under a deferred-payment plan

§ 408 - Individual retirement accounts

§ 408A - Roth IRAs

§ 409 - Qualifications for tax credit employee stock ownership plans

§ 410 - Minimum participation standards

§ 411 - Minimum vesting standards

§ 414 - Definitions and special rules

§ 417 - Definitions and special rules for purposes of minimum survivor annuity requirements

§ 419A - Qualified asset account; limitation on additions to account

§ 420 - Transfers of excess pension assets to retiree health accounts

§ 441 - Period for computation of taxable income

§ 442 - Change of annual accounting period

§ 444 - Election of taxable year other than required taxable year

§ 446 - General rule for methods of accounting

§ 453 - Installment method

§ 453A - Special rules for nondealers

§ 458 - Magazines, paperbacks, and records returned after the close of the taxable year

§ 460 - Special rules for long-term contracts

§ 461 - General rule for taxable year of deduction

§ 465 - Deductions limited to amount at risk

§ 466 - Repealed. Pub. L. 99–514, title VIII, § 823(a), Oct. 22, 1986, 100 Stat. 2373]

§ 467 - Certain payments for the use of property or services

§ 468A - Special rules for nuclear decommissioning costs

§ 468B - Special rules for designated settlement funds

§ 469 - Passive activity losses and credits limited

§ 471 - General rule for inventories

§ 472 - Last-in, first-out inventories

§ 475 - Mark to market accounting method for dealers in securities

§ 481 - Adjustments required by changes in method of accounting

§ 482 - Allocation of income and deductions among taxpayers

§ 483 - Interest on certain deferred payments

§ 493

§ 504 - Status after organization ceases to qualify for exemption under section 501(c)(3) because of substantial lobbying or because of political activities

§ 514 - Unrelated debt-financed income

§ 527 - Political organizations

§ 585 - Reserves for losses on loans of banks

§ 597 - Treatment of transactions in which Federal financial assistance provided

§ 642 - Special rules for credits and deductions

§ 643 - Definitions applicable to subparts A, B, C, and D

§ 645 - Certain revocable trusts treated as part of estate

§ 663 - Special rules applicable to sections 661 and 662

§ 664 - Charitable remainder trusts

§ 672 - Definitions and rules

§ 679 - Foreign trusts having one or more United States beneficiaries

§ 701 - Partners, not partnership, subject to tax

§ 702 - Income and credits of partner

§ 703 - Partnership computations

§ 704 - Partner’s distributive share

§ 705 - Determination of basis of partner’s interest

§ 706 - Taxable years of partner and partnership

§ 707 - Transactions between partner and partnership

§ 708 - Continuation of partnership

§ 709 - Treatment of organization and syndication fees

§ 721 - Nonrecognition of gain or loss on contribution

§ 722 - Basis of contributing partner’s interest

§ 723 - Basis of property contributed to partnership

§ 724 - Character of gain or loss on contributed unrealized receivables, inventory items, and capital loss property

§ 731 - Extent of recognition of gain or loss on distribution

§ 732 - Basis of distributed property other than money

§ 733 - Basis of distributee partner’s interest

§ 734 - Adjustment to basis of undistributed partnership property where section 754 election or substantial basis reduction

§ 735 - Character of gain or loss on disposition of distributed property

§ 736 - Payments to a retiring partner or a deceased partner’s successor in interest

§ 737 - Recognition of precontribution gain in case of certain distributions to contributing partner

§ 741 - Recognition and character of gain or loss on sale or exchange

§ 742 - Basis of transferee partner’s interest

§ 743 - Special rules where section 754 election or substantial built-in loss

§ 751 - Unrealized receivables and inventory items

§ 752 - Treatment of certain liabilities

§ 753 - Partner receiving income in respect of decedent

§ 754 - Manner of electing optional adjustment to basis of partnership property

§ 755 - Rules for allocation of basis

§ 761 - Terms defined

§ 809 - Repealed. Pub. L. 108–218, title II, § 205(a), Apr. 10, 2004, 118 Stat. 610]

§ 817A - Special rules for modified guaranteed contracts

§ 832 - Insurance company taxable income

§ 845 - Certain reinsurance agreements

§ 846 - Discounted unpaid losses defined

§ 848 - Capitalization of certain policy acquisition expenses

§ 852 - Taxation of regulated investment companies and their shareholders

§ 860E - Treatment of income in excess of daily accruals on residual interests

§ 860G - Other definitions and special rules

§ 863 - Special rules for determining source

§ 864 - Definitions and special rules

§ 865 - Source rules for personal property sales

§ 874 - Allowance of deductions and credits

§ 882 - Tax on income of foreign corporations connected with United States business

§ 883 - Exclusions from gross income

§ 884 - Branch profits tax

§ 892 - Income of foreign governments and of international organizations

§ 894 - Income affected by treaty

§ 897 - Disposition of investment in United States real property

§ 901 - Taxes of foreign countries and of possessions of United States

§ 902 - Deemed paid credit where domestic corporation owns 10 percent or more of voting stock of foreign corporation

§ 904 - Limitation on credit

§ 907 - Special rules in case of foreign oil and gas income

§ 911 - Citizens or residents of the United States living abroad

§ 924

§ 925

§ 927

§ 934 - Limitation on reduction in income tax liability incurred to the Virgin Islands

§ 936 - Puerto Rico and possession tax credit

§ 937 - Residence and source rules involving possessions

§ 954 - Foreign base company income

§ 956 - Investment of earnings in United States property

§ 957 - Controlled foreign corporations; United States persons

§ 960 - Special rules for foreign tax credit

§ 963 - Repealed. Pub. L. 94–12, title VI, § 602(a)(1), Mar. 29, 1975, 89 Stat. 58]

§ 985 - Functional currency

§ 987 - Branch transactions

§ 988 - Treatment of certain foreign currency transactions

§ 989 - Other definitions and special rules

§ 1017 - Discharge of indebtedness

§ 1032 - Exchange of stock for property

§ 1059 - Corporate shareholder’s basis in stock reduced by nontaxed portion of extraordinary dividends

§ 1060 - Special allocation rules for certain asset acquisitions

§ 1092 - Straddles

§ 1202 - Partial exclusion for gain from certain small business stock

§ 1221 - Capital asset defined

§ 1244 - Losses on small business stock

§ 1248 - Gain from certain sales or exchanges of stock in certain foreign corporations

§ 1254 - Gain from disposition of interest in oil, gas, geothermal, or other mineral properties

§ 1275 - Other definitions and special rules

§ 1286 - Tax treatment of stripped bonds

§ 1291 - Interest on tax deferral

§ 1293 - Current taxation of income from qualified electing funds

§ 1294 - Election to extend time for payment of tax on undistributed earnings

§ 1295 - Qualified electing fund

§ 1296 - Election of mark to market for marketable stock

§ 1297 - Passive foreign investment company

§ 1298 - Special rules

§ 1301 - Averaging of farm income

§ 1361 - S corporation defined

§ 1368 - Distributions

§ 1374 - Tax imposed on certain built-in gains

§ 1377 - Definitions and special rule

§ 1378 - Taxable year of S corporation

§ 1397D - Qualified zone property defined

§ 1397E - Credit to holders of qualified zone academy bonds

§ 1402 - Definitions

§ 1441 - Withholding of tax on nonresident aliens

§ 1443 - Foreign tax-exempt organizations

§ 1445 - Withholding of tax on dispositions of United States real property interests

§ 1471 - Withholdable payments to foreign financial institutions

§ 1472 - Withholdable payments to other foreign entities

§ 1473 - Definitions

§ 1474 - Special rules

§ 1502 - Regulations

§ 1503 - Computation and payment of tax

§ 1504 - Definitions

§ 1561 - Limitations on certain multiple tax benefits in the case of certain controlled corporations

§ 3401 - Definitions

§ 5000 - Certain group health plans

§ 5000A - Requirement to maintain minimum essential coverage

§ 6001 - Notice or regulations requiring records, statements, and special returns

§ 6011 - General requirement of return, statement, or list

§ 6015 - Relief from joint and several liability on joint return

§ 6033 - Returns by exempt organizations

§ 6035 - Basis information to persons acquiring property from decedent

§ 6038 - Information reporting with respect to certain foreign corporations and partnerships

§ 6038A - Information with respect to certain foreign-owned corporations

§ 6038B - Notice of certain transfers to foreign persons

§ 6038D - Information with respect to foreign financial assets

§ 6039I - Returns and records with respect to employer-owned life insurance contracts

§ 6041 - Information at source

§ 6043 - Liquidating, etc., transactions

§ 6045 - Returns of brokers

§ 6046A - Returns as to interests in foreign partnerships

§ 6049 - Returns regarding payments of interest

§ 6050E - State and local income tax refunds

§ 6050H - Returns relating to mortgage interest received in trade or business from individuals

§ 6050I-1

§ 6050K - Returns relating to exchanges of certain partnership interests

§ 6050M - Returns relating to persons receiving contracts from Federal executive agencies

§ 6050P - Returns relating to the cancellation of indebtedness by certain entities

§ 6050S - Returns relating to higher education tuition and related expenses

§ 6060 - Information returns of tax return preparers

§ 6061 - Signing of returns and other documents

§ 6065 - Verification of returns

§ 6081 - Extension of time for filing returns

§ 6103 - Confidentiality and disclosure of returns and return information

§ 6109 - Identifying numbers

§ 6302 - Mode or time of collection

§ 6402 - Authority to make credits or refunds

§ 6411 - Tentative carryback and refund adjustments

§ 6655 - Failure by corporation to pay estimated income tax

§ 6662 - Imposition of accuracy-related penalty on underpayments

§ 6695 - Other assessable penalties with respect to the preparation of tax returns for other persons

§ 6851 - Termination assessments of income tax

§ 7520 - Valuation tables

§ 7654 - Coordination of United States and certain possession individual income taxes

§ 7701 - Definitions

§ 7702 - Life insurance contract defined

§ 7805 - Rules and regulations

§ 7872 - Treatment of loans with below-market interest rates

§ 7874 - Rules relating to expatriated entities and their foreign parents

U.S. Code: Title 29 - LABOR
Statutes at Large
Public Laws
Presidential Documents

Reorganization ... 1978 Plan No. 4

Title 26 published on 16-Jun-2017 03:58

The following are ALL rules, proposed rules, and notices (chronologically) published in the Federal Register relating to 26 CFR Part 1 after this date.

  • 2017-06-30; vol. 82 # 125 - Friday, June 30, 2017
    1. 82 FR 29719 - Regulations Regarding Withholding of Tax on Certain U.S. Source Income Paid to Foreign Persons, Information Reporting and Backup Withholding on Payments Made to Certain U.S. Persons, and Portfolio Interest Treatment; Correction
      GPO FDSys XML | Text
      DEPARTMENT OF THE TREASURY, Internal Revenue Service
      Correcting amendment.
        Effective Date: These corrections are effective June 30, 2017. Applicability Date: The corrections to §§ 1.1441-0; 1.1441-1(b)(7)(ii)(B), (e)(3)(iv)(B) and (C), (e)(4)(ii)(B)( 11 ), (e)(4)(ix)(D), (e)(5)(ii) through (e)(5)(ii)(B), (e)(5)(ii)(D) through (e)(5)(v)(B)( 3 ), (e)(5)(v)(B)( 5 ) through (e)(5)(v)(D), and (f) through (f)(4); 1.1441-1T; 1.1441-3(d)(1); 1.1441-4; 1.6045-1(m)(2)(ii) and (n)(12)(ii); and 1.6049-5(c)(1) through (c)(4) are applicable on January 6, 2017.
      26 CFR Part 1

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