Tax News

CCH (cch.taxgroup.com) reports:

  The IRS has extended the temporary suspension of the rule disallowing the deduction of interest from certain applicable high yield discount obligations (AHYDOs). Generally, under Code Sec. 163(e)(5), a corporation may not deduct the "disqualified portion" of original issue discount (OID) on an AHYDO issued after July 10, 1989. However, the American Recovery and Reinvestment Act of 2009 (P.L. 111-5) suspended this rule for any AHYDO issued during the period beginning September 1, 2008, and ending December 31, 2009, in exchange for an obligation which is not an AHYDO from the same issuer. Pursuant to authority provided to it under the legislation, the Secretary of Treasury and IRS are extending the temporary suspension of the AHYDO rules to December 31, 2010, for any AHYDO that:

  --is issued after December 31, 2009, and before January 1, 2010, in exchange for an obligation which is not an AHYDO from the same issuer;

  --does not pay contingent interest;

  --is not issued to a related person;

  --the issue price of which is determined under the OID rules; and

  --would not otherwise be an AHYDO if its issue price were increased by the amount of any discharge of indebtedness income realized by the issuer upon the exchange.

Notice 2010-11, 2010FED ¶46,219

Other References:

 
Code Sec. 163

  CCH Reference - 2009FED ¶9303.12

  Tax Research Consultant

  CCH Reference - TRC ACCTNG: 36,262