Just testing a new category that will represent a newly created newsletter for I think that this k2 process will only be handy if I aj able to quickly add content and imaages to newsletters then archive them for use and viewing later
A recent Chief Counsel Advice (CCA) dealt with the situation of convertible debentures that were converted into warrants exercisable into the issuer's common stock. The CCA concludes that the unamortized debt issuance costs of the convertible debentures cannot be deducted in the tax year of the conversion.
Background. Under Code Sec. 162(a), taxpayers may deduct all ordinary and necessary expenses paid or incurred during the tax year in carrying on any trade or business. However, certain expenses must be capitalized under Code Sec. 263(a). Debt issuance costs generally must be capitalized and amortized over the term of the loan. (Reg. § 1.263(a)-5(a)(9), Reg. § 1.446-5, Enoch, 57 TC 78157 TC 781 (1972))
Under Rev Rul 72-348, 1972-2 CB 97, when bonds are converted to stock, unamortized bond expenses (for example, bond issuance expenses) assume the character of a capital expenditure under Code Sec. 263 in connection with the stock issue and can't be deducted at the time of the conversion.
A convertible debenture is a type of loan that gives a holder two rights: the right to a monetary payment of the obligation and the right to convert the loan into shares of stock of the debenture's issuer.
A warrant is a form of a stock option giving the holder the right to buy a company's stock at a specific price on a specific date.
Facts. In Year 1, Taxpayer issued Amount 1 Interest Rate convertible debentures due in Year 2 ("Debentures"). At issuance, Taxpayer incurred debt issuance costs, which it capitalized and amortized on a yearly basis over the term of the Debentures. In Year 3, per the terms of the Debentures, the holder ("Holder") exercised its right to convert the Debentures into Taxpayer's warrants exercisable into Taxpayer's common stock ("Warrants").
Most Overlooked Deductions
A recent Chief Counsel Advice (CCA) dealt with the situation of convertible debentures that were converted into warrants exercisable into the issuer's common stock. The CCA concludes that the unamortized debt issuance costs of the convertible debentures cannot be deducted in the tax year of the conversion.
Background. Under Code Sec. 162(a), taxpayers may deduct all ordinary and necessary expenses paid or incurred during the tax year in carrying on any trade or business. However, certain expenses must be capitalized under Code Sec. 263(a). Debt issuance costs generally must be capitalized and amortized over the term of the loan. (Reg. § 1.263(a)-5(a)(9), Reg. § 1.446-5, Enoch, 57 TC 78157 TC 781 (1972))
Under Rev Rul 72-348, 1972-2 CB 97, when bonds are converted to stock, unamortized bond expenses (for example, bond issuance expenses) assume the character of a capital expenditure under Code Sec. 263 in connection with the stock issue and can't be deducted at the time of the conversion.
A convertible debenture is a type of loan that gives a holder two rights: the right to a monetary payment of the obligation and the right to convert the loan into shares of stock of the debenture's issuer.
A warrant is a form of a stock option giving the holder the right to buy a company's stock at a specific price on a specific date.
Facts. In Year 1, Taxpayer issued Amount 1 Interest Rate convertible debentures due in Year 2 ("Debentures"). At issuance, Taxpayer incurred debt issuance costs, which it capitalized and amortized on a yearly basis over the term of the Debentures. In Year 3, per the terms of the Debentures, the holder ("Holder") exercised its right to convert the Debentures into Taxpayer's warrants exercisable into Taxpayer's common stock ("Warrants").