General rule
No deduction shall be allowed to the issuing corporation for any premium paid or incurred upon the repurchase of a bond, debenture, note, or certificate or other evidence of indebtedness which is convertible into the stock of the issuing corporation, or a corporation in the same parent-subsidiary controlled group (within the meaning of section 1563(a)(1)) as the issuing corporation, to the extent the repurchase price exceeds an amount equal to the adjusted issue price plus a normal call premium on bonds or other evidences of indebtedness which are not convertible. The preceding sentence shall not apply to the extent that the corporation can demonstrate to the satisfaction of the Secretary that such excess is attributable to the cost of borrowing and is not attributable to the conversion feature.
Adjusted issue price
For purposes of subsection (a), the adjusted issue price is the issue price (as defined in sections 1273(b) and 1274) increased by any amount of discount deducted before repurchase, or decreased by any amount of premium included in gross income before repurchase by the issuing corporation.
Pub. L. 91–172, title IV, § 414(a)83 Stat. 612Pub. L. 94–455, title XIX, § 1906(b)(13)(A)90 Stat. 1834Pub. L. 98–369, div. A, title I, § 42(a)(5)98 Stat. 557Pub. L. 112–95, title XI, § 1108(a)126 Stat. 154Pub. L. 113–295, div. A, title II128 Stat. 4036(Added , , ; amended , , ; , , ; , (b), , ; , §§ 220(i), 221(a)(43), , , 4044.)
Editorial Notes
Amendments
Pub. L. 113–295, § 220(i)2014—Subsec. (a). , substituted “1563(a)(1))” for “1563(a)(1)”.
Pub. L. 113–295, § 221(a)(43)Pub. L. 112–95, § 1108(b)Subsec. (b). , which directed amendment of subsec. (b)(1) by striking out “, in the case of bonds or other evidences of indebtedness issued after ,” after “repurchase, or”, was executed by making the amendment in subsec. (b) to reflect the probable intent of Congress and the prior amendment by . See 2012 Amendment note below.
Pub. L. 112–95, § 1108(a)2012—Subsec. (a). , substituted “, or a corporation in the same parent-subsidiary controlled group (within the meaning of section 1563(a)(1) as” for “, or a corporation in control of, or controlled by,”.
Pub. L. 112–95, § 1108(b)Subsec. (b). , substituted “Adjusted issue price” for “Special rules” in heading and “For purposes of subsection (a),” for “For purposes of subsection (a)—” and par. (1) designation and heading, and “the adjusted issue price” for “The adjusted issue price”, and struck out par. (2), which defined “control” as having the meaning assigned to such term by section 368(c).
Pub. L. 98–3691984—Subsec. (b)(1). substituted “sections 1273(b) and 1274” for “section 1232(b)”.
Pub. L. 94–4551976—Subsec. (a). struck out “or his delegate” after “Secretary”.
Statutory Notes and Related Subsidiaries
Effective Date of 2014 Amendment
section 221(a)(43) of Pub. L. 113–295section 221(b) of Pub. L. 113–295section 1 of this titleAmendment by effective , subject to a savings provision, see , set out as a note under .
Effective Date of 2012 Amendment
Pub. L. 112–95, title XI, § 1108(c)126 Stat. 154
Effective Date of 1984 Amendment
Pub. L. 98–369section 44 of Pub. L. 98–369section 1271 of this titleAmendment by applicable to taxable years ending after , see , set out as an Effective Date note under .
Effective Date of 1976 Amendment
Pub. L. 94–455section 1906(d)(1) of Pub. L. 94–455section 6013 of this titleAmendment by effective , see , set out as a note under .
Effective Date
Pub. L. 91–172, title IV, § 414(c)83 Stat. 613Pub. L. 99–514, § 2100 Stat. 2095