Taxation of Structured Debt in a Low-Rate Environment
Omri Y. Marian and Andrew D. Moin, Taxation of Structured Debt in a Low-Rate Environment, 135 Tax Notes 323 (2012).
Low market rates call for special types of debt instruments. This report discusses the tax questions presented by several of those instruments, including fixed-to-floating rate instruments, range accrual debt instruments, and callable step-up instruments. The authors note several ambiguities in the regulations regarding variable-rate and contingent payment debt instruments and call for clarification. They also explore some counterintuitive results of the technical operation of the regulations and argue that a possible explanation may be that the regulations were drafted during times of different market characteristics.
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