[Code of Federal Regulations]
[Title 26, Volume 4]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.381(c)(9)-1]

[Page 408-409]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.381(c)(9)-1  Amortization of bond discount or premium.

    (a) Carryover requirement. If, in a transaction to which section 
381(a) applies, the acquiring corporation assumes liability for the 
payment of bonds of a distributor or transferor corporation which were 
issued at a discount or premium, then under the provisions of section 
381(c)(9) the acquiring corporation is to be treated as the distributor 
or transferor corporation after the date of distribution or transfer for 
purposes of determining the amount of amortization allowable, or 
includible, with respect to such discount or premium in computing 
taxable income. Thus, if subsequent to February 28, 1913, a distributor 
or transferor corporation issues bonds at a premium and the liability 
for them is assumed by the acquiring corporation in a transaction to 
which section 381(a) applies, then the net amount of the premium is 
income which should be prorated or amortized over the life of the bonds, 
including the period during which the acquiring corporation is liable 
upon the obligations assumed. On the other hand, if a distributor or 
transferor corporation issues bonds at a discount and the liability for 
them is assumed by the acquiring corporation in a transaction to which 
section 381(a) applies, then the net amount of the discount is 
deductible in computing taxable income but should be prorated or 
amortized over the life of the bonds, including the period during which 
the acquiring corporation is liable upon the obligations assumed.
    (b) Expense incurred upon issuance of bonds. If, in a transaction to 
which section 381(a) applies, the acquiring corporation assumes 
liability for bonds of a distributor or transferor corporation which 
were issued at a discount or premium, the acquiring corporation shall be 
treated as the distributor or transferor corporation after the date of 
distribution or transfer with respect to the expense incurred upon the 
issuance of such bonds.
    (c) Purchase of bonds. If, in a transaction to which section 381(a) 
applies,

[[Page 409]]

the acquiring corporation assumes liability for bonds of a distributor 
or transferor corporation which were issued at a discount or premium and 
if the acquiring corporation subsequently purchases such bonds, then the 
acquiring corporation shall be treated as the distributor or transferor 
corporation for the purpose of determining the amount of any income or 
deduction resulting from the purchase. See paragraph (c) of Sec. 1.61-
12. For rules relating to the exchange or substitution of bonds issued 
by the acquiring corporation for bonds of a distributor or transferor 
corporation, see paragraph (d) of this section.
    (d) Exchange of new for old bonds. Notwithstanding any other 
provision of this section, if--
    (1) In a transaction to which section 381(a) applies, bonds of the 
acquiring corporation are exchanged or substituted for bonds of a 
distributor or transferor corporation which were issued at a discount or 
premium, or
    (2) Bonds of the acquiring corporation are exchanged or substituted 
for bonds of a distributor or transferor corporation which were issued 
at a discount or premium and in respect of which the acquiring 
corporation has assumed the liability in a transaction to which section 
381(a) applies,

then, with respect to any unamortized discount, premium, or expense of 
issuance attributable to such bonds of the distributor or transferor 
corporation, the acquiring corporation shall be treated as the 
distributor or transferor corporation.
    (e) Bonds of a distributor or transferor corporation. For purposes 
of applying section 381(c)(9), the term bonds of a distributor or 
transferor corporation includes not only bonds issued by the distributor 
or transferor corporation but also bonds for which the distributor or 
transferor corporation has assumed liability. Thus, if the distributor 
or transferor corporation has assumed liability for bonds in a 
transaction in which any unamortized discount or premium attributable to 
such bonds carried over to such corporation, then the acquiring 
corporation assuming liability for the bonds shall be treated as the 
distributor or transferor corporation after the date of distribution or 
transfer for purposes of determining the amount of amortization 
allowable, or includible, with respect to such discount or premium. On 
the other hand, if the distributor or transferor corporation has assumed 
liability for bonds in a transaction in which any unamortized discount 
or premium attributable to such bonds did not carry over to such 
corporation, then there can be no carryover to the acquiring corporation 
under this section.

[T.D. 6532, 26 FR 405, Jan. 19, 1961]