[Code of Federal Regulations]
[Title 26, Volume 7]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.544-5]

[Page 266]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.544-5  Convertible securities.

    Under section 544(b) outstanding securities of a corporation such as 
bonds, debentures, or other corporate obligations, convertible into 
stock of the corporation (whether or not convertible during the taxable 
year) shall be considered as outstanding stock of the corporation. The 
consideration of convertible securities as outstanding stock is subject 
to the exception that, if some of the outstanding securities are 
convertible only after a later date than in the case of others, the 
class having the earlier conversion date may be considered as 
outstanding stock although the others are not so considered, but no 
convertible securities shall be considered as outstanding stock unless 
all outstanding securities having a prior conversion date are also so 
considered. For example, if outstanding securities are convertible in 
1954, 1955 and 1956, those convertible in 1954 can be properly 
considered as outstanding stock without so considering those convertible 
in 1955 or 1956, and those convertible in 1954 and 1955 can be properly 
considered as outstanding stock without so considering those convertible 
in 1956. However, the securities convertible in 1955 could not be 
properly considered as outstanding stock without so considering those 
convertible in 1954 and the securities convertible in 1956 could not be 
properly considered as outstanding stock without so considering those 
convertible in 1954 and 1955. For the restriction on the applicability 
of the rule of this section, see paragraph (b) of Sec. 1.544-1.