Taxation of Structured Debt in a Low-Rate Environment

Abstract:     
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.

Number of Pages in PDF File: 14

Keywords: Taxation of Financial Instruments, Taxation of Structured Debt, Original Issue Discount

JEL Classification: H25, K34

Accepted Paper Series