Hybrid Instruments and the Debt-Equity Distinction in Corporate Taxation

32 Pages Posted: 13 Apr 2016

Date Written: January 1, 1985

Abstract

Debt and equity are treated differently for many purposes in federal tax law. The most important difference is that payments made on debt may be deducted in computing a corporation's taxable income, while payments made on equity may not. Although this distinction is well-settled, it has little theoretical basis and is not clearly drawn in the tax law. As a result, there has for a long time been confusion over how to classify, for tax purposes, instruments that do not closely resemble "ordinary" debt or "ordinary" equity.

Keywords: Corporate taxation, hybrid instruments

JEL Classification: K34

Suggested Citation

Emmerich, Adam O., Hybrid Instruments and the Debt-Equity Distinction in Corporate Taxation (January 1, 1985). University of Chicago Law Review, Vol. 52, Iss. 1, Article 4 (1985). Available at SSRN: https://ssrn.com/abstract=2762348

Adam O. Emmerich (Contact Author)

Wachtell, Lipton, Rosen & Katz ( email )

51 West 52nd Street
New York, NY 10019
United States
(212) 403-1234 (Phone)
(212) 403-2234 (Fax)

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