Res 1995-121 - Laserfiche WebLink

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{ Dl(;(,. The following discussion is applicable to investors, other than those 'Wilo are subject to special provisions of the Code, such as financial institutions, property and casualty insurance companies, life insurance companies, individual recipients of Social Security or Railroad Retirement benefits, certain S corporations with Subchapter C earnings and profits and taxpayers who may be deemed to have incurred or continued indebtedness to purchase tax~x=pt obligations. JNVESTORS, INCLUDING rnOSE WHO ARE SUBÆCT TO SPECIAL PROVISIONS OF 1BE CODE, SHOULD CONSULT1BEIR OWN TAX ADVISORS AS TO 1BE TAX TREATMENT WHICH MAY BE ANTICIPA1ED TO RESULT FROM 1BE PURCHASE, OWNERSHIP AND DISPOSmON OF TAX-EXEMPT OBUGATIONS BEFORE DETERMINING WHE1BER TO PURCHASE 1BE BONDS. Interest on the Bonds will be includable as an adjustment for "adjusted earnings and profits" to calculate the alternative 0.- minimum tax imposed on corporations by section 55 of the Code. Section 55 of the Code imposes a ta.x equal to 20 percent for corporations, or 26 percent for noncorporate ta.xpayers (28 percent for ta.xable income exceeding $175,000), of the taxpayer's "alternative minimum ta.xable income," if the amount of such alternative minimum ta.x is greater than the ta.xpayer's regular income ta.x for the œxable yem:. Interest on the Bonds is includable in the "alternative minimum œxable income" of a corporation (other than a regulated investment company or a real estate investment trust) for purposes of detennining the envirorunental tax imposed by section 59A of the Code. Section 59A of the Code imposes on a corporation an environmental ta.x, in addition to any other income tax imposed by the Code, equal to 0.12 percent of the excess of the modified alternative minimum œxable income of such corporation for the ta.xable yem: over $2,000,000. Interest on the Bonds '~y be subject to the "branch profits ta.x" imposed by section 884 of the Code on the efIective1y- connected earnings and profits of a foreign corporation doing business in the United States. Under section 6012 of the Code, holders of ta.x-exempt obligations, such as the Bonds, may be required to disclose interest received or accrued during each ta.xable yem: on their returns of federal income ta.xation. Section 1276 of the Code provides for ordinary income ta.x treatment of gain recognized upon the disposition of a ta.x~xempt obligation, such as the Bonds, if such obligation was acquired at a "market discount" and if the fixed maturity of such obligation is equal to, or exceeds, one yem: from the date of issue. Such treatment applies to "market discount bonds" to the extent such gain does not exceed the accrued market discount of such bonds; although for this purpose, a de minimis amount of market discount is ignored. A "market discount bond" is one which is acquired by the holder at a purchase price which is less than the stated redemption price at maturity or, in the case of a bond issued at an original issue discount, the "revised issue price" (Le., the issue price plus accrued original issue discount). The "accrued mar.ket discount" is the amount which bears the same ratio to the market discount as the number of days during which the holder holds the obligation bears to the number of days between the acquisition date and the final maturity date. State, Local and Foreign Taxes Investors should consult their own ta.x advisors concerning the ta.x implications of the purchase, ownership or disposition of the Bonds under applicable state or local laws. Foreign investors should also consult their own ta.x advisors regarding the tax consequences unique to investors who are not United States persons.