California Revenue and Taxation Code

§ 24439

RTC § 24439 Effective Sep 30, 2015Div. 2 · Part 11 · Ch. 7 · Art. 3

Statute text

(a)No deduction shall be allowed to the issuing corporation for any premium paid or incurred upon the repurchase of a bond, debenture, note, or certificate or other evidence of indebtedness which is convertible into the stock of the issuing corporation, or a corporation in the same parent-subsidiary controlled group, within the meaning of Section 1563(a)(1) of the Internal Revenue Code, relating to parent-subsidiary controlled group, as the issuing corporation, to the extent the repurchase price exceeds an amount equal to the adjusted issue price plus a normal call premium on bonds or other evidences of indebtedness which are not convertible. The preceding sentence shall not apply to the extent that the corporation can demonstrate to the satisfaction of the Franchise Tax Board that such excess is attributable to the cost of borrowing and is not attributable to the conversion feature.

(b)For purposes of subdivision (a), the adjusted issue price is the issue price, as defined in Sections 1273(b) and 1274 of the Internal Revenue Code, increased by any amount of discount deducted before repurchase, or, in the case of bonds or other evidences of indebtedness issued after February 28, 1913, decreased by any amount of premium included in gross income before repurchase by the issuing corporation.

(c)The provisions of this section shall not apply to a convertible bond or other convertible evidence of indebtedness repurchased pursuant to a binding obligation incurred on or before April 22, 1969, to repurchase such bond or other evidence of indebtedness at a specified call premium, but no inference shall be drawn from the fact that this section does not apply to the repurchase of such convertible bond or other convertible evidence of indebtedness.

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Legislative history

Amended by Stats. 2015, Ch. 359, Sec. 33. (AB 154) Effective September 30, 2015. Applicable to taxable years beginning on or after January 1, 2015, as provided in Sec. 41 of Stats. 2015, Ch. 359.