
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC249]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
               Subchapter B--Computation of Taxable Income
 
             PART VIII--SPECIAL DEDUCTIONS FOR CORPORATIONS
 
Sec. 249. Limitation on deduction of bond premium on repurchase


(a) General rule

    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 control 
of, or controlled by, 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 
Secretary that such excess is attributable to the cost of borrowing and 
is not attributable to the conversion feature.

(b) Special rules

    For purposes of subsection (a)--

                      (1) Adjusted issue price

        The adjusted issue price is the issue price (as defined in 
    sections 1273(b) and 1274) 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.

                             (2) Control

        The term ``control'' has the meaning assigned to such term by 
    section 368(c).

(Added Pub. L. 91-172, title IV, Sec. 414(a), Dec. 30, 1969, 83 Stat. 
612; amended Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A), Oct. 4, 
1976, 90 Stat. 1834; Pub. L. 98-369, div. A, title I, Sec. 42(a)(5), 
July 18, 1984, 98 Stat. 557.)


                               Amendments

    1984--Subsec. (b)(1). Pub. L. 98-369 substituted ``sections 1273(b) 
and 1274'' for ``section 1232(b)''.
    1976--Subsec. (a). Pub. L. 94-455 struck out ``or his delegate'' 
after ``Secretary''.


                    Effective Date of 1984 Amendment

    Amendment by Pub. L. 98-369 applicable to taxable years ending after 
July 18, 1984, see section 44 of Pub. L. 98-369, set out as an Effective 
Date note under section 1271 of this title.


                    Effective Date of 1976 Amendment

    Amendment by Pub. L. 94-455 effective Feb. 1, 1977, see section 
1906(d)(1) of Pub. L. 94-455, set out as a note under section 6013 of 
this title.


                             Effective Date

    Section 414(c) of Pub. L. 91-172, as amended by Pub. L. 99-514, 
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ``The amendments 
made by this section [enacting this section] shall apply to a 
convertible bond or other convertible evidence of indebtedness 
repurchased after April 22, 1969, other than such a bond or other 
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 section 249 of the Internal Revenue 
Code of 1986 [formerly I.R.C. 1954] (as added by subsection (a) of this 
section) does not apply to the repurchase of such convertible bond or 
other convertible evidence of indebtedness.''
