[26834]
January 4, 2013
TO: 529 PLAN MEMBERS No. 1-13ACCOUNTING/TREASURERS MEMBERS No. 2-13
INTERNATIONAL MEMBERS No. 4-13
TAX MEMBERS No. 3-13
TRANSFER AGENT ADVISORY COMMITTEE No. 3-13
PENSION MEMBERS No. 3-13 RE: GUIDANCE RELEASED ON TIPS AND BOND PREMIUM CARRYFORWARD
The Treasury Department and IRS released guidance on:
- Treasury inflation-protected securities (TIPS) issued at a premium, [1] and
- Debt instruments with bond premium carryforwards in the holder’s final accrual period, including Treasury bills acquired at a premium. [2]
This guidance generally resolves a character mismatch problem for funds that hold zero-coupon instruments (including especially Treasury bills acquired at a premium and having a negative-yield). Under the guidance, a deduction for the unamortized bond premium, rather than a capital loss, is allowed at maturity.
Ryan Lovin
Assistant Counsel – Tax Law
endnotes
[1] See the Final Regulations provided by T.D. 9609, available at: http://www.ofr.gov/OFRUpload/OFRData/2012-31747_PI.pdf. These Final Regulations take the place of the Temporary Regulations that were issued in December 2011 and adopt those regulations “without substantive change.”
[2] See the Temporary Regulations provided by T.D. 9609, available at: http://www.ofr.gov/OFRUpload/OFRData/2012-31747_PI.pdf. These temporary regulations were also issued as proposed regulations in REG-140437-12, available at: http://www.ofr.gov/OFRUpload/OFRData/2012-31746_PI.pdf.