March 22, 1994
TO: TAX COMMITTEE NO. 12-94
RE: ACCOUNTING POLICY SUBCOMMITTEE PAPERS ON DOLLAR ROLLS AND
PIK BONDS
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As you may know, the Institute's Accounting/Treasurers Committee created
an Accounting Policy Subcommittee ("APS") to develop guidance on accounting
issues for which generally accepted accounting principles ("GAAP") have not
yet been developed and/or settled. Recently, the APS drafted the attached
papers on mortgage dollar rolls and payment-in-kind ("PIK") bonds. While
these papers focus primarily on methods to account for these securities, each
paper also discusses tax issues.
The APS has requested that the Tax Committee review each of these papers
to ensure that the tax discussions are accurate. The discussion of the tax
issues for mortgage dollar rolls is on pages 9 and 10. The tax discussion
contained on page 5 of the PIK bond paper reflects the proposed OID
regulations issued in 1992 and will need updating to reflect the final OID
regulations. (See Institute Memorandum to Accounting/Treasurers Members No.
5-94 and Tax Members No. 6-94, dated February 2, 1994.)
Please call me at (202) 326-5832 by April 15 with your comments.
Alternatively, you may fax them to me at (202) 326-5841.
We will keep you informed of developments.
Keith D. Lawson
Associate Counsel - Tax
Attachments