- 17 -
considered to be issued with OID.15 We note that final
regulations were not published until 1994 and are generally not
applicable to debt instruments issued before April 4, 1994.16 In
addition, this Court usually regards proposed regulations as
having no more weight than a position asserted in a brief by the
Commissioner.17 However, the portion of respondent's brief cited
by the majority in Security Bank Minn. v. Commissioner, supra,
did refer to the proposed regulations. Security Bank Minn. v.
Commissioner, 98 T.C. at 37-38. For this reason, we believe that
15 Sec. 1273(a)(1) defines the amount of OID an obligation
contains to be equal to the excess of the obligation's "stated
redemption price at maturity" (SRPM) over the obligation's "issue
price". Under sec. 1.1273-1, Proposed Income Tax Regs., 51 Fed.
Reg. 12059-12061 (Apr. 8, 1986), the SRPM of an obligation was in
turn defined to be equal to the sum of all payments to be made
under the terms of that obligation, other than "qualified
periodic interest payments". In addition, sec. 1.1273-
1(b)(1)(ii)(D), Proposed Income Tax Regs., 51 Fed. Reg. 12060
(Apr. 8, 1986), provided that in the case of short-term
obligations, no interest payments were considered to constitute
"qualified periodic interest payments".
What all this means is that under the 1986 Proposed Regs.,
all interest payments on a short-term obligation would be
included in the obligation's SRPM, and would therefore constitute
OID.
16 Sec. 1.1271-0(a), Income Tax Regs. It does not appear
that the final regulations made any substantive changes to the
1986 Proposed Regs.' definition of OID as discussed in the text.
See sec. 1.1273-1(b), 1.1273-1(c)(5), Income Tax Regs.
17 For examples of opinions so characterizing proposed
regulations, see Laglia v. Commissioner, 88 T.C. 894, 897-898
(1987); F.W. Woolworth Co. v. Commissioner, 54 T.C. 1233, 1265-
1266 (1970).
Page: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 NextLast modified: May 25, 2011