Business Services Industry
Capitalizing and amortizing debt issuance costs.
Tax Adviser, The, March, 2005 by Blinder, Michael; Yanchisin, Helen
Final regulations published under Secs. 263 and 446 (TD 9107) provide new tax accounting rules for amortizing debt issuance costs. Such costs must now be amortized in the same manner as original issue discount (OID).
The regulations generally do not change which type of debt issuance costs must be capitalized, although they do allow a current deduction for certain de minimis debt issuance costs. However, they do alter the method of amortizing capitalized debt issuance costs to conform generally to the constant yield to maturity method for OID. The new method applies to issuance costs on debt instruments issued on or after Dec. 31, 2003. Because of these new rules, the issuance costs deductible each year for tax purposes will often differ from the amount...
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