Section 24361 Of Article 1. Deductions From California Revenue And Taxation Code >> Division 2. >> Part 11. >> Chapter 7. >> Article 1.
24361
. (a) For purposes of subsection (b), the amount of bond
premium, in the case of the holder of any bond, shall be determined--
(1) With reference to the amount of the basis (for determining
loss on sale or exchange) of such bond;
(2) With reference to the amount payable on maturity or on earlier
call date; and
(3) With adjustments proper to reflect unamortized bond premium,
with respect to the bond, for the period before the date as of which
Section 24360 becomes applicable with respect to the taxpayer with
respect to such bond.
In no case shall the amount of bond premium on a convertible bond
include any amount attributable to the conversion features of the
bond.
(b) The amortizable bond premium of the taxable year shall be the
amount of the bond premium attributable to such year. In the case of
a bond described in Section 24362(a) issued after January 22, 1951,
and acquired after January 22, 1954, which has a call date not more
than three years after the date of such issue, the amount of bond
premium attributable to the taxable year in which the bond is called
shall include an amount equal to the excess of the amount of the
adjusted basis (for determining loss on sale or exchange) of such
bond as of the beginning of the taxable year over the amount received
on redemption of the bond or (if greater) the amount payable on
maturity.
(c) (1) Except as provided in regulations, the determinations
required under subdivisions (a) and (b) shall be made on the basis of
the taxpayer's yield to maturity determined by--
(A) Using the taxpayer's basis for purposes of determining loss on
sale or exchange of the obligation, and
(B) Compounding at the close of each accrual period (as defined in
Section 1272(a)(5) of the Internal Revenue Code).
(2) For purposes of paragraph (1), if the amount payable on an
earlier call date is used under subparagraph (B) of paragraph (1) in
determining the amortizable bond premium attributable to the period
before the earlier call date, that bond shall be treated as maturing
on that date for the amount so payable and then reissued on that date
for the amount so payable.