republic-os/legal/us/code/title-26/chapter-1/section-249.md

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LegalText	26 U.S.C. § 249	Limitation on deduction of bond premium on repurchase	us	united_states_code	code_section	26	INTERNAL REVENUE CODE	1	NORMAL TAXES AND SURTAXES	249	26 U.S.C. § 249	current	119-100	2026-06-26	official	https://uscode.house.gov/download/releasepoints/us/pl/119/100/xml_usc26@119-100.zip	/us/usc/t26/s249	data/legal/raw/us/code/title-26/usc26.xml	9ca02e07e8eb582db72eb2f6fb92602702efe021730ce46cf1e86738c13fe1b4	a261f094809116f42a96648a3d5eee80fa010379d67412551c21dd5c900b27f4	bc432267635622455f0af41d29756d7f789aca4346d87a23ab5c7bbaffd9e597	2026-07-04	official	legal us-code

26 U.S.C. § 249 - Limitation on deduction of bond premium on repurchase

Text

(a) General rule No deduction shall be allowed to the issuing corporation for any premium paid or incurred upon the repurchase of a bond, debenture, note, or certificate or other evidence of indebtedness which is convertible into the stock of the issuing corporation, or a corporation in the same parent-subsidiary controlled group (within the meaning of section 1563(a)(1)) as the issuing corporation, to the extent the repurchase price exceeds an amount equal to the adjusted issue price plus a normal call premium on bonds or other evidences of indebtedness which are not convertible. The preceding sentence shall not apply to the extent that the corporation can demonstrate to the satisfaction of the Secretary that such excess is attributable to the cost of borrowing and is not attributable to the conversion feature.

(b) Adjusted issue price For purposes of subsection (a), the adjusted issue price is the issue price (as defined in sections 1273(b) and 1274) increased by any amount of discount deducted before repurchase, or decreased by any amount of premium included in gross income before repurchase by the issuing corporation.

(Added Pub. L. 91–172, title IV, § 414(a), Dec. 30, 1969, 83 Stat. 612; amended Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 98–369, div. A, title I, § 42(a)(5), July 18, 1984, 98 Stat. 557; Pub. L. 112–95, title XI, § 1108(a), (b), Feb. 14, 2012, 126 Stat. 154; Pub. L. 113–295, div. A, title II, §§ 220(i), 221(a)(43), Dec. 19, 2014, 128 Stat. 4036, 4044.)

Notes

Editorial Notes

Amendments2014—Subsec. (a). Pub. L. 113–295, § 220(i), substituted “1563(a)(1))” for “1563(a)(1)”. Subsec. (b). Pub. L. 113–295, § 221(a)(43), which directed amendment of subsec. (b)(1) by striking out “, in the case of bonds or other evidences of indebtedness issued after February 28, 1913,” after “repurchase, or”, was executed by making the amendment in subsec. (b) to reflect the probable intent of Congress and the prior amendment by Pub. L. 112–95, § 1108(b). See 2012 Amendment note below. 2012—Subsec. (a). Pub. L. 112–95, § 1108(a), substituted “, or a corporation in the same parent-subsidiary controlled group (within the meaning of section 1563(a)(1) as” for “, or a corporation in control of, or controlled by,”. Subsec. (b). Pub. L. 112–95, § 1108(b), substituted “Adjusted issue price” for “Special rules” in heading and “For purposes of subsection (a),” for “For purposes of subsection (a)—” and par. (1) designation and heading, and “the adjusted issue price” for “The adjusted issue price”, and struck out par. (2), which defined “control” as having the meaning assigned to such term by section 368(c). 1984—Subsec. (b)(1). Pub. L. 98–369 substituted “sections 1273(b) and 1274” for “section 1232(b)”. 1976—Subsec. (a). Pub. L. 94–455 struck out “or his delegate” after “Secretary”.

Statutory Notes and Related Subsidiaries

Effective Date of 2014 AmendmentAmendment by section 221(a)(43) of Pub. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title.

Effective Date of 2012 AmendmentPub. L. 112–95, title XI, § 1108(c), Feb. 14, 2012, 126 Stat. 154, provided that: “The amendments made by this section [amending this section] shall apply to repurchases after the date of the enactment of this Act [Feb. 14, 2012].”

Effective Date of 1984 AmendmentAmendment by Pub. L. 98–369 applicable to taxable years ending after July 18, 1984, see section 44 of Pub. L. 98–369, set out as an Effective Date note under section 1271 of this title.

Effective Date of 1976 AmendmentAmendment by Pub. L. 94–455 effective Feb. 1, 1977, see section 1906(d)(1) of Pub. L. 94–455, set out as a note under section 6013 of this title.

Effective DatePub. L. 91–172, title IV, § 414(c), Dec. 30, 1969, 83 Stat. 613, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: “The amendments made by this section [enacting this section] shall apply to a convertible bond or other convertible evidence of indebtedness repurchased after April 22, 1969, other than such a bond or other evidence of indebtedness repurchased pursuant to a binding obligation incurred on or before April 22, 1969, to repurchase such bond or other evidence of indebtedness at a specified call premium, but no inference shall be drawn from the fact that section 249 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as added by subsection (a) of this section) does not apply to the repurchase of such convertible bond or other convertible evidence of indebtedness.”