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SECTION 2. BACKGROUND

Internal Revenue Bulletin 1999-11 · 2026-10-03 edition · updated 2026-10-04 · United States

.01 Under § 1.1001–1(a), gain or loss is realized from the exchange of property for other property differing materially either in kind or in extent.

.02 Section 1.1001–3 provides rules to determine whether a modification of the

1999–11 I.R.B. 7 March 15, 1999

issue discount over the remaining term of the instrument. See §§ 163(e) and 1272.

.06 An issuer may want to refinance and consolidate debt instruments (“old debt”) from two or more outstanding issues of debt into debt instruments (“new debt”) from a single new issue. In general, if the terms of the new debt are not materially different from the terms of the old debt, substituting the new debt for the old debt does not result in a significant modification of the old debt under § 1.1001–3. Therefore, the substitution of the new debt for the old debt in the consolidation is not a realization event for federal income tax purposes. However, under § 1.1275–2(j), some or all of the new debt may have original issue discount in varying amounts, depending upon the terms of the old debt for which the new debt was substituted. As a result, the new debt may not be fungible.

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▸Contents — Internal Revenue Bulletin 1999-11
Internal Revenue Bulletin 1999-11

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