SECTION 1. PURPOSE

This revenue procedure describes circumstances in which the Internal Revenue Service (“Service”) will not treat a debt instrument as an applicable high yield discount obligation (“AHYDO”) for purposes of §§ 163(e)(5) and 163(i) of the Internal Revenue Code.

This revenue procedure provides certainty with respect to certain potential tax issues that may be implicated by the issuance of a debt instrument (including a deemed issuance of a debt instrument under § 1.1001–3 of the Income Tax Regulations) in the circumstances described below. No inference should be drawn about whether similar consequences would obtain if a debt instrument falls outside the limited scope of this revenue procedure. Furthermore, there should be no inference that, in the absence of this revenue procedure, a debt instrument within its scope would be an AHYDO.