March 25, 1992
Taxation of Reopened Treasury Securities
WASHINGTON - The Internal
Revenue Service today issued a notice announcing that final Treasury regulations on
original issue discount will include rules relating to reopenings of Treasury securities
in cases of acute and protracted shortages.
In January 1992, the Treasury Department announced that it will issue additional
quantities of a Treasury security that is subject to an acute and protracted shortage.
This reopening policy, discussed in the Joint Report on the Government Securities Market,
is intended to promote the efficiency, liquidity and fairness of the government securities
market. The rules announced today are necessary to ensure that any additional Treasury
securities issued in a reopening to alleviate an acute and protracted shortage receive the
same tax treatment as the outstanding Treasury securities.
IRS Notice 92-13 provides that final regulations to be issued under sections 1273 and
1275 of the Internal Revenue Code will contain special rules for additional Treasury
securities that (1) are issued in a reopening to alleviate an acute, protracted shortage
of an outstanding Treasury security, (2) are issued not more than one year after the
original Treasury securities were first issued to the public, and (3) have terms identical
to those of the original Treasury securities. Under these special rules:
- The additional Treasury securities and the original Treasury securities are part of the
- The issue date of the additional Treasury securities is the same as the issue date of
the original Treasury securities.
- The issue price of the additional Treasury securities is the average price at which the
original Treasury securities were sold.
These rules will be effective for reopenings of Treasury securities on or after March
25, 1992. Notice 92-13 is attached and will also appear in the Internal Revenue Bulletin
1992-15 dated April 13, 1992.
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