§ 24360-24363(a). Amortizable Bond Premium.

Source: https://govt.westlaw.com/calregs/Document/IFFDA35034C8311EC89E5000D3A7C4BC3?viewType=FullText&originationContext=documenttoc&transitionType=CategoryPageItem&contextData=(sc.Default)

§ 24360-24363(a). [FN*] Amortizable Bond Premium.

(1) In General. Under Section 24360, bond premium is amortizable by the owner of the bond (as defined in Reg. 24360-24363(d)) in accordance with paragraph (A) or (B) of this subsection as follows:

(A) Amortization of bond premium is mandatory with respect to--

(i) Fully tax-exempt bonds (the interest on which is excludable from gross income under Chapter 3).

(B) Amortization of bond premium is optional, at the election of the taxpayer, with respect to--

(i) Fully taxable bonds.

(2) Operation.

(A) In the case of a fully tax-exempt bond, the amortizable bond premium for the income year is simply an adjustment to the basis or adjusted basis of the bond. Thus, if such premium is $1, the basis or adjusted basis of the bond is reduced by $1. No deduction is allowable on account of such amortizable bond premium. See subsection (2)(B) of Reg. 24360-24363(b) for treatment of bonds with alternative call dates.

(B) In the case of a fully taxable bond to which Section 24360 is applicable, the amortizable bond premium is applied both as an adjustment to the basis or adjusted basis of the bond and as a deduction in computing net income. For the disallowance of a deduction in certain cases, see subsection (1)(C) of Reg. 24360-24363(b).

Credits

Note: Authority cited: Section 26422, Revenue and Taxation Code.

History

1. New section filed 12-22-69; effective thirtieth day thereafter (Register 69, No. 52).

[FN*]

This regulation is based on Section 26 CFR 1.171-1.