• IRS Provides Favorable Guidance on, and Parameters for, Convertible Bond Hedge Issuances
  • October 19, 2007 | Authors: Mark H. Leeds; Diana S. Davis
  • Law Firms: Greenberg Traurig, LLP - New York Office; Greenberg Traurig, LLP - Miami Office
  • On July 20, 2007, the Internal Revenue Service (IRS) released Associate Chief Counsel Advice Memorandum 2007-0014. AM 2007-0014 is the first federal income tax guidance that the IRS has released with respect to convertible bond hedge transactions. Although these transactions have been in the market for several years, the IRS noted several important elements that must be satisfied in order for the transactions to have their desired tax treatment. In certain instances, the new guidance differs from the market practice that we have seen. This GT Alert describes the elements of a convertible bond hedge transaction that will fall within the parameters specified by the IRS.