26 U.S.C. § 249
Section 249 · Limitation on deduction of bond premium on repurchase
Amended 5 times on record
Applied in 9 court decisions — leading case Chock Full O' Nuts Corp. v. United States (1971)
Most recently applied in Clark Equipment Company, and Consolidated Subsidiaries v. United States (August 1990)
How often courts cite this section
Court decisions citing this, by year.Markers show enactment, consequential amendments, and circuit splits over this section — watch for a citation surge after a change or a disagreement. The dip in the last several years is a data-coverage gap, not a real trend — our corpus holds fewer opinions from the most recent years, so recent citations are undercounted.
No deduction shall be allowed to the issuing corporation for any premium paid or incurred upon the repurchase of a bond, debenture, note, or certificate or other evidence of indebtedness which is convertible into the stock of the issuing corporation, or a corporation in the same parent-subsidiary controlled group (within the meaning of section 1563(a)(1)) as the issuing corporation, to the extent the repurchase price exceeds an amount equal to the adjusted issue price plus a normal call premium on bonds or other evidences of indebtedness which are not convertible. The preceding sentence shall not apply to the extent that the corporation can demonstrate to the satisfaction of the Secretary that such excess is attributable to the cost of borrowing and is not attributable to the conversion feature.
For purposes of subsection (a), the adjusted issue price is the issue price (as defined in sections 1273(b) and 1274) increased by any amount of discount deducted before repurchase, or decreased by any amount of premium included in gross income before repurchase by the issuing corporation.
Editorial notes U.S. Code · Office of the Law Revision Counsel
Amendments
2014—Subsec. (a). Pub. L. 113–295, § 220(i), substituted “1563(a)(1))” for “1563(a)(1)”.
Subsec. (b). Pub. L. 113–295, § 221(a)(43), which directed amendment of subsec. (b)(1) by striking out “, in the case of bonds or other evidences of indebtedness issued after February 28, 1913,” after “repurchase, or”, was executed by making the amendment in subsec. (b) to reflect the probable intent of Congress.
2012—Subsec. (a). Pub. L. 112–95, § 1108(a), substituted “, or a corporation in the same parent-subsidiary controlled group (within the meaning of section 1563(a)(1) as” for “, or a corporation in control of, or controlled by,”.
Subsec. (b). Pub. L. 112–95, § 1108(b), substituted “Adjusted issue price” for “Special rules” in heading and “For purposes of subsection (a),” for “For purposes of subsection (a)—” and par. (1) designation and heading, and “the adjusted issue price” for “The adjusted issue price”, and struck out par. (2), which defined “control” as having the meaning assigned to such term by section 368(c).
1984—Subsec. (b)(1). Pub. L. 98–369 substituted “sections 1273(b) and 1274” for “section 1232(b)”.
1976—Subsec. (a). Pub. L. 94–455 struck out “or his delegate” after “Secretary”.
Effective Date of 2014 Amendment
Amendment by section 221(a)(43) of Pub. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title.
Effective Date of 2012 Amendment
Pub. L. 112–95, title XI, § 1108(c), Feb. 14, 2012, 126 Stat. 154, provided that: “The amendments made by this section [amending this section] shall apply to repurchases after the date of the enactment of this Act [Feb. 14, 2012].”
Effective Date of 1984 Amendment
Amendment by Pub. L. 98–369 applicable to taxable years ending after July 18, 1984, see section 44 of Pub. L. 98–369, set out as an Effective Date note under section 1271 of this title.
Effective Date of 1976 Amendment
Amendment by Pub. L. 94–455 effective Feb. 1, 1977, see section 1906(d)(1) of Pub. L. 94–455, set out as a note under section 6013 of this title.
Effective Date
Pub. L. 91–172, title IV, § 414(c), Dec. 30, 1969, 83 Stat. 613, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: “The amendments made by this section [enacting this section] shall apply to a convertible bond or other convertible evidence of indebtedness repurchased after April 22, 1969, other than such a bond or other evidence of indebtedness repurchased pursuant to a binding obligation incurred on or before April 22, 1969, to repurchase such bond or other evidence of indebtedness at a specified call premium, but no inference shall be drawn from the fact that section 249 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as added by subsection (a) of this section) does not apply to the repurchase of such convertible bond or other convertible evidence of indebtedness.”