Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 73-7

1973-1 C.B. 370

Sec. 1031
Sec. 1037

IRS Headnote

Recognition of gain or loss, and other tax effects, resulting from the exchange of certain United States obligations solely for the Treasury Notes and Bonds offered in Treasury Department Circulars, Public Debt Series Nos. 7-72, 8-72, and 9-72.

Full Text

Rev. Rul. 73-7

The Secretary of the Treasury offered Treasury Notes or Treasury Bonds in exchange for other Treasury securities as specified in the following Treasury Department Circulars:

Treasury Department Circular, Public Debt Series No. 7-72, dated July 27, 1972, 37 F.R. 15387, offered 57/8 percent Treasury Notes of Series F-1976 at 99.75 percent of their face value in exchange for the following securities:

5    percent Treasury Notes of Series E-1972, dated May 15, 1971, due   August 15, 1972;

4    percent Treasury Bonds of 1972, dated September 15, 1962, due August 15, 1972;

21/2 percent Treasury Bonds of 1967-72, dated October 20, 1941, due September 15, 1972, with cash payment of $1.12220 per $1,000 to the United States;

6    percent Treasury Notes of Series F-1972, dated June 29, 1971, due November 15, 1972, with a cash payment of $4.20838 per $1,000 to subscribers; or

21/2 percent Treasury Bonds of 1967-72, dated November 15, 1945, due December 15, 1972, with a cash payment of $6.00915 per $1,000 to the United States.

Treasury Department Circular, Public Debt Series No. 8-72, dated July 27, 1972, 37 F.R. 15388, offered 61/4 percent Treasury Notes of Series A-1979, at par, in exchange for the following securities:

5    percent Treasury Notes of Series E-1972, dated May 15, 1971, due August 15, 1972;

4    percent Treasury Bonds of 1972, dated September 15, 1962, due August 15, 1972;

21/2 percent Treasury Bonds of 1967-72, dated October 20, 1941, due September 15, 1972, with a cash payment of $1.12220 per $1,000 to the United States;

6    percent Treasury Notes of Series F-1972, dated June 29, 1971, due November 15, 1972, with a cash payment of $4.20838 per $1,000 to subscribers;

21/2 percent Treasury Bonds of 1967-72, dated November 15, 1945, due December 15, 1972, with a cash payment of $6.00915 per $1,000 to the United States;

53/4 percent Treasury Notes of Series A-1974, dated November 15, 1967, due November 15, 1974, with a cash payment of $6.10880 per $1,000 to subscribers;

37/8 percent Treasury Bonds of 1974, dated December 2, 1957, due November 15, 1974, with a cash payment of $30.23856 per $1,000 to the United States;

53/4 percent Treasury Notes of Series A-1975, dated February 15, 1968, due February 15, 1975, with a cash payment of $3.06136 per $1,000 to subscribers; or

57/8 percent Treasury Notes of Series E-1975, dated October 22, 1971, due February 15, 1975, with a cash payment of $5.81659 per $1,000 to subscribers.

Treasury Department Circular, Public Debt Series No. 9-72, dated July 27, 1972, 37 F.R. 15386, offered 63/8 percent Treasury Bonds of 1984 at 99.40 percent of their face value in exchange for the following securities:

5    percent Treasury Notes of Series E-1972, dated May 15, 1971, due August 15, 1972;

4    percent Treasury Bonds of 1972, dated September 15, 1962, due August 15, 1972;

21/2 percent Treasury Bonds of 1967-72, dated October 20, 1941, due September 15, 1972, with a cash payment of $1.12220 per $1,000 to the United States;

6    percent Treasury Notes of Series F-1972, dated June 29, 1971, due November 15, 1972, with a cash payment of $4.20838 per $1,000 to subscribers;

21/2 percent Treasury Bonds of 1967-72, dated November 15, 1945, due December 15, 1972, with a cash payment of $6.00915 per $1,000 to the United States;

53/4 percent Treasury Notes of Series A-1974, dated November 15, 1967, due November 15, 1974, with a cash payment of $6.10880 per $1,000 to subscribers;

37/8 percent Treasury Bonds of 1974, dated December 2, 1957, due November 15, 1974, with a cash payment of $30.23856 per $1,000 to the United States;

53/4 percent Treasury Notes of Series A-1975, dated February 15, 1968, due February 15, 1975, with a cash payment of $3.06136 per $1,000 to subscribers; or

57/8 percent Treasury Notes of Series E-1975, dated October 22, 1971, due February 15, 1975, with a cash payment of $5.81659 per $1,000 to subscribers.

The income derived from the notes and bonds issued in exchange is subject to all taxes imposed under the Internal Revenue Code of 1954. The notes and bonds are subject to estate, inheritance, gift, or other excise taxes, whether Federal or State, but are exempt from all taxation now or hereafter imposed on the principal or interest thereof by any State or any of the possessions of the United States, or by any local taxing authority.

The notes and bonds issued in exchange will be acceptable to secure deposits of public moneys. However, the notes and bonds will not be acceptable in payment of taxes.

In accordance with the provisions of section 1037(a) of the Code, the Secretary of the Treasury has declared that gain or loss for Federal income tax purposes realized upon the exchange with the United States of the last four issues enumerated in Treasury Department Circulars, Public Debt Series Nos. 8-72 and 9-72 solely for the 61/4 percent Treasury Notes of Series A-1979 and the 63/8 percent Treasury Bonds of 1984 may be recognized either in the taxable year of the exchange, or in the taxable year of disposition or redemption of the new obligations.

However, section 1031(b) of the Code requires the recognition of any gain realized on the exchange to the extent that money is received by the security holder in connection with the exchange. The payment due to the subscriber on account of the issue price of the notes and bonds to be issued is the maximum amount of gain, if any, required to be recognized under section 1031(b) of the Code at the time of the exchange.

To the extent not recognized at the time of the exchange, gain or loss, if any, upon the obligations surrendered in exchange will be taken into account upon the disposition or redemption of the new obligations.

Since the Secretary of the Treasury has not provided, in accordance with section 1037(a), for the nonrecognition of gain or loss, if any, realized upon the exchange with the United States of the first five issues enumerated in each circular solely for the 57/8 percent Treasury Notes of Series F-1976, the 61/4 percent Treasury Notes of Series A-1979, and the 63/8 percent Treasury Bonds of 1984, any such gain or loss must be fully recognized in the year in which the exchange is made.

In addition, each subscriber requesting registered bonds is required to furnish his social security number or employer identification number as required on tax returns or other documents submitted to the Internal Revenue Service.