# § 249. Limitation on deduction of bond premium on repurchase
**(a)** **General rule** 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.
**(b)** **Adjusted issue price** 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.
---
**Source Credit**: (Added Pub. L. 91–172, title IV, § 414(a), Dec. 30, 1969, 83 Stat. 612; amended Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 98–369, div. A, title I, § 42(a)(5), July 18, 1984, 98 Stat. 557; Pub. L. 112–95, title XI, § 1108(a), (b), Feb. 14, 2012, 126 Stat. 154; Pub. L. 113–295, div. A, title II, §§ 220(i), 221(a)(43), Dec. 19, 2014, 128 Stat. 4036, 4044.)
## Editorial Notes
### Amendments
2014—Subsec. (a). , substituted “1563(a)(1))” for “1563(a)(1)”.
Subsec. (b). , which directed amendment of subsec. (b)(1) by striking out “, in the case of bonds or other evidences of indebtedness issued after ,” after “repurchase, or”, was executed by making the amendment in subsec. (b) to reflect the probable intent of Congress and the prior amendment by . See 2012 Amendment note below.
2012—Subsec. (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). , 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). substituted “sections 1273(b) and 1274” for “section 1232(b)”.
1976—Subsec. (a). struck out “or his delegate” after “Secretary”.
## Statutory Notes and Related Subsidiaries
### Effective Date of 2014 Amendment
Amendment by effective , subject to a savings provision, see , set out as a note under .
### Effective Date of 2012 Amendment
> “The amendments made by this section [amending this section] shall apply to repurchases after the date of the enactment of this Act [
>
> ].”
, , , provided that:
### Effective Date of 1984 Amendment
Amendment by applicable to taxable years ending after , see , set out as an Effective Date note under .
### Effective Date of 1976 Amendment
Amendment by effective , see , set out as a note under .
### Effective Date
> “The amendments made by this section [enacting this section] shall apply to a convertible bond or other convertible evidence of indebtedness repurchased after
>
> , other than such a bond or other evidence of indebtedness repurchased pursuant to a binding obligation incurred on or before
>
> , 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.”
, , , as amended by , , , provided that: