A bill to amend the Internal Revenue Code of 1954 to provide tax incentives for the issuance of small business participating debentures.

Summary

Amends the Internal Revenue Code to apply long-term capital gains treatment to amounts actually paid to a taxpayer in respect of a small business participating debenture, which constitute the distribution of a share of the earnings of the issuer. Defines "small business participating debenture" (SBPD) as a written debt instrument issued by a qualified small business which: (1) is a general obligation of the business; (2) bears interest at not less than the rate prescribed by the Secretary of the Treasury; (3) has a fixed maturity; (4) grants no voting or conversion rights in the business to the purchaser; and (5) provides for the payment of a share of the issuer's earnings. Limits "qualified small business" to one (whether or not incorporated): (1) whose equity capital does not exceed $25,000,000; (2) the face value of all of whose outstanding SBPD's does not exceed $1,000,000; and (3) which has no outstanding securities subject to regulation by the Securities and Exchange Commission. Treats members of a controlled group of companies as a single taxpayer. Denies capital gains treatment where the taxpayer is "related" to the SBPD-issuing company, having at least a ten percent interest in it. Treats losses on such debentures as ordinary losses. Allows an interest expense deduction for interest and share-of-earnings payments made on such a debenture.

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1 official file

• Introduced in Senate

  summary · EN · 28 July 1980

  Open at official source

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