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Understanding the Stated Redemption Price at Maturity in Debt Instruments
Definition & Meaning
The stated redemption price at maturity refers to the total amount that a debt instrument will pay back to the holder when it matures. This amount includes all payments specified by the debt instrument, excluding any payments categorized as qualified stated interest. If the payment schedule of the debt instrument is influenced by certain contingencies, the specific schedule outlined in the relevant regulations is used to determine this redemption price.
Table of content
Legal Use & context
The term "stated redemption price at maturity" is primarily used in the context of debt instruments, such as bonds or notes. It is relevant in various legal practices, including finance and taxation. Understanding this term is crucial for investors and financial professionals when evaluating the value of debt securities and their tax implications. Users can manage related documentation through legal templates available on platforms like US Legal Forms.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A bond with a face value of $1,000 that pays $50 annually in interest and returns the principal at maturity would have a stated redemption price at maturity of $1,000.
Example 2: A debt instrument with a payment schedule that includes contingent payments based on certain conditions would use that specific schedule to determine its redemption price at maturity. (hypothetical example)
Relevant laws & statutes
The concept of stated redemption price at maturity is defined under the Internal Revenue Code, specifically in regulations related to debt instruments (26 CFR 1.1273-1). These regulations outline how to calculate the redemption price and the implications for tax reporting.
Comparison with related terms
Term
Definition
Difference
Redemption Price
The price at which a bond or debt instrument can be redeemed before maturity.
Stated redemption price at maturity includes all payments at maturity, while redemption price may refer to early redemption.
Qualified Stated Interest
Interest payments that are considered regular and are not included in the stated redemption price.
Qualified stated interest payments are excluded from the calculation of the stated redemption price at maturity.
Common misunderstandings
What to do if this term applies to you
If you are dealing with a debt instrument, it is important to understand its stated redemption price at maturity for accurate financial planning and tax reporting. Consider using legal form templates from US Legal Forms to create necessary documents related to your debt instruments. If your situation is complex, consulting a financial advisor or legal professional may be beneficial.
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