Rev. Rul. 55-641

When United States Treasury Certificates of Indebtedness, issued in unregistered form and without interest coupons, are surrendered at maturity in 1954 in exchange for a like face amount of such certificates with a later maturity date, such exchange constitutes a transaction in which gain or loss is recognized for Federal income tax purposes. Compare I.T. 2734, C.B. XII-2, 73 (1933), and I.T. 2359, C.B. VI-I, 51 (1927); and see section 39.112(b)(1)-1(d) of Regulations 118. Since any premiums paid upon the purchase of the old certificates of indebtedness were not amortizable (see Rev. Rul. 54-66, C.B. 1954-1, 128), any gain or loss is measured by the difference between the cost (including any premiums paid upon the acquisition thereof) or other basis of the old certificates and the fair market value of the new certificates at the date of the exchange. Interest accrued on the old certificates to the date of the exchange should be treated as ordinary income. Compare Sol. Op. 46, C.B. 3, 90 (1920). If the old certificates are capital assets in the hands of a taxpayer, any gain or loss thus determined constitutes a capital gain or loss. The market value thus established for the new certificates received represents the basis of such certificates for the purpose of computing gain or loss upon subsequent disposition.

That portion of Revenue Ruling 54-66, C.B. 1954-1, 128, which holds that any losses realized upon redemption of such types of obligations are deductible as ordinary losses is not applicable in the instant case since that ruling is concerned with loss upon redemption and not with gain or loss upon the exchange of such obligations, at maturity, under the circumstances described above