Rev. Rul. 58-587

Advice has been requested whether certain modifications made in debentures constitute such material changes as to effect a new issuance taxable under sections 4311 and 4313 of the Internal Revenue Code of 1954.

A company had two classes of debentures in registered form which entitled the holders thereof to interest at a specified percentage. In order to eliminate the necessity of payment of the interest to the registered holders of the securities by check, new debentures bearing the same rate of interest with coupons attached were issued to replace the old debentures. In all other respects the old and the new debentures are substantially identical.

Section 4311 of the Code provides that a tax shall be imposed on all certificates of indebtedness issued by a corporation. Section 4313 of the Code provides that every renewal of any certificate of indebtedness shall be taxed as a new issue.

The exchange of the new debentures with coupons attached for the old debentures without coupons merely changes the method of paying interest thereon. Accordingly, it is held that the new debentures do not effect such material changes in terms as to constitute a new issue subject to the original issue tax under sections 4311 and 4313 of the Code.