Message Font: Serif | Sans-Serif
No. of Recommendations: 0
If you provide the link to the prospectus, I may be able to help you work through this. There are a number of different ways trust preferred deals were structured. One thing you'd want to look at, outside the tax section, is what is considered to happen under the trust indenture when an event of default (suspension of payment on the trust preferred) occurs. Is there, for example, a liquidating distribution of trust assets, or in-kind deemed exchange of trust assets for trust securities in order of liquidation priority, so that, after the exchange, holders of preferred securities are deemed to directly own pro rata interests in the trust assets (which are OID notes issued by the company, in this case, Ford)? Either would explain having to start accruing OID upon a suspension of payment on the trust preferred.

It was not uncommon for bonds that backed trust preferred securities to give the issuer the option to capitalize interest for the first few years. This would have made all the interest on the bonds have to be accrued as OID rather than 'qualified stated interest.' But there were a lot of ways that trust preferred were structured, too. This makes sense to me based on what you've said and what I remember, but this may all be completely off base for this particular deal.

As to how to figure out amount of OID, there should be an "OID legend" on the front page of the security that tells you either how to calculate the OID or who to call for information about OID. 1099-OID reporting is required, so if you hold the securities in a brokerage account you should call them, refer them to the prospectus and ask them how they plan to go about getting you this information from the company or the company's accountants or paying agent or whoever. Let them earn their fee.
Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.