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SEC Filings

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applied to reduce interest on the notes and, in the case of a 11.75% note, by
any payments received thereon.
     Gain or loss realized on the sale, exchange, retirement or other taxable
disposition of a note will be capital gain or loss and will be long-term capital
gain or loss if at the time of sale, exchange, retirement, or other taxable
disposition, the note has been held for more than 12 months. The maximum rate of
tax on long-term capital gains with respect to notes held by an individual is
20%. The deductibility of capital losses is subject to certain limitations.
     A holder receives a "market discount" when he/she
     (1) purchases a 10.00% note or a 10.25% note for an amount below the issue
price, or
     (2) purchases a 11.75% note for an amount below the adjusted issue price on
the date of purchase, as determined in accordance with the original issue
discount rules above.
     Under the market discount rules, a U.S. holder will be required to treat
any partial principal payment on, or any gain on the sale, exchange, retirement
or other disposition of, a note as ordinary income to the extent of the market
discount which has not previously been included in income and is treated as
having accrued on such note at the time of such payment or disposition. In
addition, the U.S. holder may be required to defer, until the maturity of the
note or its earlier disposition in a taxable transaction, the deduction of a
portion of the interest expense on any indebtedness incurred or continued to
purchase or carry such notes.
     Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the note, unless the U.S.
holder elects to accrue such discount on a constant interest rate method. A U.S.
holder may elect to include market discount in income currently as it accrues,
on either a ratable or constant interest rate method. If this election is made,
the holder's basis in the note will be increased to reflect the amount of income
recognized and the rules described above regarding deferral of interest
deductions will not apply. This election to include market discount in income
currently, once made, applies to all market discount obligations acquired on or
after the first taxable year to which the election applies and may not be
revoked without the consent of the Internal Revenue Service.
     A U.S. holder that
     (1) purchases a 10.00% note or a 10.25% note for an amount in excess of the
principal amount, or
     (2) purchases a 11.75% note for an amount in excess of the stated
redemption price will be considered to have purchased such note with
"amortizable bond premium." A U.S. holder generally may elect to amortize the
premium over the remaining term of the note on a constant yield method as
applied with respect to each accrual period of the note, and allocated ratably
to each day within an accrual period in a manner substantially similar to the
method of calculating daily portions of original issue discount, as described
above. However, because the notes may be optionally redeemed for an amount that
is in excess of their principal amount, special rules apply that could result in
a deferral of the amortization of bond premium until later in the term of the
note. The amount amortized in any year will be treated as a reduction of the
U.S. holder's interest income, including original issue discount income, from
the note. Bond premium on a note held by a U.S. holder that does not make such
an election will decrease the gain or increase the loss otherwise recognized
upon disposition of the note. The election to amortize premium on a constant
yield method, once made, applies to all