to maturity of the debt instrument. We will not be presumed to redeem the notes
prior to their stated maturity under these rules because the exercise of such
options would not lower the yield to maturity of the notes.
U.S. holders may wish to consult their own tax advisors regarding the
treatment of such contingencies.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES
Upon the sale, exchange, retirement or other taxable disposition of a note,
a U.S. holder will recognize gain or loss in an amount equal to the difference
(1) the amount of cash and the fair market value of other property received
in the exchange, and
(2) the holder's adjusted tax basis in such note.
Amounts attributable to accrued but unpaid interest on the 8.250% notes and
the 8.625% notes will be treated as ordinary interest income. A holder's
adjusted tax basis in a note will equal the purchase price paid by such holder
for the note increased by the amount of any market discount, and in the case of
a 9.920% note by any original issue discount previously included in income by
such holder with respect to such note, and decreased by the amount of any
amortized bond premium applied to reduce interest on the notes, and in the case
of a 9.920% note by any payments received on such note.
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
currently is 20%. The deductibility of capital losses is subject to certain
A holder receives a "market discount" when it
(1) purchases an 8.250% note or an 8.625% note for an amount below
the issue price, or
(2) purchases a 9.920% 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