Congress passed the H.R. 658, the FAA Air Transportation Modernization and Safety Improvement Act. Included in it is a change to Code section 249, a provision that disallows certain deductions in connection with bond premium paid on repurchase of debt convertible into the stock of issuing or a corporation in control of issuing, to the extent the repurchase price exceeds the adjusted issue price plus a normal call premium payable on nonconvertible debt.
Prior to this change, the provision applied to conversion of the debt into stock of the issuing corporation or of a corporation in control of issuing under the definition of control in section 368(c) (requiring 80% of the voting power and 80% of each other class of shares to be owned).
The change applies the provision to debt convertible into stock of the issuing corporation or to a corporation in the same parent subsidiary controlled group, as defined in section 1563. Under that provision, a parent-subsidiary group is a chain of corporations where stock representing 80% of the vote or 80% of the value of each corporation (other than the common parent) is owned by one or more of the other corporations and the common parent owns at least 80% of the vote or 80% of the value of one of the other corporations.