Arkansas Administrative Code
Agency 006 - Department of Finance and Administration
Division 05 - Division of Revenues
1998-1 - Comprehensive Corporation Income Tax Regulations
Rule 26-51-404 - GROSS INCOME GENERALLY
Rule 9.26-51-404(a)(1) - Corporate Bonds

When bonds are originally issued by a corporation at a fair market value which results in a premium or a discount compared to face value, the premium (income) or discount (expense) should be prorated or amortized over the life of the bonds.

When a corporation purchases and retires any of its bonds at a fair market price greater than or less than the issuing price, the amount of the purchase price over the issue price (excess amount) is a deductible expense for the tax year or the amount of the issue price over the purchase price (lesser amount) is income for the tax year. The deductible excess amount is reduced by any previously amortized issue discount or increased by any previously amortized issue premium of the bonds. The taxable lesser amount is increased by any previously amortized issue discount or reduced by any previously amortized issue premium.