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Since debt is the most common financing method, Chapman and Cutler LLP attorneys are particularly concerned about tax issues associated with various types of these transactions. We understand that tax characterization requires a careful balance of factors. Transactions documented as loans may, under specific circumstances, be characterized for tax purposes as something else, such as the sale of underlying collateral, equity in the borrowing entity or an option to acquire ownership of assets in the future.

We regularly provide structuring guidance, tax disclosure and opinions and partner with other Chapman counsel to give clients optimum legal counsel.

Most tax issues are complicated. Their resolution may depend on whether an instrument is characterized as debt for tax purposes. Once an investment has been determined to be debt, we consider issues related to the exempt or non-exempt character of the interest and the timing for accrual of interest or original issue discount.

Additionally, we investigate and resolve the treatment of market discount and bond premium, source and allocation of interest, withholding obligations, qualification under portfolio interest rules and the impact of such interest on other obligations (such as the obligation to pay rent).

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