IRS Temporarily Suspends AHYDO Rules in Certain Financing Transactions

August 20, 2008
The IRS has announced temporary relief from the rules that defer, and in some cases deny, interest deductions for original issue discount accrued on an Applicable High Yield Discount Obligation (“AHYDO”). Revenue Procedure 2008-51 temporarily suspends the application of the AHYDO rules for lending transactions where corporate borrowers obtain financing commitments before January 1, 2009, and where circumstances beyond the borrower’s control might otherwise cause the debt instrument to inadvertently become an AHYDO instrument. This update examines the application of the temporary relief from the AHYDO rules.