Erika Wies Nijenhuis
LAW T 527
Examines the classification and tax consequences of various financial instruments including: fixed, variable, and contingent rate debt instruments; secondary market transactions in debt instruments, such as coupon stripping and market discount purchases; and transactions in common stock-equity derivatives, such as notional principal contracts, hedging transactions, and monetization strategies.
This course will introduce students to financial instruments and the tax rules that apply to them. The course will cover three general areas: (i) the taxation of debt instruments, including debt instruments that provide for contingent payments; (ii) the taxation of options, forwards and notional principal contracts, which are three of the fundamental financial instruments and the building blocks of many more complex instruments; and (iii) the rules relating to hedging and integration of those instruments with each other and with stock. The materials and discussion will start with black-letter law as set forth in the Code, regulations, IRS rulings and case law, and move from there to discuss a variety of financial products developed by Wall Street, most of relatively recent vintage, and how the rules apply, or might apply, or might apply in a rational universe if only we lived in one.
No prior experience with financial instruments is necessary or expected. Because the economic transactions that this course will cover are likely to be unfamiliar, and classes will build on each other, it will be essential to do the reading and to attend class. No background in economics or mathematics is required, although students should be prepared to work through problems and variations thereon in class. There will be a final examination on June 6.
Generally, the instructor will introduce topics, after which students may be asked in advance to prepare set problems to present in class. Class participation may improve your grade if it demonstrates understanding of the materials (quality is more important than quantity). As this course has not previously been given in this format or by this instructor, the course outline is subject to revision during the quarter. Your suggestions are welcome.
Student learning goals
General method of instruction
Class assignments and grading
There is no textbook. Course materials will include Code sections, regulations, cases, rulings, excerpts from treatises, articles, securities offering documents, and other miscellaneous documents. Materials will be posted on-line. The instructor will strive to post materials several weeks in advance of each class.