Commentary on Sections Overview Chapter 2: Accrued income profits and losses Section 662: New securities issued with extra return: special rules about payments
1961.This section provides for calculating the amount of the payment treated as made where securities have been issued in tranches and the conditions in section 649 apply. It is based on section 726A of ICTA.
1962.Subsection (1) provides that the amount of the payment is not calculated under section 632. Instead the amount is calculated by reference to subsection (3) or (4) (which are equivalent to the calculation rules in sections 632 and 633).
1963.The amount of the payment (that is, the extra return) is therefore taken into account under section 628 in calculating whether an accrued income profit or an accrued income loss is made. The effect of this (assuming no other transfer of the same kind of security has taken place in the interest period) is that the recipient of the new securities will only be taxed on the interest which accrued during the time he or she owned the securities.