Exchange of Certain Claims for New Common Stock Sample Clauses

Exchange of Certain Claims for New Common Stock. Subject to the discussion of the exchange of Certain Convertible Note Claims (discussed below), the receipt of New Common Stock by a U.S. Holder in exchange for its Claims generally will be a taxable transaction for U.S. federal income tax purposes. A U.S. Holder generally will recognize gain or loss in an amount equal to the difference between (i) the fair market value on the Effective Date of the New Common Stock received in exchange for its Claims and (ii) the U.S. Holder’s adjusted tax basis in its Claims. A U.S. Holder’s adjusted tax basis in its Claims generally will equal (a) such U.S. Holder’s cost for its Claims, (b) increased by any market discount (as discussed below) previously included in gross income by the U.S. Holder with respect to its Claims and (c) decreased (but not below zero) by any bond premium previously amortized by the U.S. Holder with respect to its Claims. Except with respect to accrued interest and to the extent that gain is recharacterized as ordinary income pursuant to the market discount rules discussed below, such gain or loss generally will be capital gain or loss and will be a long-term capital gain or loss if the U.S. Holder’s holding period for its Claims exceeds one year at the time of the exchange. Long-term capital gains recognized by non-corporate U.S. Holders (including individuals) are currently eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations. (b) Exchange of Convertible Note Claims for New Convertible Notes. The U.S. federal income tax consequences of the Plan may, to the extent certain Convertible Notes Claims are exchanged for New Convertible Notes depend in part upon: (i) whether such Convertible Notes Claim is based on an obligation that constitutes a “security” for U.S. federal income tax purposes, and (ii) whether all or a portion of the consideration received for such Convertible Notes Claim is an obligation that constitutes a “security” U.S. for federal income tax purposes. The term “security” is not defined in the IRC or in the Treasury Regulations issued thereunder and has not been clearly defined by judicial decisions. The determination of whether a particular debt obligation constitutes a “security” depends on an overall evaluation of the nature of the debt, including whether the holder of such debt obligation is subject to a material level of entrepreneurial risk and whether a continuing proprietary interest is intended or not. One of the most sig...