or other disposition (other than any amount attributable to accrued interest, which, if not previously included in such U.S. Holders income, will be taxable as interest income to such U.S.
Holder) and such U.S. Holders adjusted tax basis in such note.
A U.S. Holder that receives CAD on the sale, exchange,
retirement or other disposition of a note generally will have an amount realized equal to the U.S. dollar value of such CAD translated at the spot rate of exchange on the date of such sale, exchange, retirement or other disposition (or, if such note
is treated as traded on an established securities market, on the settlement date in the case of a cash basis or electing accrual basis taxpayer). A U.S. Holders adjusted tax basis in such note generally will be equal to the U.S. dollar value
of the purchase price in CAD translated at the spot rate of exchange on the date of purchase (or, if such note is treated as traded on an established securities market, on the settlement date of the purchase in the case of a cash basis or electing
accrual basis taxpayer). A U.S. Holder generally will realize foreign currency exchange gain or loss upon such sale, exchange, retirement or other disposition (as ordinary income or loss from sources within the United States) to the extent that the
gain or loss is attributable to changes in exchange rates during the period in which the U.S. Holder held the note. Such foreign currency exchange gain or loss, together with any foreign currency exchange gain or loss realized on such disposition in
respect of accrued interest (which will not be treated as an adjustment to such interest), generally will be realized only to the extent of the total gain or loss realized by such U.S. Holder on such disposition. Any such total gain or loss not
treated as foreign currency exchange gain or loss generally will be capital gain or loss from sources within the United States. Net long-term capital gain of certain non-corporate U.S. Holders generally is
subject to preferential rates of tax. The deductibility of capital losses is subject to limitations.
With respect to a note that is
treated as traded on an established securities market, a U.S. Holder that is an accrual basis taxpayer who does not elect to determine its basis or amount realized in connection with the purchase, sale, exchange, retirement or other disposition of
the note by reference to the spot rate of exchange on the settlement date of such purchase, sale, exchange, retirement or other disposition (rather than on the actual date) may recognize additional foreign currency exchange gain or loss upon receipt
of CAD from such sale, exchange, retirement or other disposition. Such an election, if made by an accrual basis taxpayer, must be applied consistently to all debt instruments from year to year and cannot be changed without the consent of the IRS.
A U.S. Holder generally will have a basis in CAD received upon a sale, exchange, retirement or other disposition of a note equal to the
U.S. dollar value of such CAD on the date of receipt. Any gain or loss on a conversion or other disposition of such CAD by such U.S. Holder generally will be treated as ordinary income or loss from sources within the United States.
Medicare Tax
In
addition to regular U.S. federal income tax, certain U.S. Holders that are individuals, estates or trusts (and possibly certain foreign estates or trusts with U.S. beneficiaries) are subject to a 3.8% tax on all or a portion of their net
investment income, which may include all or a portion of their interest income on a note and net gain from the sale, exchange, retirement or other disposition of a note.
Information Reporting and Backup Withholding
Information reporting generally will apply to payments to a U.S. Holder of interest on, or proceeds from the sale, exchange, retirement or
other disposition of, a note, unless such U.S. Holder is an entity that is exempt from information reporting and, when required, demonstrates this fact. Any such payment to a U.S. Holder that is subject to information reporting generally will also
be subject to backup withholding, unless such U.S. Holder provides the appropriate documentation (generally, IRS Form W-9) to the applicable withholding agent certifying that, among other things, its
taxpayer identification number (which for an individual would be his or her Social Security number) is correct, or otherwise establishes an exemption.
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