Levin College of Law
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Tax of Financial Instruments

Course Number: LAW 7931 Credits: 2

This course is about U.S. taxation of financial instruments, including debt instruments, options, futures, forwards, swaps, and other “derivatives.” Roughly the half of the course is about debt instruments, beginning with an examination of interest and the time value of money and continuing with the tax consequences of issuing or holding a debt instrument that is issued or purchased at a price differing from the instrument’s face value. The course also covers debt securitizations. In a securitization, an organizer (e.g., an investment bank) creates a special purpose entity and transfers many mortgages or other debt instruments to the entity, which capitalizes itself by issuing debt instruments with varying rights and priorities and a very thin slice of equity.