Financial Instruments Tax Solutions

The COVID-19 pandemic has caused the largest dislocation in credits since the Great Financial Crisis. EY’s Financial Instruments Tax Solutions (FITS) practice utilizes modelling and calculation tools to provide debt tax planning, compliance, and advisory services to debt investors.

Ernst & Young LLP’s Financial Instruments Tax Solutions (FITS) practice utilizes modeling and calculation tools to provide debt tax planning, compliance, and advisory services to debt investors.

FITS debt specialists currently work with distressed credit funds to apply tax methods and elections that provide the most efficient tax results for their individual investors. In addition, utilizing proprietary technologies, our team of dedicated and experienced professionals performs complex debt tax accounting calculations, pursuant to IRC § 1272(a)(6), on structured debt instruments with prepayment features, including eligible TALF 2.0 collateral.

Debt tax analysis

When analyzing debt instruments held in investment portfolios, the FITS practice uses a four-step approach:

Step 1: Categorize the debt instruments

Step 2: Identify the purchase conditions

Step 3: Determine the tax methods and elections

Step 4: Perform the debt tax calculations

In March 2020, the Federal Reserve established TALF 2.0 for the continued flow of credit to con-sumers and businesses amid the economic crisis caused by the COVID-19 pandemic. TALF 2.0 provides government financing to private investors for the purchase of eligible asset-backed securities.

The EY difference

Proven debt tax technology solutions:

EY’s debt tax technology solutions have been utilized to process more than 1.2 million debt positions, which has resulted in $10s of millions in tax savings for our clients.

Unparalleled features in solutions:

EY’s debt tax technology solutions have features that are unparalleled in the market, which include the ability to: (i) properly handle calculations on term loans with amortization schedules, (ii) perform correct yield calculations on bonds with call features, and (iii) accurately calculate all IRC section 988 income items on foreign denominated bonds.

Most knowledgeable and experienced debt tax team:

EY has a core team of debt tax specialists who have more than 80 years of combined financial industry experience. This team includes contributing authors of the “Federal Income Taxation of Debt Instruments” treatise as well as the authors of numerous articles on the taxation of financial instruments.

View our recent webcast series

Tax implications due to the challenges facing credit funds

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Opportunities in the market for credit funds and the associated tax complexities

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Credit: an international perspective and key industry insights

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