Where a corporation issues a convertible debenture and the debenture is converted to shares, the amount paid-up for the shares that are issued is the amount originally paid for the debenture. It is not the fair market value of the shares at the time they are issued. Accordingly, in my view the paid-up capital is the proper measure of value for tax purposes in this situation. Thus, it follows that "principal amount" is the initial issue price for the debenture. I further suggest that this same principle should apply in the case of trusts.
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