CFM6143 - Taxing loan relationships: convertibles: premium put arrangements

Right to sell the security

FA96/S92 (1)(dd) ensures that there are no 'premium put' arrangements.

'A premium put gives the holder of the security the right to require any person (except the issuer of the security) to purchase the security at a premium if the holder does not exercise its right to convert.'

Because this is not an amount payable on redemption, the security is not an RDS, but instead it is caught by S92(1)(dd). The ultimate reward could still be the equivalent of a deep gain, which should be taxed as income.

There is an example at CFM6143a.