French General Tax Code
In forceI. - Where credit institutions, finance companies or investment firms mentioned in article 38 bis A purchase or subscribe fixed-income securities for a price different from their redemption price, the profit or loss corresponding to this difference increased or decreased, as the case may be, by the accrued coupon on purchase is spread over the period remaining until redemption.
This apportionment is made on an actuarial basis by attaching to the profit or loss for each financial year a sum equal to the difference between:
1° The accrued interest for the financial year or since acquisition, calculated by applying the market interest rate for the securities concerned at the time of their acquisition to the purchase price of these securities plus or minus the profits or losses defined above, recognised in respect of previous financial years; after payment of the interest coupon, the purchase price is understood to exclude the accrued coupon;
2° And the interest, accrued for the financial year or since acquisition, calculated by applying the nominal rate to their redemption value.
For securities transferred under the conditions referred to in the second paragraph of Article 38 bis A, the transfer value referred to in that paragraph takes the place of the acquisition price.
At the close of each financial year, the cost price of the securities is increased or decreased, as appropriate, by the fraction of the profit or loss included in the result.
II. - The regime defined in I applies to fixed-income securities registered in an investment securities account or an investment securities account.
III. - Securities recorded in an investment securities account may not be the subject of a provision for depreciation. Provisions for depreciation made in respect of fixed-income securities prior to their inclusion in this account are deducted from taxable income for the financial year in which they are included, with the exception of the portion corresponding to the part of the acquisition price of the securities concerned which exceeds their redemption value; this portion is deducted from taxable income in instalments under the conditions defined in I over the period remaining until the securities concerned are redeemed.
IV. - For securities acquired before the start of the first financial year in which the system defined in this article is applied, the amount of the gain or loss corresponding to the corrected difference mentioned in the first paragraph of I that must be spread over the period remaining until the redemption is reduced by the fraction that should have been added to or deducted from the profit or loss of previous financial years if the method had been applied since the acquisition of the securities. This fraction is included in the taxable income during the period in which the securities are sold or redeemed.
