Law Commons^™

Long-Term Debt, The Term Structure Of Interest And The Case For Accrual Taxation, Theodore S. Sims

Faculty Scholarship

During the past 25 years, the Internal Revenue Code has become increasingly sophisticated in its treatment of long-term debt. That transformation occurred as part of a wider set of legislative changes, changes that have made the Code generally more sensitive to the consequences of compound interest and discounted (or present) values. Much of this was dictated by necessity. By ignoring the effects of compound interest, the Code often measured income in a way that was economically unsound, and thereby allowed taxpayers to take advantage of the statutory shortcomings, often with dramatic, unanticipated results.