Summary
Floating rate notes (FRNs) are bonds that have a variable coupon that is pegged to a reference rate, typically LIBOR, plus a fixed spread. There are several variations of FRNs, but this article will focus on those utilized to fulfill IRC Section 1042 requirements. Incorporating floating rate notes to partially or wholly fulfill one’s 1042 qualified replacement property requirement allows a selling shareholder to separate the tax deferral benefits of Section 1042 election from their investment decisions.
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