Contingent Interest is either:
- Interest that is determined by reference to:
- Any receipts, sales, or other cash flow of the debtor or related person
- Income or profits of the debtor or related person
- Any change in value of any property of the debtor or a related person
- Any dividend, partnership distributions, or similar payments made by the debtor or a related person.
- Any other type of contingent interest that is identified by the Secretary of the Treasury in regulations.
Contingent interest does not include interest paid or accrued on any debt with a fixed term that was issued:
- On or before April 7, 1993
- After April 7, 1993, pursuant to a written binding contract in effect on that date and at all times thereafter before that debt was issued.
Citation: IRC § 871(h)(4). Tax on nonresident alien individuals