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Contingent Interest


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