|ENTERPRISE PRODUCTS PARTNERS L P filed this Form 424B5 on 02/02/2018|
general OID rules to the equivalent fixed rate debt instrument and you will account for such OID and QSI as if you held the equivalent fixed rate debt instrument. For each accrual period, appropriate adjustments will be made to the amount of QSI or OID assumed to have been accrued or paid with respect to the equivalent fixed rate debt instrument in the event that such amounts differ from the actual amount of interest accrued or paid on the notes during the accrual period.
The Treasury regulations provide special rules for determining the yield and maturity of a debt instrument that provide an issuer with the option to call the instrument at specified times. The Treasury regulations generally deem an issuer to exercise a call option in a manner that minimizes the yield on the debt instrument for purposes of determining whether a debt instrument is issued with OID. Under the terms of the notes, if the initial fixed rate substitute on the equivalent fixed rate debt instrument (as determined in the manner described above) is greater than the fixed rate substitute of the floating rate (as determined in the manner described above), the notes will be presumed not to be called and OID with respect to the notes will be calculated as described above. If, however, the initial fixed rate substitute on the equivalent fixed rate debt instrument (as determined in the manner described above) is less than the fixed rate substitute of the floating rate (as determined in the manner described above), the yield on the notes would be minimized if the notes were called immediately before the change in the interest rate on February 15, 2028, and therefore the notes would be treated as maturing on such date for OID purposes. This assumption is made solely for purposes of determining whether the notes are issued with OID for U.S. federal income tax purposes, and is not an indication of our intention to call or not to call the notes at any time. If, contrary to this presumption, the notes are not called prior to the change in the interest rate on February 15, 2028, then, solely for OID purposes, the notes will be deemed to be reissued at their adjusted issue price on February 15, 2028. This deemed reissuance should not give rise to taxable gain or loss to you.
Based upon current market conditions and the manner in which the interest rates on each of the notes are determined, we expect that the equivalent fixed rate debt instrument (as determined in the manner described above) would provide for a single fixed interest rate throughout the term of the notes. Accordingly, solely for purposes of determining QSI and OID, as of the issue date of the notes, we expect that the notes will be presumed to remain outstanding until maturity, all interest on the notes will be treated as QSI and the notes will not be treated as having been issued with any OID.
In addition to the foregoing, the Treasury regulations provide that the possibility that interest on the notes might be deferred could result in the notes being treated as issued with OID, unless the likelihood of such deferral is remote. Due to the terms of the notes and the relevant facts and circumstances, we believe that the likelihood of our exercising the option to defer payment of stated interest is remote, within the meaning of the applicable Treasury regulations, and therefore that the possibility of such deferral will not result in the notes being treated as issued with OID. Accordingly, the notes generally will be taxable to you as set forth above. However, no rulings or other interpretations have been issued by the IRS that address the meaning of the term remote, as used in the applicable Treasury regulations, and there can be no assurance that the IRS or a court will agree with this position.
If the possibility of interest deferral were determined not to be remote, or if interest were in fact deferred, the notes would be treated as issued with OID at the time of issuance, or at the time of such deferral, as the case may be, and all stated interest, or if interest is in fact deferred, all stated interest due after such deferral, would be treated as OID. In such case, you would be required to include interest in income as it accrues, regardless of your method of accounting, using the constant-yield-to-maturity method of accrual, before you receive any payment attributable to such income, and would not separately report the actual cash payments of interest on the notes as taxable income.
Sale or Other Disposition of the Notes
You will generally recognize capital gain or loss on the sale, redemption, exchange, retirement or other taxable disposition of a note equal to the difference, if any, between the amount realized on such disposition and your adjusted tax basis in the note. The amount realized will include the amount of any cash and the fair market