1940.This section excludes transfers under sale and repurchase agreements (“repos”) from the accrued income scheme, if the transferor or a person connected with the transferor is required or entitled to repurchase the securities. It is based on section 727A of ICTA.
1941.Under a repo, as with stock lending, the economic benefit of the interest on the securities sold and repurchased remains with the original holder of the securities, to whom they return. The original owner is taxed on the interest under other rules so there is no need for the accrued income scheme to apply to either the sale or the repurchase.
1942.This section exempts the transfer under the sale and the transfer under the repurchase.