U.S. Federal Income Tax Summary
The
following summary of the material U.S. federal income and estate tax considerations of the
acquisition, ownership, and disposition of the Notes supplements, and to the extent inconsistent
supersedes, the discussion under “U.S. Federal Income Tax Considerations” in the
accompanying prospectus and is not exhaustive of all possible tax considerations. This summary
is based upon the Internal Revenue Code of 1986, as amended (the “Code”),
regulations promulgated under the Code by the U.S. Treasury Department (“Treasury”)
(including proposed and temporary regulations), rulings, current administrative interpretations
and official pronouncements of the IRS, and judicial decisions, all as currently in effect and
all of which are subject to differing interpretations or to change, possibly with retroactive
effect. No assurance can be given that the IRS would not assert, or that a court would not
sustain, a position contrary to any of the tax consequences described below. This summary does
not include any description of the tax laws of any state or local governments, or of any foreign
government, that may be applicable to a particular holder.
Although
the Notes are issued by us, they will be treated as if they were issued by BAC for U.S. federal
income tax purposes. Accordingly throughout this tax discussion, references to “we,”
“our” or “us” are generally to BAC unless the context requires
otherwise.
This
summary is directed solely to U.S. Holders and Non-U.S. Holders that, except as otherwise
specifically noted, will purchase the Notes upon original issuance and will hold the Notes as
capital assets within the meaning of Section 1221 of the Code, which generally means property
held for investment, and that are not excluded from the discussion under “U.S. Federal
Income Tax Considerations” in the accompanying prospectus.
You
should consult your own tax advisor concerning the U.S. federal income tax consequences to you
of acquiring, owning, and disposing of the Notes, as well as any tax consequences arising under
the laws of any state, local, foreign, or other tax jurisdiction and the possible effects of
changes in U.S. federal or other tax laws.
General
Although
there is no statutory, judicial, or administrative authority directly addressing the
characterization of the Notes, we intend to treat the Notes for all tax purposes as contingent
income-bearing single financial contracts with respect to the Underlying Stocks and under the
terms of the Notes, we and every investor in the Notes agree, in the absence of an
administrative determination or judicial ruling to the contrary, to treat the Notes in
accordance with such characterization. In the opinion of our counsel, Sidley Austin LLP, it is
reasonable to treat the Notes as contingent income-bearing single financial contracts with
respect to the Underlying Stocks. However, Sidley Austin LLP has advised us that it is unable to
conclude that it is more likely than not that this treatment will be upheld. This discussion
assumes that the Notes constitute contingent income-bearing single financial contracts with
respect to the Underlying Stocks for U.S. federal income tax purposes. If the Notes did not
constitute contingent income-bearing single financial contracts, the tax consequences described
below would be materially different.
This
characterization of the Notes is not binding on the IRS or the courts. No statutory,
judicial, or administrative authority directly addresses the characterization of the Notes
or any similar instruments for U.S. federal income tax purposes, and no ruling is being
requested from the IRS with respect to their proper characterization and treatment. Due to
the absence of authorities on point, significant aspects of the U.S. federal income tax
consequences of an investment in the Notes are not certain, and no assurance can be given
that the IRS or any court will agree with the characterization and tax treatment described
in this pricing supplement. Accordingly, you are urged to consult your tax advisor regarding
all aspects of the U.S. federal income tax consequences of an investment in the Notes,
including possible alternative characterizations.
Unless
otherwise stated, the following discussion is based on the characterization described above. The
discussion in this section assumes that there is a significant possibility of a significant loss
of principal on an investment in the Notes.
We will
not attempt to ascertain whether the issuer of any Underlying Stock would be treated as a
“passive foreign investment company” (“PFIC”), within the meaning of
Section 1297 of the Code, or a United States real property holding corporation, within the
meaning of Section 897(c) of the Code. If the issuer of any Underlying Stock were so treated,
certain adverse U.S. federal income tax consequences could possibly apply to a holder of the
Notes. You should refer to information filed with the SEC by the issuers of the Underlying
Stocks and consult your tax advisor regarding the possible consequences to you, if any, if the
issuer of any Underlying Stock is or becomes a PFIC or is or becomes a United States real
property holding corporation.
U.S. Holders
Although
the U.S. federal income tax treatment of any Contingent Coupon Payment on the Notes is
uncertain, we intend to take the position, and the following discussion assumes, that any
Contingent Coupon Payment constitutes taxable ordinary income to a U.S. Holder at the time
received or accrued in accordance with the U.S. Holder’s regular method of
accounting. By purchasing the Notes you agree, in the absence of an administrative
determination or judicial ruling to the contrary, to treat any Contingent Coupon Payment as
described in the preceding sentence.
Upon
receipt of a cash payment at maturity or upon a sale, exchange, or redemption of the Notes prior
to maturity, a U.S. Holder generally will recognize capital gain or loss equal to the difference
between the amount realized (other than amounts representing any Contingent Coupon Payment,
which would be taxed as described above) and the U.S. Holder’s tax basis in the Notes. A
U.S. Holder’s tax basis in the Notes will equal the amount paid by that holder to acquire
them. This capital gain or loss generally will be long-term capital gain or loss if the U.S.
Holder held the Notes for more than one year. The deductibility of capital losses is subject to
limitations.