surplus debenture

  • Generally an unsecured interest-bearing note carried as an equity contribution (normally made by shareholders or affiliates) to prevent a surplus deficiency by the borrowing company. The debenture is normally worded to require repayment only from future earnings of the company and this repayment generally requires the approval of the state insurance commissioner. For statutory purposes, the company can charge unassigned surplus directly for interest; however, the preferred treatment is to charge the statements of operations for such interest.

    Internal Revenue Service 1

1Internal Revenue Service, Internal Revenue Manual 4.42.6 Glossary, http://­­irm/­part4/­irm_04-042-006.html (last accessed Dec. 22, 2009).