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Deflation adjustment to Principal. Tax_tips || ||

The deflationary adjustment reduces the interest otherwise includible in income. If the amount of the deflationary adjustment exceeds the interest otherwise includible in income for the taxable year, the holder of the TIP Security treats the excess as an ordinary loss in the taxable year. If the deflation adjustment exceeds the interest otherwise includible in income by the holder with respect to the debt instrument for the taxable year, the excess is carried forward to offset interest income on the debt instrument in subsequent taxable years.


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