Landeskreditbank Baden-Württemberg - L-Bank

will equal such U.S. Holder’s initial investment in the Debt Security increased by any original issue discount
included in income and decreased by any payment on the Debt Security other than a payment of qualified stated
interest. Any gain or loss recognized on a sale, retirement or other disposition of a Debt Security, other than
amounts attributable to interest, generally will be treated as U.S. source gain or loss and generally will be longterm
capital gain or loss if the Debt Security was held for more than one year. In the case of a U.S. Holder who is
an individual, capital gains, if any, generally will be subject to U.S. federal income taxation at preferential rates if
specified minimum holding periods are met. The deductibility of capital losses is subject to limitations.
Optional Redemption
Certain of the Debt Securities may be redeemable at our option prior to their stated maturity and/or may be
repayable at the option of the holder prior to their stated maturity. Debt Securities containing such features may
be subject to rules that differ from the general rules discussed above. Investors intending to purchase Debt
Securities with such features should carefully examine the applicable prospectus supplement and should consult
their own tax advisors, since the tax consequences with respect to original issue discount will depend, in part, on
the particular terms and features of the purchased Debt Securities.
Election to Treat All Interest as Original Issue Discount
A U.S. Holder generally may elect to include in income all interest (including stated interest, original issue
discount, de minimis original issue discount and unstated interest) that accrues on a Debt Security by using the
constant yield method applicable to original issue discount, subject to certain limitations and exceptions. The
election may not be revoked without the consent of the IRS. U.S. Holders should consult their own tax advisors
regarding the advisability of making this election.
Short-Term Debt Securities
Debt Securities that have a fixed maturity of one year or less (“Short-Term Debt Securities”) generally will
be treated as having been issued with original issue discount in an amount equal to the excess of the sum of the
total principal and the interest payments on the Debt Security over its issue price. Except as noted below, an
individual and certain other cash method U.S. Holders generally are not required to include accrued original issue
discount on Short-Term Debt Securities in their income currently. However, such Holders may be required to
include any stated interest in income when the interest is received if such receipt occurs prior to maturity. Any
gain realized by such U.S. Holders on the sale, exchange or maturity of Short-Term Debt Securities generally
will be ordinary income to the extent of the original issue discount accrued through the date of the sale,
retirement or other disposition. In addition, a portion of the deductions otherwise allowable to the U.S. Holder for
interest on borrowings allocable to the Short-Term Debt Security may be required to be deferred until the Debt
Security matures. Notwithstanding the foregoing, a cash method U.S. Holder of a Short-Term Debt Security may
elect to accrue original issue discount on a current basis (in which case the limitation on the deductibility of
interest described above will not apply). U.S. Holders who report income for United States federal income tax
purposes under the accrual method, and certain other holders (including banks and dealers in securities), are
required to accrue original issue discount on a Short-Term Debt Security on a straight-line basis unless an
election is made to accrue the original issue discount under a constant yield method (based on daily
compounding).
In the case of a Short-Term Debt Security that is also a single Foreign Currency Debt Security, the amount
of original issue discount subject to current accrual and the amount of any exchange gain or loss on a sale,
retirement or other disposition generally are determined under the same rules that apply to accrued interest on a
single Foreign Currency Debt Security held by a holder using the accrual method of accounting.
Investors considering the purchase of Short-Term Debt Securities should carefully examine the applicable
prospectus supplement and should consult their tax advisors regarding the U.S. federal income tax consequences
of holding and disposing of such Debt Securities.
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