<TABLE>
<S> <C>
Pricing Supplement dated March 3, 1994
(To Prospectus dated March 9, 1994 and Rule 424 (b)(3)
Prospectus Supplement dated March 9, 1994 File No. 33-52359
TOYOTA MOTOR CREDIT CORPORATION
Medium-Term Note - Indexed
______________________________________________________________________________________
Face Amount: $112,700,000 Trade Date: March 3, 1994
Issue Price: 100% Original Issue Date: March 17, 1994
Interest Rate: 4.25% Net Proceeds to Issuer: $112,530,950
Interest Payment Dates: September 17, 1994 Agent's Discount or Commission: 0.15%
and March 17, 1995
Stated Maturity Date: March 17, 1995
______________________________________________________________________________________
Calculation Agent: Merrill Lynch Capital Services, Inc.
Day Count Convention:
[x] 30/360 for the period from March 17, 1994 to March 17, 1995
[ ] Actual/Actual for the period from to
[ ] Other (see attached) to
Redemption:
[x] The Notes cannot be redeemed prior to the Stated Maturity Date.
[ ] The Notes may be redeemed prior to Stated Maturity Date.
Initial Redemption Date:
Initial Redemption Percentage: %
Annual Redemption Percentage Reduction: % until Redemption
Percentage is 100% of the Principal Amount.
Repayment:
[x] The Notes cannot be repaid prior to the Stated Maturity Date.
[ ] The Notes can be repaid prior to the Stated Maturity Date at the option of
the holder of the Notes.
Optional Repayment Date(s):
Repayment Price: %
Currency:
Specified Currency: U.S. dollars
(If other than U.S. dollars, see attached)
Minimum Denominations:
(Applicable only if Specified Currency is other than U.S. dollars)
Original Issue Discount: [ ] Yes [x] No
Total Amount of OID:
Yield to Maturity:
Initial Accrual Period:
Form: [x] Book-entry [ ] Certificated
</TABLE>
___________________________
Merrill Lynch & Co.
<PAGE>
ADDITIONAL TERMS OF THE NOTES
Interest
The Medium-Term Notes offered by this Pricing
Supplement (the "Notes") will bear interest, payable in U.S.
dollars from the Original Issue Date, at the fixed rate of 4.25%
per annum of the Face Amount of such Note.
Principal Payment at Maturity
Principal payable on the Notes (the "Indexed Principal
Amount") will be payable in U.S. dollars on the date of Maturity
in an amount equal to the sum of the following:
(i) 25% x [Face Amount + (Face Amount x DUR 1 x (6.19% - FRF 7 Swap Rate ))]
(ii) 10% x [Face Amount + (Face Amount x DUR 2 x (6.06% - DEM 5 Swap Rate ))]
(iii) 30% x [Face Amount + (Face Amount x DUR 3 x (6.41% - DEM 7 Swap Rate ))]
(iv) 10% x [Face Amount + (Face Amount x DUR 4 x (6.01% - NGL 5 Swap Rate ))]
(v) 10% x [Face Amount + (Face Amount x DUR 5 x (7.13% - GBP 5 Swap Rate ))]
(vi) 15% x [Face Amount + (Face Amount x DUR 6 x (7.54% - GBP 10 Swap Rate ))]
provided that the payment in respect of the Indexed Principal
Amount shall in no event be less than zero.
For purposes of these Notes, the following terms shall
have the following meanings:
"FRF 7 Swap Rate" means, on the Determination Date, the
offered quotation for the seven-year French Franc Swap Rate,
quoted on a constant maturity basis and expressed as a
percentage as displayed on the Dow Jones Telerate Service on
Page 42284 (or such other page as may replace such page on
such service for the purpose of displaying the seven-year
French Franc swap rate) as of 11:00 A.M., London time, on
such Determination Date. If no rate appears on such page on
such date at such time, FRF 7 Swap Rate on such
Determination Date will be the offered quotation for the
seven-year French Franc Swap Rate, quoted on a constant
maturity basis and expressed as a percentage, as determined
by the Calculation Agent as follows: the Calculation Agent
will request each of five Reference Dealers to provide the
Calculation Agent with its offered quotation for the seven-
year French Franc Swap Rate at approximately 11:00 a.m.
(London time) on the Determination Date and in an amount
that is representative of a single transaction for such
Reference Dealer at such time. The Calculation Agent will
disregard the highest and lowest of the five quotations and
"FRF 7 Swap Rate" will be the arithmetic mean (rounded to
the nearest one hundred-thousandth of a percentage point,
with five one millionths of a percentage point rounded
upwards) of the remaining three quotations. If the
Calculation Agent is able to obtain quotations from less
than five but more than one Reference Dealer, the FRF 7 Swap
Rate shall be determined without disregarding any
<PAGE>
quotations. If the Calculation Agent is unable to obtain
quotations from at least two Reference Dealers, the FRF 7
Swap Rate will be determined by the Calculation Agent by
such method as the Calculation Agent determines, in good
faith, in its sole discretion.
"seven-year French Franc Swap Rate" means, in general, a per
annum fixed rate of interest quoted on a 30/360 day basis
and paid annually that a hypothetical fixed rate payor would
be prepared to pay under an interest-rate-swap or -exchange
agreement, and for which such payor would expect to receive,
in return, a floating rate of interest over a period of
seven years equal to the then-prevailing six-month French
Franc LIBOR rate.
"DEM 5 Swap Rate" means, on the Determination Date, the
offered quotation for the five-year Deutsche Mark Swap Rate,
quoted on a constant maturity basis and expressed as a
percentage as displayed on the Dow Jones Telerate Service on
Page 42280 (or such other page as may replace such page on
such service for the purpose of displaying the five-year
Deutsche Mark swap rate) as of 11:00 A.M., London time, on
such Determination Date. If no rate appears on such page on
such date at such time, DEM 5 Swap Rate on such
Determination Date will be the offered quotation for the
five-year Deutsche Mark Swap Rate, quoted on a constant
maturity basis and expressed as a percentage, as determined
by the Calculation Agent as follows: the Calculation Agent
will request each of five Reference Dealers to provide the
Calculation Agent with its offered quotation for the five-
year Deutsche Mark Swap Rate at approximately 11:00 a.m.
(London time) on the Determination Date and in an amount
that is representative of a single transaction for such
Reference Dealer at such time. The Calculation Agent will
disregard the highest and lowest of the five quotations and
"DEM 5 Swap Rate" will be the arithmetic mean (rounded to
the nearest one hundredth-thousandth of a percentage point,
with five one millionths of a percentage point rounded
upwards) of the remaining three quotations. If the
Calculation Agent is able to obtain quotations from less
than five but more than one Reference Dealer, the DEM 5 Swap
Rate shall be determined without disregarding any
quotations. If the Calculation Agent is unable to obtain
quotations from at least two Reference Dealers, the DEM 5
Swap Rate will be determined by the Calculation Agent by
such method as the Calculation Agent determines, in good
faith, in its sole discretion.
"five-year Deutsche Mark Swap Rate" means, in general, a per
annum fixed rate of interest quoted on a 30/360 day basis
and paid annually that a hypothetical fixed rate payor would
be prepared to pay under an interest-rate-swap or -exchange
agreement, and for which such payor would expect to receive,
in return, a floating rate of interest over a period of five
<PAGE>
years equal to the then-prevailing six-month Deutsche Mark
LIBOR rate.
"DEM 7 Swap Rate" means, on the Determination Date, the
offered quotation for the seven-year Deutsche Mark Swap
Rate, quoted on a constant maturity basis and expressed as a
percentage as displayed on the Dow Jones Telerate Service on
Page 42280 (or such other page as may replace such page on
such service for the purpose of displaying the seven-year
Deutsche Mark swap rate) as of 11:00 A.M., London time, on
such Determination Date. If no rate appears on such page on
such date at such time, DEM 7 Swap Rate on such
Determination Date will be the offered quotation for the
seven-year Deutsche Mark Swap Rate, quoted on a constant
maturity basis and expressed as a percentage, as determined
by the Calculation Agent as follows: the Calculation Agent
will request each of five Reference Dealers to provide the
Calculation Agent with its offered quotation for the seven-
year Deutsche Mark Swap Rate at approximately 11:00 a.m.
(London time) on the Determination Date and in an amount
that is representative of a single transaction for such
Reference Dealer at such time. The Calculation Agent will
disregard the highest and lowest of the five quotations and
"DEM 7 Swap Rate" will be the arithmetic mean (rounded to
the nearest one hundred-thousandth of a percentage point,
with five one millionths of a percentage point rounded
upwards) of the remaining three quotations. If the
Calculation Agent is able to obtain quotations from less
than five but more than one Reference Dealer, the DEM 7 Swap
Rate shall be determined without disregarding any
quotations. If the Calculation Agent is unable to obtain
quotations from at least two Reference Dealers, the DEM 7
Swap Rate will be determined by the Calculation Agent by
such method as the Calculation Agent determines, in good
faith, in its sole discretion.
"seven-year Deutsche Mark Swap Rate" means, in general, a
per annum fixed rate of interest quoted on a 30/360 day
basis and paid annually that a hypothetical fixed rate payor
would be prepared to pay under an interest-rate-swap or -
exchange agreement, and for which such payor would expect to
receive, in return, a floating rate of interest over a
period of seven years equal to the then-prevailing six-month
Deutsche Mark LIBOR rate.
"NLG 5 Swap Rate" means, on the Determination Date, the
offered quotation for the five-year Dutch Guilder Swap Rate,
quoted on a constant maturity basis and expressed as a
percentage as displayed on the Dow Jones Telerate Service on
Page 42286 (or such other page as may replace such page on
such service for the purpose of displaying the five-year
Dutch Guilder swap rate) as of 11:00 A.M., London time, on
such Determination Date. If no rate appears on such page on
such date at such time, NGL 5 Swap Rate on such
<PAGE>
Determination Date will be the offered quotation for the
five-year Dutch Guilder Swap Rate, quoted on a constant
maturity basis and expressed as a percentage, as determined
by the Calculation Agent as follows: the Calculation Agent
will request each of five Reference Dealers to provide the
Calculation Agent with its offered quotation for the five-
year Dutch Guilder Swap Rate at approximately 11:00 a.m.
(London time) on the Determination Date and in an amount
that is representative of a single transaction for such
Reference Dealer at such time. The Calculation Agent will
disregard the highest and lowest of the five quotations and
"NGL 5 Swap Rate" will be the arithmetic mean (rounded to
the nearest one hundred-thousandth of a percentage point,
with five one millionths of a percentage point rounded
upwards) of the remaining three quotations. If the
Calculation Agent is able to obtain quotations from less
than five but more than one Reference Dealer, the NLG 5 Swap
Rate shall be determined without disregarding any
quotations. If the Calculation Agent is unable to obtain
quotations from at least two Reference Dealers, the NLG 5
Swap Rate will be determined by the Calculation Agent by
such method as the Calculation Agent determines, in good
faith, in its sole discretion.
"five-year Dutch Guilder Swap Rate" means, in general, a per
annum fixed rate of interest quoted on a 30/360 day basis
and paid annually that a hypothetical fixed rate payor would
be prepared to pay under an interest-rate-swap or -exchange
agreement, and for which such payor would expect to receive,
in return, a floating rate of interest over a period of five
years equal to the then-prevailing six-month Dutch Guilder
LIBOR rate.
"GBP 5 Swap Rate" means, on the Determination Date, the
offered quotation for the five-year Pound Sterling Swap
Rate, quoted on a constant maturity basis and expressed as a
percentage as displayed on the Dow Jones Telerate Service on
Page 42279 (or such other page as may replace such page on
such service for the purpose of displaying the five-year
Pound Sterling swap rate) as of 11:00 A.M., London time, on
such Determination Date. If no rate appears on such page on
such date at such time, GBP 5 Swap Rate on such
Determination Date will be the offered quotation for the
five-year Pound Sterling Swap Rate, quoted on a constant
maturity basis and expressed as a percentage, as determined
by the Calculation Agent as follows: the Calculation Agent
will request each of five Reference Dealers to provide the
Calculation Agent with its offered quotation for the five-
year Pound Sterling Swap Rate at approximately 11:00 a.m.
(London time) on the Determination Date and in an amount
that is representative of a single transaction for such
Reference Dealer at such time. The Calculation Agent will
disregard the highest and lowest of the five quotations and
"GBP 5 Swap Rate" will be the arithmetic mean (rounded to
<PAGE>
the nearest one hundred-thousandth of a percentage point,
with five one millionths of a percentage point rounded
upwards) of the remaining three quotations. If the
Calculation Agent is able to obtain quotations from less
than five but more than one Reference Dealer, the GBP 5 Swap
Rate shall be determined without disregarding any
quotations. If the Calculation Agent is unable to obtain
quotations from at least two Reference Dealers, the GBP 5
Swap Rate will be determined by the Calculation Agent by
such method as the Calculation Agent determines, in good
faith, in its sole discretion.
"five-year Pound Sterling Swap Rate" means, in general, a
per annum fixed rate of interest quoted on a 30/360 day
basis and paid semi-annually that a hypothetical fixed rate
payor would be prepared to pay under an interest-rate-swap
or -exchange agreement, and for which such payor would
expect to receive, in return, a floating rate of interest
over a period of five years equal to the then-prevailing
six-month Pound Sterling LIBOR rate.
"GBP 10 Swap Rate" means, on the Determination Date, the
offered quotation for the ten-year Pound Sterling Swap Rate,
quoted on a constant maturity basis and expressed as a
percentage as displayed on the Dow Jones Telerate Service on
Page 42279 (or such other page as may replace such page on
such service for the purpose of displaying the ten-year
Pound Sterling swap rate) as of 11:00 A.M., London time, on
such Determination Date. If no rate appears on such page on
such date at such time, GBP 10 Swap Rate on such
Determination Date will be the offered quotation for the
ten-year Pound Sterling Swap Rate, quoted on a constant
maturity basis and expressed as a percentage, as determined
by the Calculation Agent as follows: the Calculation Agent
will request each of five Reference Dealers to provide the
Calculation Agent with its offered quotation for the ten-
year Pound Sterling Swap Rate at approximately 11:00 a.m.
(London time) on the Determination Date and in an amount
that is representative of a single transaction for such
Reference Dealer at such time. The Calculation Agent will
disregard the highest and lowest of the five quotations and
"GBP 10 Swap Rate" will be the arithmetic mean (rounded to
the nearest one hundred-thousandth of a percentage point,
with five one millionths of a percentage point rounded
upwards) of the remaining three quotations. If the
Calculation Agent is able to obtain quotations from less
than five but more than one Reference Dealer, the GBP 10
Swap Rate shall be determined without disregarding any
quotations. If the Calculation Agent is unable to obtain
quotations from at least two Reference Dealers, the GBP 10
Swap Rate will be determined by the Calculation Agent by
such method as the Calculation Agent determines, in good
faith, in its sole discretion.
<PAGE>
"ten-year Pound Sterling Swap Rate" means, in general, a per
annum fixed rate of interest quoted on a 30/360 day basis
and paid semi-annually that a hypothetical fixed rate payor
would be prepared to pay under an interest-rate-swap or -
exchange agreement, and for which such payor would expect to
receive, in return, a floating rate of interest over a
period of ten years equal to the then-prevailing six-month
Pound Sterling LIBOR rate.
"Calculation Agent" means Merrill Lynch Capital Services,
Inc. In the absence of manifest error, the determination by
the Calculation Agent of the amounts payable under these
Notes shall be final and binding on TMCC and the holders of
the Notes.
"Determination Date" means the date that is the second
Business Day in London, England immediately prior to the
date of Maturity for the Notes, provided that such date is
also a Business Day in (i) Frankfurt, Germany, (for purposes
of determining the DEM 5 Swap Rate and the DEM 7 Swap Rate);
(ii) Paris, France (for purposes of determining the FRF 7
Swap Rate); and (iii) Amsterdam, the Netherlands (for
purposes of determining the NLG 5 Swap Rate). If any such
date is not a Business Day in Frankfurt, Germany (for the
DEM 5 Swap Rate and the DEM 7 Swap Rate), Paris, France (for
the FRF 7 Swap Rate) or Amsterdam, the Netherlands (for the
NLG 5 Swap Rate), the Determination Date shall mean the next
preceding date that is a Business Day in London, England and
Frankfurt, Germany, Paris, France and Amsterdam, the
Netherlands, as applicable.
"Business Day" means any day, other than a Saturday or
Sunday, that is a day on which (i) banks are generally open
for business in the City of New York and (ii) in which
dealings in deposits in each of French Francs, Deutsche
Marks, Dutch Guilders and the Pound Sterling are transacted
in the London interbank market (including dealings in
foreign exchange and foreign currency).
"Reference Dealer" means any major bank or banking
corporation in London, selected in good faith by the
Calculation Agent which will provide offered quotations on
the relevant swap rate.
<PAGE>
"DUR" shall be calculated in accordance with the
following formula (expressed as a percentage and rounded to the
nearest one hundred-thousandth of a percentage point, with five
one-millionths of a percentage point rounded upwards):
DUR = 1/R x { 1-[(1+R/F)^(-F x N)] }
where
N = For DUR 1, is 7; for DUR 2, is 5; for DUR 3,
is 7; for DUR 4, is 5; for DUR 6, is 5; and
DUR 7, is 10.
R = For DUR 1, is the FRF 7 Swap Rate; for DUR 2,
is the DEM 5 Swap Rate; for DUR 3, is the DEM
7 Swap Rate; for DUR 4, is the NGL 5 Swap
Rate; for DUR 5, is the GBP 5 Swap Rate; and
for DUR 6, is the GBP 10 Swap Rate.
F = For the FRF 7 Swap Rate, DEM 5 Swap Rate, DEM
7 Swap Rate, and NGL 5 Swap Rate, is 1; and
for the GBP 5 Swap Rate and GBP 10 Swap Rate,
is 2.
Historical Swap Rate and Basket CMS Rate
The six tables below set forth, respectively, the FRF 7
Swap Rate, the DEM 5 Swap Rate, the DEM 7 Swap Rate, the NLG 5
Swap Rate, the GBP 5 Swap Rate and the GBP 10 Swap Rate on the
ending dates of the indicated calendar quarters, as reported by
Reuters Information Services, Inc ("Reuters"). The fluctuations
in these Swap Rates that have occurred in the past are not
necessarily indicative of fluctuations that may occur over the
term of the Notes, which may be greater or less than those that
have occurred in the past. On March 15, 1994, the FRP 7 Swap
Rate as reported by Reuters was 6.21%, the DEM 5 Swap Rate as
reported by Reuters was 5.89%, the DEM 7 Swap Rate, as reported
by Reuters was 6.21%, the NGL 5 Swap Rate as reported by Reuters
was 5.95%, the GBP 5 Swap Rate as reported by Reuters was 6.86%,
the GBP 10 Swap Rate as reported by Reuters was 7.43%.
<PAGE>
<TABLE>
<CAPTION>
Historical FRF 7 Swap Rate
Year/Quarter End FRF 7 Swap Rate %
<S> <C>
1989: 1st Q 9.38%
2nd Q 9.25%
3rd Q 9.45%
4th Q 9.80%
1990: 1st Q 10.40%
2nd Q 10.21%
3rd Q 10.99%
4th Q 10.50%
1991: 1st Q 9.70%
2nd Q 9.68%
3rd Q 9.34%
4th Q 9.18%
1992: 1st Q 9.24%
2nd Q 9.22%
3rd Q 9.26%
4th Q 8.48%
1993: 1st Q 7.60%
2nd Q 6.63%
3rd Q 6.07%
4th Q 5.57%
</TABLE>
<TABLE>
<CAPTION>
Historical DEM 5 Swap Rate
Year/Quarter End DEM 5 Swap Rate %
<S> <C>
1989: 1st Q 7.17%
2nd Q 7.15%
3rd Q 7.55%
4th Q 8.12%
1990: 1st Q 9.07%
2nd Q 9.03%
3rd Q 9.32%
4th Q 9.35%
1991: 1st Q 8.88%
2nd Q 8.86%
3rd Q 8.91%
4th Q 8.80%
1992: 1st Q 8.63%
2nd Q 8.74%
</TABLE>
<PAGE>
<TABLE>
<S> <C>
3rd Q 7.97%
4th Q 7.18%
1993: 1st Q 6.53%
2nd Q 6.47%
3rd Q 5.81%
4th Q 5.15%
</TABLE>
<TABLE>
<CAPTION>
Historical DEM 7 Swap Rate
Year/Quarter End DEM 7 Swap Rate %
<S> <C>
1989: 1st Q 7.19%
2nd Q 7.15%
3rd Q 7.46%
4th Q 8.06%
1990: 1st Q 8.95%
2nd Q 9.03%
3rd Q 9.31%
4th Q 9.23%
1991: 1st Q 8.70%
2nd Q 8.75%
3rd Q 8.70%
4th Q 8.44%
1992: 1st Q 8.37%
2nd Q 8.52%
3rd Q 7.93%
4th Q 7.30%
1993: 1st Q 6.66%
2nd Q 6.63%
3rd Q 6.08%
4th Q 5.56%
</TABLE>
<TABLE>
<CAPTION>
Historical NLG 5 Swap Rate
Year/Quarter End NLG 5 Swap Rate %
<S> <C>
1989: 1st Q 7.48%
2nd Q 7.50%
3rd Q 7.95%
4th Q 8.43%
1990: 1st Q 9.14%
2nd Q 9.14%
3rd Q 9.46%
4th Q 9.60%
</TABLE>
<PAGE>
<TABLE>
<S> <C>
1991: 1st Q 9.07%
2nd Q 9.02%
3rd Q 9.05%
4th Q 9.04%
1992: 1st Q 8.75%
2nd Q 8.82%
3rd Q 8.17%
4th Q 7.21%
1993: 1st Q 6.62%
2nd Q 6.34%
3rd Q 5.83%
4th Q 5.22%
</TABLE>
<TABLE>
<CAPTION>
Historical GBP 5 Swap Rate
Year/Quarter End GBP 5 Swap Rate %
<S> <C>
1989: 1st Q 11.39%
2nd Q 11.87%
3rd Q 12.30%
4th Q 12.43%
1990: 1st Q 13.80%
2nd Q 12.54%
3rd Q 12.78%
4th Q 11.67%
1991: 1st Q 10.97%
2nd Q 10.85%
3rd Q 10.07%
4th Q 10.39%
1992: 1st Q 10.46%
2nd Q 9.47%
3rd Q 8.70%
4th Q 7.83%
1993: 1st Q 7.19%
2nd Q 7.28%
3rd Q 6.68%
4th Q 5.90%
</TABLE>
<TABLE>
<CAPTION>
Historical GBP 10 Swap Rate
Year/Quarter End GBP 10 Swap Rate %
<S> <C>
1989: 1st Q 11.07%
</TABLE>
<PAGE>
<TABLE>
<S> <C>
2nd Q 11.39%
3rd Q 11.62%
4th Q 11.93%
1990: 1st Q 13.18%
2nd Q 12.31%
3rd Q 12.64%
4th Q 11.57%
1991: 1st Q 10.97%
2nd Q 11.02%
3rd Q 10.11%
4th Q 10.32%
1992: 1st Q 10.33%
2nd Q 9.44%
3rd Q 9.05%
4th Q 8.46%
1993: 1st Q 7.99%
2nd Q 7.88%
3rd Q 7.15%
4th Q 6.40%
</TABLE>
Certain U.S. Tax Considerations
The following is a summary of the principal United
States federal income tax consequences of ownership of the Notes.
The summary concerns initial U.S. Holders (as defined in the
Prospectus Supplements) who hold the Notes as capital assets and
does not deal with tax consequences to special classes of holders
such as dealers in securities or currencies, persons who hold the
Notes as a hedge against currency risks or who hedge any currency
risks of holding the Notes, tax-exempt investors, or U. S.
Holders whose functional currency is other than the United States
dollar. The discussion below is based upon the Internal Revenue
Code of 1986, as amended, and final, temporary and proposed
United States Treasury Regulations. Persons considering the
purchase of the Notes should consult with and rely solely upon
their own tax advisors concerning the application of United
States federal income tax laws to their particular situations as
well as any consequences arising under the laws of any other
domestic or foreign taxing jurisdiction.
Except where otherwise indicated below, this summary
supplements and, to the extent inconsistent, replaces the
discussion under the caption "United States Taxation" in the
Prospectus Supplement.
General. There are no regulations (except the 1986
Proposed Regulations described below), published rulings or
judicial decisions involving the characterization, for United
States federal income tax purposes, of securities with terms
<PAGE>
substantially the same as the Notes. Although the matter is not
entirely free from doubt and the Notes may be subject to
different characterizations by the Internal Revenue Service (the
"IRS"), this discussion assumes that the Notes will be treated as
debt in their entirety. The Company intends to treat the Notes
as debt obligations of the Company for United States federal
income tax purposes and when required, intends to file
information returns with the IRS in accordance with such
treatment in the absence of any change or clarification in the
law, by regulation or otherwise, requiring a different
characterization. If the Notes are not in fact treated as debt
obligations of the Company for United States federal income tax
purposes, then the United States federal income tax treatment of
the purchase, ownership and disposition of the Notes could differ
from that discussed below.
U.S. Holders. Under general principles of current
United States federal income tax law, payments of interest on a
debt instrument generally will be taxable to a U.S. Holder as
ordinary interest income at the time such payments are accrued or
are received in accordance with the U.S. Holder's regular method
of tax accounting. Although the matter is not free from doubt,
under the foregoing principles, the amount payable with respect
to a Note at the 4.25% Interest Rate (the "Interest Payments")
should be includible in income by a U.S. Holder as ordinary
interest at the time the Interest Payments are accrued or are
received in accordance with such Holder's regular method of tax
accounting.
Under these same principles, upon retirement of a Note,
the excess of the Indexed Principal Amount over the Face Amount,
if any, should be treated as contingent interest and generally
should be includible in income by a U.S. Holder as ordinary
interest on the date that the Indexed Principal Amount is accrued
(i.e., determined) or when such amount is received (in accordance
with the U.S. Holder's regular method of tax accounting).
However, if upon maturity the Indexed Principal Amount is equal
to or less than the Face Amount, then, under general principles
of current United States federal income tax law, a Note should be
treated as retired on the Stated Maturity Date for an amount
equal to the Indexed Principal Amount. A U.S. Holder generally
would recognize a capital loss under such circumstances in an
amount equal to the excess of the U.S. Holder's tax basis in the
Note (i.e., the Face Amount) over the Indexed Principal Amount.
Upon the sale or exchange of a Note prior to the date of
Maturity, a U.S. Holder should recognize taxable gain or loss
equal to the difference between the amount realized upon such
sale or exchange (other than amounts representing accrued and
unpaid interest) and the Face Amount (i.e., the U.S. Holder's tax
basis in the Note). Such gain or loss generally should be short-
term capital gain or loss.
In 1986, the Treasury Department issued proposed
regulations (the "1986 Proposed Regulations") under the original
<PAGE>
issue discount provisions of the Code concerning contingent
payment debt obligations. If the 1986 Proposed Regulations are
ultimately adopted in their current form, such regulations would
apply to the Notes and, if applied, would cause the timing and
character of income, gain or loss recognized on a Note to differ
from the timing and character of income, gain or loss recognized
on a Note discussed above.
The 1986 Proposed Regulations set forth a special set
of rules applicable to debt instruments that fail to provide for
total noncontingent payments at least equal to their issue price.
Under these rules, where the total noncontingent payments on a
debt instrument are less than its issue price, the debt
instrument will be treated as having contingent interest and
principal and payments on the Notes will be taxed as described
below regardless of whether such payments are designated as
"principal" or "interest." Applying these rules, the Interest
Payments are treated as a return of principal. Then, if the sum
of the Interest Payments and the Indexed Principal Amount (the
"Total Redemption Amount") equals or exceeds the Face Amount, the
Notes would be treated as having been retired on the date of
Maturity for an amount equal to the Face Amount. The excess of
the Total Redemption Amount over the Face Amount (the "Excess
Amount"), if any, would be treated as ordinary interest and would
be includible in income by a U.S. Holder on the date on which the
Indexed Principal Amount is determined, regardless of the U.S.
Holder's regular method of tax accounting. Under these rules, if
the Total Redemption Amount is less than the Face Amount, then a
U.S. Holder should recognize a short-term capital loss in an
amount equal to the excess of the Face Amount over the Total
Redemption Amount.
There is no assurance that the 1986 Proposed
Regulations will be adopted or, if adopted, adopted in their
current form to apply to short term obligations such as the
Notes. On January 19, 1993, the Treasury Department issued
proposed regulations (the "1993 Proposed Regulations"),
concerning contingent payment debt obligations, which would have
replaced the 1986 Proposed Regulations and would have provided
for a set of rules with respect to the timing and character of
income and loss recognition on contingent payment debt
obligations that differ from the rules contained in the 1986
Proposed Regulations with respect to the timing and character of
income and loss recognition. The 1993 Proposed Regulations,
which would have applied to debt instruments issued 60 days or
more after the date the 1993 Proposed Regulations became final,
generally provided for several alternative timing methods which
would have required annual interest accruals to reflect either a
market yield for the debt instrument, determined as of the issue
date, or a reasonable estimate of the performance of
contingencies. The amount of interest deemed to accrue in a
taxable year pursuant to such methods would have been currently
includible in income by a U.S. Holder, with subsequent
adjustments to the extent that the estimate of income was
<PAGE>
incorrect. In addition, under the 1993 Proposed Regulations, any
gain realized on the sale, exchange or retirement of a contingent
payment debt obligation generally would have been treated
entirely as ordinary interest income and any loss realized on the
sale, exchange or retirement of a contingent payment debt
obligation generally would have been treated entirely as a
capital loss. However, on January 22, 1993, the United States
Government's Office of Management and Budget announced that
certain proposed regulations which had not yet been published in
the Federal Register, including the 1993 Proposed Regulations,
had been withdrawn. Accordingly, it is unclear whether the 1993
Proposed Regulations will be re-proposed or, if re-proposed, what
effect, if any, such regulations would have on the Notes. It
should also be noted that proposed Treasury regulations are not
binding upon either the IRS or taxpayers prior to becoming
effective as temporary or final regulations. Prospective
investors in the Notes are urged to consult their own tax
advisors regarding the application of the 1986 Proposed
Regulations, if any, and the effect of possible changes to the
1986 Proposed Regulations.
