Capital gains treatment on bond conversion excludes transfer where company instruments are exchanged for shares or debentures. Conversion of bonds, debentures, debenture-stock or deposit certificates of a company into shares or debentures of that company is not regarded as a transfer for capital gains purposes. The company is treated as both transferor and transferee, and the cost in the hands of the recipient is linked to the original cost of the converted instrument. The period of holding of the previous owner is not taken into account.