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Hi Lisa,
I read the beginning of footnote 7 as simply stating the guidance that is explicit above in paragraph 17B, which talks about gains when consideration is less than par but more than BACV. Footnote 7 towards the end then clarifies what to do if if it is less than both (since 17B is already less than par guidance), this is simply saying it is also less than BACV.
However, i do agree that IMR guidance should trump this, and I would think the entire difference should be an interest related loss in the IMR, otherwise it defeats the purpose of it. One could event interpret it as still going through investment income, because that is where amortization of IMR flows through.
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