Section 1272(d), referred to in subsec. (b)(2), was redesignated section 1272(c) by Pub. L. 115–141, div. U, title IV, § 401(c)(1)(B),
2018—Subsec. (a)(2)(A)(ii). Pub. L. 115–141, § 401(c)(1)(D), substituted “section 1272(a)(7)” for “subsection (a)(7) or (b)(4) of section 1272”.
Subsec. (a)(2)(B). Pub. L. 115–141, § 401(c)(1)(A)(ii), struck out “(and paragraph (2) of subsection (c))” after “This paragraph” in introductory provisions.
Subsec. (b)(1). Pub. L. 115–141, § 401(c)(1)(E), amended par. (1) generally. Prior to amendment, text read as follows: “This section shall not apply to—
“(A) any obligation issued by a natural person before
“(B) any obligation issued before
Subsecs. (c), (d). Pub. L. 115–141, § 401(c)(1)(A)(i), redesignated subsec. (d) as (c) and struck out former subsec. (c) which related to special rule for certain obligations with respect to which original issue discount not currently includible.
2014—Subsec. (c). Pub. L. 113–295 amended subsec. (c) generally. Prior to amendment, subsec. (c) related to transition rules, including special rules for certain obligations issued before
1997—Subsec. (b). Pub. L. 105–34 amended heading and text of subsec. (b) generally. Prior to amendment, text read as follows: “This section shall not apply to—
“(1)
“(2)
“(A) is not a corporation, and
“(B) is not a government or political subdivision thereof.”
1988—Subsec. (a)(2)(A)(ii). Pub. L. 100–647 substituted “subsection (a)(7)” for “subsection (a)(6)”.
1986—Subsec. (a)(3)(B). Pub. L. 99–514, § 1803(a)(3), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: “For purposes of this paragraph, the term ‘short-term Government obligation’ means any obligation of the United States or any of its possessions, or of a State or any political subdivision thereof, or of the District of Columbia which is—
“(i) issued on a discount basis, and
“(ii) payable without interest at a fixed maturity date not more than 1 year from the date of issue.
Such term does not include any tax-exempt obligation.”
Subsec. (a)(3)(D). Pub. L. 99–514, § 1803(a)(2)(B), inserted “except as provided in subparagraph (E),”.
Subsec. (a)(3)(E). Pub. L. 99–514, § 1803(a)(2)(A), added subpar. (E).
Subsec. (a)(4). Pub. L. 99–514, § 1803(a)(1)(A), added par. (4).
Amendment by Pub. L. 115–141 applicable to debt instruments issued on or after
Amendment by Pub. L. 113–295 effective
Pub. L. 105–34, title X, § 1003(c)(2),
Amendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.
Amendment by Pub. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title.
Pub. L. 98–369, div. A, title I, § 44, “(a) Except as otherwise provided in this section, the amendments made by this subtitle [subtitle C (§§ 41–44) of title I of div. A of Pub. L. 98–369, enacting this section and sections 1272 to 1288 and 6706, amending sections 103A, 163, 165, 249, 341, 405, 409, 453B, 483, 751, 811, 871, 881, 1016, 1037, 1351, 1441, 6049, 7701, and 7805, and repealing sections 1232, 1232A, and 1232B of this title] shall apply to taxable years ending after the date of the enactment of this Act [“(b) “(1) “(A) Except as otherwise provided in this subsection, section 1274 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as added by section 41) and the amendment made by section 41(b) (relating to amendment of section 483) shall apply to sales or exchanges after “(B) Section 1274 of such Code and the amendment made by section 41(b) shall not apply to any sale or exchange pursuant to a written contract which was binding on “(2) Not later than 180 days after the date of the enactment of this Act [“(3) “(A) “(i) In the case of any sale or exchange— “(I) after “(II) after “(ii) In the case of any sale or exchange after “(B) “(i) Subparagraph (A)(i)(I) shall not apply to any sale or exchange pursuant to a written contract which was binding on “(ii) Subparagraph (A)(i)(II) shall not apply to any sale or exchange pursuant to a written contract which was binding on “(C) Clause (i) of subparagraph (A) shall not apply to any debt instrument with substantially equal annual payments.“(4) “(A) In the case of any sale or exchange after “(i) sections 483(c)(1)(B) and 1274(c)(3) of the Internal Revenue Code of 1986 shall be applied by substituting the testing rate determined under subparagraph (B) for 110 percent of the applicable Federal rate determined under section 1274(d) of such Code, and“(ii) sections 483(b) and 1274(b) of such Code shall be applied by substituting the imputation rate determined under subparagraph (C) for 120 percent of the applicable Federal rate determined under section 1274(d) of such Code.“(B) For purposes of this paragraph—“(i) The testing rate determined under this subparagraph is the sum of— “(I) 9 percent, plus “(II) if the borrowed amount exceeds $2,000,000, the excess determined under clause (ii) multiplied by a fraction the numerator of which is the borrowed amount to the extent it exceeds $2,000,000, and the denominator of which is the borrowed amount.“(ii) For purposes of clause (i), the excess determined under this clause is the excess of 110 percent of the applicable Federal rate determined under section 1274(d) of such Code over 9 percent.“(C) For purposes of this paragraph—“(i) The imputation rate determined under this subparagraph is the sum of— “(I) 10 percent, plus “(II) if the borrowed amount exceeds $2,000,000, the excess determined under clause (ii) multiplied by a fraction the numerator of which is the borrowed amount to the extent it exceeds $2,000,000, and the denominator of which is the borrowed amount.“(ii) For purposes of clause (i), the excess determined under this clause is the excess of 120 percent of the applicable Federal rate determined under section 1274(d) of such Code over 10 percent.“(D) For purposes of this paragraph, the term ‘borrowed amount’ means the stated principal amount.“(E) For purposes of this paragraph—“(i) all sales or exchanges which are part of the same transaction (or a series of related transactions) shall be treated as one sale or exchange, and“(ii) all debt instruments arising from the same transaction (or a series of related transactions) shall be treated as one debt instrument.“(F) In the case of any sale or exchange before “(i) section 1274 of the Internal Revenue Code of 1986 shall not apply, and“(ii) interest on the obligation issued in connection with such sale or exchange shall be taken into account by both buyer and seller on the cash receipts and disbursements method of accounting.The Secretary of the Treasury or his delegate may by regulation prescribe rules to prevent the mismatching of interest income and interest deductions in connection with obligations on which interest is computed on the cash receipts and disbursements method of accounting.“(G) This paragraph and paragraphs (5), (6), and (7) shall apply only in the case of sales or exchanges to which section 1274 or 483 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as amended by section 41) applies.“(5) Except as provided in paragraphs (6) and (7), if any person—“(A) assumes, in connection with the sale or exchange of property, any debt obligation, or“(B) acquires any property subject to any debt obligation,sections 1274 and 483 of the Internal Revenue Code of 1986 shall apply to such debt obligation by reason of such assumption (or such acquisition).“(6) “(A) If any person—“(i) assumes, in connection with the sale or exchange of property, any debt obligation described in subparagraph (B) and issued on or before “(ii) acquires any property subject to any such debt obligation issued on or before sections 1274 and 483 of the Internal Revenue Code of 1986 shall not be applied to such debt obligation by reason of such assumption (or such acquisition) unless the terms and conditions of such debt obligation are modified in connection with the assumption (or acquisition).“(B) A debt obligation is described in this subparagraph if such obligation—“(i) was issued on or before “(ii) was assumed (or property was taken subject to such obligation) in connection with the sale or exchange of property (including a deemed sale under section 338 (a)) the sales price of which is not greater than $100,000,000.“(C) The Secretary shall prescribe such regulations as may be appropriate to effect the purpose of this paragraph and paragraph (5), including regulations relating to tax-exempt obligations, government subsidized loans, or other instruments.“(D) The Secretary shall prescribe regulations under which any transaction shall be exempt from the application of this paragraph if such exemption is not likely to significantly reduce the tax liability of the purchaser by reason of the overstatement of the adjusted basis of the acquired asset.“(7) “(A) If any person—“(i) assumes, in connection with the sale or exchange of property described in subparagraph (B), any debt obligation, or“(ii) acquires any such property subject to any such debt obligation, sections 1274 and 483 of the Internal Revenue Code of 1986 shall not be applied to such debt obligation by reason of such assumption (or such acquisition) unless the terms and conditions of such debt obligation are modified in connection with the assumption (or acquisition).“(B) This paragraph shall apply to any of the following sales or exchanges:“(i) Any sale or exchange of a residence by an individual, an estate, or a testamentary trust, but only if— “(I) either—“(aa) such residence on the date of such sale or exchange (or in the case of an estate or testamentary trust, on the date of death of the decedent) was the principal residence (within the meaning of section 1034) of the individual or decedent, or“(bb) during the 2-year period ending on such date, no substantial portion of such residence was of a character subject to an allowance under this title [probably means the Internal Revenue Code of 1986] for depreciation (or amortization in lieu thereof) in the hands of such individual or decedent, and “(II) such residence was not at any time, in the hands of such individual, estate, testamentary trust, or decedent, described in section 1221(1) (relating to inventory, etc.).“(ii) Any sale or exchange by a qualified person of— “(I) real property which was used as a farm (within the meaning of section 6420(c)(2)) at all times during the 3-year period ending on the date of such sale or exchange, or “(II) tangible personal property which was used in the active conduct of the trade or business of farming on such farm and is sold in connection with the sale of such farm, but only if such property is sold or exchanged for use in the active conduct of the trade or business of farming by the transferee of such property.“(iii) “(I) Any sale or exchange by a qualified person of any trade or business. “(II) This subparagraph shall not apply to any sale or exchange of any property described in subparagraph (B). “(III) This subparagraph shall not apply to the sale or exchange of any property which, in the hands of the transferee, is new section 38 property.“(iv) Any sale or exchange of any real property used in an active trade or business by a person who would be a qualified person if he disposed of his entire interest. This subparagraph shall not apply to any transaction described in the last sentence of paragraph (6)(B) (relating to transaction in excess of $100,000,000).“(C) For purposes of this paragraph—“(i) The term ‘qualified person’ means— “(I) a person who—“(aa) is an individual, estate, or testamentary trust,“(bb) is a corporation which immediately prior to the date of the sale or exchange has 35 or fewer shareholders, or“(cc) is a partnership which immediately prior to the date of the sale or exchange has 35 or fewer partners, “(II) is a 10-percent owner of a farm or a trade or business, “(III) pursuant to a plan, disposes of—“(aa) an interest in a farm or farm property, or“(bb) his entire interest in a trade or business and all substantially similar trades or businesses, and “(IV) the ownership interest of whom may be readily established by reason of qualified allocations (of the type described in section 168(j)(9)(B), one class of stock, or the like).“(ii) 10-The term ‘10-percent owner’ means a person having at least a 10-percent ownership interest, applying the attribution rules of section 318 (other than subsection (a)(4)).“(iii) “(I) The term ‘trade or business’ means any trade or business, including any line of business, qualifying as an active trade or business within the meaning of section 355. “(II) For purposes of this clause, the holding of real property for rental shall not be treated as an active trade or business.“(c) “(1) Section 1276 of the Internal Revenue Code of 1986 (as added by section 41) shall apply to obligations issued after the date of the enactment of this Act [“(2) Section 1277 of such Code (as added by section 41) shall apply to obligations acquired after the date of the enactment of this Act in taxable years ending after such date.“(d) Subpart C of part V of subchapter P of chapter 1 of such Code (as added by section 41) shall apply to obligations acquired after the date of the enactment of this Act [“(e) 5-“(1) A taxpayer may elect for his first taxable year ending after the date of the enactment of this Act [“(2) 5-“(A) In the case of any taxpayer who makes an election under paragraph (1)—“(i) the provisions of section 1281 of the Internal Revenue Code of 1986 (as added by section 41) shall be treated as a change in the method of accounting of the taxpayer,“(ii) such change shall be treated as having been made with the consent of the Secretary, and“(iii) the net amount of the adjustments required by section 481(a) of such Code to be taken into account by the taxpayer in computing taxable income (hereinafter in this paragraph referred to as the ‘net adjustments’) shall be taken into account during the spread period with the amount taken into account in each taxable year in such period determined under subparagraph (B).“(B) “(i) The amount taken into account for the first taxable year in the spread period shall be the sum of— “(I) one-fifth of the net adjustments, and “(II) the excess (if any) of—“(a) the cash basis income over the accrual basis income, over“(b) one-fifth of the net adjustments.“(ii) The amount taken into account in the second or any succeeding taxable year in the spread period shall be the sum of— “(I) the portion of the net adjustments not taken into account in the preceding taxable year of the spread period divided by the number of remaining taxable years in the spread period (including the year for which the determination is being made), and “(II) the excess (if any) of—“(a) the excess of the cash basis income over the accrual basis income, over“(b) one-fifth of the net adjustments, multiplied by 5 minus the number of years remaining in the spread period (not including the current year). The excess described in subparagraph (B)(ii)(II)(a) shall be reduced by any amount taken into account under this subclause or clause (i)(II) in any prior year.“(C) For purposes of this paragraph, the term ‘spread period’ means the period consisting of the 5 taxable years beginning with the year for which the election is made under paragraph (1).“(D) For purposes of this paragraph, the term ‘cash basis income’ means for any taxable year the aggregate amount which would be includible in the gross income of the taxpayer with respect to short-term obligations described in subsection (b) of section 1281 of such Code if the provisions of section 1281 of such Code did not apply to such taxable year and all prior taxable years within the spread period.“(E) For purposes of this paragraph, the term ‘accrual basis income’ means for any taxable year the aggregate amount includible in gross income under section 1281(a) of such Code for such a taxable year and all prior taxable years within the spread period.“(f) Section 1288 of such Code (as added by section 41) shall apply to obligations issued after “(g) Section 1272 of such Code (as added by section 41) shall not apply to any obligation issued on or before “(h) Section 1275(c) of such Code (as added by section 41) and the amendments made by section 41(c) [enacting section 6706 of this title] shall take effect on the day 30 days after the date of the enactment of this Act [“(i) “(1) In the case of any obligation issued after “(2) Section 1272(a)(6) of such Code (as so amended) shall not apply to any purchase on or before the date of the enactment of this Act [“(j) Nothing in the amendment made by section 41(a) shall affect the application of any effective date provision (including any transitional rule) for any provision which was a predecessor to any provision contained in part V of subchapter P of chapter 1 of the Internal Revenue Code of 1954 (as added by section 41).”
[Amendment of section 44 of Pub. L. 98–369, set out above, by Pub. L. 98–612 (which added pars. (4) to (7) to subsec. (b)) not applicable to sales and exchanges after
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after