26 USC 1283 - Definitions and special rules

U.S Code last checked for updates: May 19, 2024

§ 1283.

Definitions and special rules

(a)

Definitions

For purposes of this subpart—

(1)

Short-term obligation

(A)

In general

(B)

Exceptions for tax-exempt obligations

(2)

Acquisition discount

The term “acquisition discount” means the excess of—

(A)

the stated redemption price at maturity (as defined in section 1273), over

(B)

the taxpayer’s basis for the obligation.

(b)

Daily portion

For purposes of this subpart—

(1)

Ratable accrual

Except as otherwise provided in this subsection, the daily portion of the acquisition discount is an amount equal to—

(A)

the amount of such discount, divided by

(B)

the number of days after the day on which the taxpayer acquired the obligation and up to (and including) the day of its maturity.

(2)

Election of accrual on basis of constant interest rate (in lieu of ratable accrual)

(A)

In general

At the election of the taxpayer with respect to any obligation, the daily portion of the acquisition discount for any day is the portion of the acquisition discount accruing on such day determined (under regulations prescribed by the Secretary) on the basis of—

(i)

the taxpayer’s yield to maturity based on the taxpayer’s cost of acquiring the obligation, and

(ii)

compounding daily.

(B)

Election irrevocable

(c)

Special rules for nongovernmental obligations

(1)

In general

In the case of any short-term obligation which is not a short-term Government obligation (as defined in section 1271(a)(3)(B))—

(A)

sections 1281 and 1282 shall be applied by taking into account original issue discount in lieu of acquisition discount, and

(B)

appropriate adjustments shall be made in the application of subsection (b) of this section.

(2)

Election to have paragraph (1) not apply

(A)

In general

(B)

Period to which election applies

(d)

Other special rules

(1)

Basis adjustments

(2)

Double inclusion in income not required

(3)

Coordination with other provisions

(Added Pub. L. 98–369, div. A, title I, § 41(a), July 18, 1984, 98 Stat. 549; amended Pub. L. 99–514, title XVIII, § 1803(a)(1)(B), Oct. 22, 1986, 100 Stat. 2792.)

cite as: 26 USC 1283