26 U.S.C. § 1276
Except as otherwise provided in this section, gain on the disposition of any market discount bond shall be treated as ordinary income to the extent it does not exceed the accrued market discount on such bond. Such gain shall be recognized notwithstanding any other provision of this subtitle.
For purposes of paragraph (1), a person disposing of any market discount bond in any transaction other than a sale, exchange, or involuntary conversion shall be treated as realizing an amount equal to the fair market value of the bond.
Any partial principal payment on a market discount bond shall be included in gross income as ordinary income to the extent such payment does not exceed the accrued market discount on such bond.
If subparagraph (A) applies to any partial principal payment on any market discount bond, for purposes of applying this section to any disposition of (or subsequent partial principal payment on) such bond, the amount of accrued market discount shall be reduced by the amount of such partial principal payment included in gross income under subparagraph (A).
Except for purposes of sections 103, 871(a), 881, 1441, 1442, and 6049 (and such other provisions as may be specified in regulations), any amount treated as ordinary income under paragraph (1) or (3) shall be treated as interest for purposes of this title.
For purposes of this section-
Except as otherwise provided in this subsection or subsection (c), the accrued market discount on any bond shall be an amount which bears the same ratio to the market discount on such bond as-
At the election of the taxpayer with respect to any bond, the accrued market discount on such bond shall be the aggregate amount which would have been includible in the gross income of the taxpayer under section 1272(a) (determined without regard to paragraph (2) thereof) with respect to such bond for all periods during which the bond was held by the taxpayer if such bond had been-
In the case of any bond having original issue discount, for purposes of applying subparagraph (A)-
An election under subparagraph (A), once made with respect to any bond, shall be irrevocable.
In the case of a bond the principal of which may be paid in 2 or more payments, the amount of accrued market discount shall be determined under regulations prescribed by the Secretary.
Under regulations prescribed by the Secretary-
If a market discount bond is transferred in a nonrecognition transaction and such bond is transferred basis property in the hands of the transferee, for purposes of determining the amount of the accrued market discount with respect to the transferee-
If any market discount bond is disposed of by the taxpayer in a nonrecognition transaction and paragraph (1) does not apply to such transaction, any accrued market discount determined with respect to the property disposed of to the extent not theretofore treated as ordinary income under subsection (a)-
For purposes of paragraph (1), if the basis of any market discount bond in the hands of a transferee is determined under section 732(a), or 732(b), such property shall be treated as transferred basis property in the hands of such transferee.
Under regulations prescribed by the Secretary-
26 U.S.C. § 1276
EDITORIAL NOTES
AMENDMENTS2018-Subsec. (a)(4). Pub. L. 115-141 substituted "871(a)," for "871(a),,".1993-Subsec. (a)(4). Pub. L. 103-66, §13206(b)(2)(B)(i), substituted "sections 103, 871(a)," for "sections 871(a)".Subsec. (e). Pub. L. 103-66, §13206(b)(1)(A), struck out heading and text of subsec. (e). Text read as follows: "This section shall not apply to any market discount bond issued on or before July 18, 1984."1988-Subsec. (b)(3). Pub. L. 100-647 designated paragraph relating to special rule where there are partial principal payments as par. (3) and inserted period at end. 1986-Subsec. (a)(3). Pub. L. 99-514, §1803(a)(13)(A)(i), added par. (3). Former par. (3) redesignated (4).Subsec. (a)(4). Pub. L. 99-514, §1803(a)(13)(A)(i), (ii), redesignated par. (3) as (4) and substituted "under paragraph (1) or (3)" for "under paragraph (1)".Subsec. (b). Pub. L. 99-514, §1803(a)(13)(A)(iii), added undesignated par. at end relating to special rule where partial principal payments.Subsec. (c)(3). Pub. L. 99-514, §631(e)(15), struck out reference to section 334(c). Subsec. (d)(1)(C). Pub. L. 99-514, §1803(a)(5), added subpar. (C).Subsec. (e). Pub. L. 99-514, §1899A(28), substituted "July 18, 1984" for "the date of the enactment of this section".
STATUTORY NOTES AND RELATED SUBSIDIARIES
EFFECTIVE DATE OF 1993 AMENDMENT Pub. L. 103-66, §13206(b)(3), Aug. 10, 1993, 107 Stat. 465, provided that: "The amendments made by this section [probably should be "subsection", which amended this section and sections 1277 and 1278 of this title] shall apply to obligations purchased (within the meaning of section 1272(d)(1) of the Internal Revenue Code of 1986) after April 30, 1993."
EFFECTIVE DATE OF 1988 AMENDMENT 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.
EFFECTIVE DATE OF 1986 AMENDMENT Amendment by section 631(e)(15) of Pub. L. 99-514 applicable to any distribution in complete liquidation, and any sale or exchange, made by a corporation after July 31, 1986, unless such corporation is completely liquidated before Jan. 1, 1987, any transaction described in section 338 of this title for which the acquisition date occurs after Dec. 31, 1986, and any distribution, not in complete liquidation, made after Dec. 31, 1986, with exceptions and special and transitional rules, see section 633 of Pub. L. 99-514, set out as an Effective Date note under section 336 of this title.Amendment by section 1803(a)(5) of 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. 99-514, title XVIII, §1803(a)(13)(C), Oct. 22, 1986, 100 Stat. 2797, provided that: "The amendments made by this paragraph [amending this section and section 1286 of this title] shall apply to obligations acquired after the date of the enactment of this Act [Oct. 22, 1986]."
EFFECTIVE DATESection applicable to taxable years ending after July 18, 1984, and applicable to obligations issued after July 18, 1984, in taxable years ending after such date, see section 44 of Pub. L. 98-369, set out as a note under section 1271 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989For 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 Jan. 1, 1989, see section 1140 of Pub. L. 99-514, as amended, set out as a note under section 401 of this title.
- Internal Revenue Code of 1986
- The term "Internal Revenue Code of 1986" means this title, and the term "Internal Revenue Code of 1939" means the Internal Revenue Code enacted February 10, 1939, as amended.
- Secretary
- The term "Secretary" means the Secretary of the Treasury or his delegate.
- corporation
- The term "corporation" includes associations, joint-stock companies, and insurance companies.
- exchanged basis property
- The term "exchanged basis property" means property having a basis determined under any provision of subtitle A (or under any corresponding provision of prior income tax law) providing that the basis shall be determined in whole or in part by reference to other property held at any time by the person for whom the basis is to be determined.
- nonrecognition transaction
- The term "nonrecognition transaction" means any disposition of property in a transaction in which gain or loss is not recognized in whole or in part for purposes of subtitle A.
- person
- The term "person" shall be construed to mean and include an individual, a trust, estate, partnership, association, company or corporation.
- taxpayer
- The term "taxpayer" means any person subject to any internal revenue tax.
- transaction
- The term "transaction" includes a series of transactions.
- transferred basis property
- The term "transferred basis property" means property having a basis determined under any provision of subtitle A (or under any corresponding provision of prior income tax law) providing that the basis shall be determined in whole or in part by reference to the basis in the hands of the donor, grantor, or other transferor.