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United States Code
Title 26 - INTERNAL REVENUE CODESubtitle A - INCOME TAXESChapter 1 - NORMAL TAXES AND SURTAXESSubchapter P - CAPITAL GAINS AND LOSSESPart V - SPECIAL RULES FOR BONDS AND OTHER DEBT INSTRUMENTS
Subpart C - DISCOUNT ON SHORT-TERM OBLIGATIONS
Section 1283 - Definitions and special rules

26 U.S.C. § 1283

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Current through P.L. 118-106 (published on www.congress.gov on 10/04/2024)
Section 1283 - Definitions and special rules
(a) Definitions

For purposes of this subpart-

(1) Short-term obligation
(A) In general

Except as provided in subparagraph (B), the term "short-term obligation" means any bond, debenture, note, certificate, or other evidence of indebtedness which has a fixed maturity date not more than 1 year from the date of issue.

(B) Exceptions for tax-exempt obligations

The term "short-term obligation" shall not include any tax-exempt obligation (as defined in section 1275(a)(3)).

(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

An election under subparagraph (A), once made with respect to any obligation, shall be 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

A taxpayer may make an election under this paragraph to have paragraph (1) not apply to all obligations acquired by the taxpayer on or after the first day of the first taxable year to which such election applies.

(B) Period to which election applies

An election under this paragraph shall apply to the taxable year for which it is made and for all subsequent taxable years, unless the taxpayer secures the consent of the Secretary to the revocation of such election.

(d) Other special rules
(1) Basis adjustments

The basis of any short-term obligation in the hands of the holder thereof shall be increased by the amount included in his gross income pursuant to section 1281.

(2) Double inclusion in income not required

Section 1281 shall not require the inclusion of any amount previously includible in gross income.

(3) Coordination with other provisions

Section 454(b) and paragraphs (3) and (4) of section 1271(a) shall not apply to any short-term obligation to which section 1281 applies.

26 U.S.C. § 1283

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.

EDITORIAL NOTES

AMENDMENTS1986-Subsec. (d)(3). Pub. L. 99-514 substituted "paragraphs (3) and (4) of section 1271(a)" for "section 1271(a)(3)".

STATUTORY NOTES AND RELATED SUBSIDIARIES

EFFECTIVE DATE OF 1986 AMENDMENT 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.

EFFECTIVE DATESection applicable to taxable years ending after July 18, 1984, and to obligations acquired after that 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.

Secretary
The term "Secretary" means the Secretary of the Treasury or his delegate.
taxable year
The term "taxable year" means the calendar year, or the fiscal year ending during such calendar year, upon the basis of which the taxable income is computed under subtitle A. "Taxable year" means, in the case of a return made for a fractional part of a year under the provisions of subtitle A or under regulations prescribed by the Secretary, the period for which such return is made.
taxpayer
The term "taxpayer" means any person subject to any internal revenue tax.