§1275. Other definitions and special rules — Inbound Citations
26 U.S.C. § 1275
Cited by 177 provisions in release 119-102.
Citations to §1275(a)
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(4) For purposes of this subsection, the term “debt instrument” means any instrument which is a debt instrument as defined in section 1275(a).
Citations to §1275(a)(1)
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(B) The term “debt instrument” means a bond, debenture, note, certificate, or any other instrument or contractual arrangement constituting indebtedness (within the meaning of section 1275(a)(1)).
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(A) The term “debt instrument” has the meaning given such term by section 1275(a)(1).
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(3) For purposes of this subsection, the term “debt instrument” has the meaning given such term by section 1275(a)(1).
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(I) is attributable to stock or a debt instrument (within the meaning of section 1275(a)(1)),
Citations to §1275(a)(1)(A)
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(A) For purposes of determining income of a debtor from discharge of indebtedness, if a debtor issues a debt instrument in satisfaction of indebtedness, such debtor shall be treated as having satisfied the indebtedness with an amount of money equal to the issue price of such debt instrument.
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(B) For purposes of subparagraph (A), the issue price of any debt instrument shall be determined under sections 1273 and 1274. For purposes of the preceding sentence, section 1273(b)(4) shall be applied by reducing the stated redemption price of any instrument by the portion of such stated redemption price which is treated as interest for purposes of this chapter.
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(1) At the election of the taxpayer, income from the discharge of indebtedness in connection with the reacquisition after December 31, 2008, and before January 1, 2011, of an applicable debt instrument shall be includible in gross income ratably over the 5-taxable-year period beginning with—(A) in the case of a reacquisition occurring in 2009, the fifth taxable year following the taxable year in which the reacquisition occurs, and(B) in the case of a reacquisition occurring in 2010, the fourth taxable year following the taxable year in which the reacquisition occurs.
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(A) If, as part of a reacquisition to which paragraph (1) applies, any debt instrument is issued for the applicable debt instrument being reacquired (or is treated as so issued under subsection (e)(4) and the regulations thereunder) and there is any original issue discount determined under subpart A of part V of subchapter P of this chapter with respect to the debt instrument so issued—(i) except as provided in clause (ii), no deduction otherwise allowable under this chapter shall be allowed to the issuer of such debt instrument with respect to the portion of such original issue discount which—(I) accrues before the 1st taxable year in the 5-taxable-year period in which income from the discharge of indebtedness attributable to the reacquisition of the debt instrument is includible under paragraph (1), and(II) does not exceed the income from the discharge of indebtedness with respect to the debt instrument being reacquired, and(ii) the aggregate amount of deductions disallowed under clause (i) shall be allowed as a deduction ratably over the 5-taxable-year period described in clause (i)(I).If the amount of the original issue discount accruing before such 1st taxable year exceeds the income from the discharge of indebtedness with respect to the applicable debt instrument being reacquired, the deductions shall be disallowed in the order in which the original issue discount is accrued.
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(i) except as provided in clause (ii), no deduction otherwise allowable under this chapter shall be allowed to the issuer of such debt instrument with respect to the portion of such original issue discount which—(I) accrues before the 1st taxable year in the 5-taxable-year period in which income from the discharge of indebtedness attributable to the reacquisition of the debt instrument is includible under paragraph (1), and(II) does not exceed the income from the discharge of indebtedness with respect to the debt instrument being reacquired, and
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(I) accrues before the 1st taxable year in the 5-taxable-year period in which income from the discharge of indebtedness attributable to the reacquisition of the debt instrument is includible under paragraph (1), and
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(II) does not exceed the income from the discharge of indebtedness with respect to the debt instrument being reacquired, and
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(B) For purposes of subparagraph (A), if any debt instrument is issued by an issuer and the proceeds of such debt instrument are used directly or indirectly by the issuer to reacquire an applicable debt instrument of the issuer, the debt instrument so issued shall be treated as issued for the debt instrument being reacquired. If only a portion of the proceeds from a debt instrument are so used, the rules of subparagraph (A) shall apply to the portion of any original issue discount on the newly issued debt instrument which is equal to the portion of the proceeds from such instrument used to reacquire the outstanding instrument.
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(A) The term “applicable debt instrument” means any debt instrument which was issued by—(i) a C corporation, or(ii) any other person in connection with the conduct of a trade or business by such person.
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(B) The term “debt instrument” means a bond, debenture, note, certificate, or any other instrument or contractual arrangement constituting indebtedness (within the meaning of section 1275(a)(1)).
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(A) The term “reacquisition” means, with respect to any applicable debt instrument, any acquisition of the debt instrument by—(i) the debtor which issued (or is otherwise the obligor under) the debt instrument, or(ii) a related person to such debtor.
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(i) the debtor which issued (or is otherwise the obligor under) the debt instrument, or
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(B) The term “acquisition” shall, with respect to any applicable debt instrument, include an acquisition of the debt instrument for cash, the exchange of the debt instrument for another debt instrument (including an exchange resulting from a modification of the debt instrument), the exchange of the debt instrument for corporate stock or a partnership interest, and the contribution of the debt instrument to capital. Such term shall also include the complete forgiveness of the indebtedness by the holder of the debt instrument.
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(i) An election under this subsection with respect to any applicable debt instrument shall be made by including with the return of tax imposed by chapter 1 for the taxable year in which the reacquisition of the debt instrument occurs a statement which—(I) clearly identifies such instrument, and(II) includes the amount of income to which paragraph (1) applies and such other information as the Secretary may prescribe.
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(1) The portion of the original issue discount with respect to any debt instrument which is allowable as a deduction to the issuer for any taxable year shall be equal to the aggregate daily portions of the original issue discount for days during such taxable year.
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(A) The term “debt instrument” has the meaning given such term by section 1275(a)(1).
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(A) If any debt instrument having original issue discount is held by a related foreign person, any portion of such original issue discount shall not be allowable as a deduction to the issuer until paid. The preceding sentence shall not apply to the extent that the original issue discount is effectively connected with the conduct by such foreign related person of a trade or business within the United States unless such original issue discount is exempt from taxation (or is subject to a reduced rate of tax) pursuant to a treaty obligation of the United States.
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(i) In the case of any debt instrument having original issue discount which is held by a related foreign person which is a controlled foreign corporation (as defined in section 957) or a passive foreign investment company (as defined in section 1297), a deduction shall be allowable to the issuer with respect to such original issue discount for any taxable year before the taxable year in which paid only to the extent such original issue discount is includible (determined without regard to properly allocable deductions and qualified deficits under section 952(c)(1)(B)) during such prior taxable year in the gross income of a United States person who owns (within the meaning of section 958(a)) stock in such corporation.
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(4) This subsection shall not apply to any debt instrument described in section 1272(a)(2)(D) (relating to loans between natural persons).
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(i) This paragraph shall not apply to any applicable high yield discount obligation issued during the period beginning on September 1, 2008, and ending on December 31, 2009, in exchange (including an exchange resulting from a modification of the debt instrument) for an obligation which is not an applicable high yield discount obligation and the issuer (or obligor) of which is the same as the issuer (or obligor) of such applicable high yield discount obligation. The preceding sentence shall not apply to any obligation the interest on which is interest described in section 871(h)(4) (without regard to subparagraph (D) thereof) or to any obligation issued to a related person (within the meaning of section 108(e)(4)).
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(iii) The Secretary may apply this paragraph with respect to debt instruments issued in periods following the period described in clause (i) if the Secretary determines that such application is appropriate in light of distressed conditions in the debt capital markets.
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(1) For purposes of this section, the term “applicable high yield discount obligation” means any debt instrument if—(A) the maturity date of such instrument is more than 5 years from the date of issue,(B) the yield to maturity on such instrument equals or exceeds the sum of—(i) the applicable Federal rate in effect under section 1274(d) for the calendar month in which the obligation is issued, plus(ii) 5 percentage points, and(C) such instrument has significant original issue discount.For purposes of subparagraph (B)(i), the Secretary may by regulation (i) permit a rate to be used with respect to any debt instrument which is higher than the applicable Federal rate if the taxpayer establishes to the satisfaction of the Secretary that such higher rate is based on the same principles as the applicable Federal rate and is appropriate for the term of the instrument, or (ii) permit, on a temporary basis, a rate to be used with respect to any debt instrument which is higher than the applicable Federal rate if the Secretary determines that such rate is appropriate in light of distressed conditions in the debt capital markets.
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(2) For purposes of paragraph (1)(C), a debt instrument shall be treated as having significant original issue discount if—(A) the aggregate amount which would be includible in gross income with respect to such instrument for periods before the close of any accrual period (as defined in section 1272(a)(5)) ending after the date 5 years after the date of issue, exceeds—(B) the sum of—(i) the aggregate amount of interest to be paid under the instrument before the close of such accrual period, and(ii) the product of the issue price of such instrument (as defined in sections 1273(b) and 1274(a)) and its yield to maturity.
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(3) For purposes of determining whether a debt instrument is an applicable high yield discount obligation—(A) any payment under the instrument shall be assumed to be made on the last day permitted under the instrument, and(B) any payment to be made in the form of another obligation of the issuer (or a related person within the meaning of section 453(f)(1)) shall be assumed to be made when such obligation is required to be paid in cash or in property other than such obligation.Except for purposes of paragraph (1)(B), any reference to an obligation in subparagraph (B) of this paragraph shall be treated as including a reference to stock.
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(4) For purposes of this subsection, the term “debt instrument” means any instrument which is a debt instrument as defined in section 1275(a).
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(A) regulations providing for modifications to the provisions of this subsection and subsection (e)(5) in the case of varying rates of interest, put or call options, indefinite maturities, contingent payments, assumptions of debt instruments, conversion rights, or other circumstances where such modifications are appropriate to carry out the purposes of this subsection and subsection (e)(5), and
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(B) regulations to prevent avoidance of the purposes of this subsection and subsection (e)(5) through the use of issuers other than C corporations, agreements to borrow amounts due under the debt instrument, or other arrangements.
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(1) No deduction shall be allowed under this chapter for any interest paid or accrued on a disqualified debt instrument.
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(2) For purposes of this subsection, the term “disqualified debt instrument” means any indebtedness of a corporation which is payable in equity of the issuer or a related party or equity held by the issuer (or any related party) in any other person.
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(4) If the disqualified debt instrument of a corporation is payable in equity held by the issuer (or any related party) in any other person (other than a related party), the basis of such equity shall be increased by the amount not allowed as a deduction by reason of paragraph (1) with respect to the instrument.
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(5) For purposes of this subsection, the term “disqualified debt instrument” does not include indebtedness issued by a dealer in securities (or a related party) which is payable in, or by reference to, equity (other than equity of the issuer or a related party) held by such dealer in its capacity as a dealer in securities. For purposes of this paragraph, the term “dealer in securities” has the meaning given such term by section 475.
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(IV) any debt instrument or other evidence of indebtedness,
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(I) Such term shall not include any interest in a partnership, or any debt instrument or other evidence of indebtedness, issued by the partnership, if 1 or more of the trades or businesses of the partnership are (or, without regard to the 5-year requirement under subsection (b)(2)(B), would be) taken into account by the distributing or controlled corporation, as the case may be, in determining whether the requirements of subsection (b) are met with respect to the distribution.
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(4) For purposes of computing present value and interest under subsection (a)(2), the rate used shall be equal to 110 percent of the applicable Federal rate determined under section 1274(d) (compounded semiannually) which is in effect at the time the agreement is entered into with respect to debt instruments having a maturity equal to the term of the agreement.
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(2) For purposes of this section, a debt instrument of the purchaser which is given in consideration for the sale or exchange of property shall not be treated as a payment, and any payment due under such debt instrument shall be treated as due under the contract for the sale or exchange.
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(3) For purposes of this subsection, the term “debt instrument” has the meaning given such term by section 1275(a)(1).
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(1) This section shall not apply to any debt instrument for which an issue price is determined under section 1273(b) (other than paragraph (4) thereof) or section 1274.
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(B) The term “real estate assets” means real property (including interests in real property and interests in mortgages on real property or on interests in real property), shares (or transferable certificates of beneficial interest) in other real estate investment trusts which meet the requirements of this part, and debt instruments issued by publicly offered REITs. Such term also includes any property (not otherwise a real estate asset) attributable to the temporary investment of new capital, but only if such property is stock or a debt instrument, and only for the 1-year period beginning on the date the real estate trust receives such capital.
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(I) is attributable to stock or a debt instrument (within the meaning of section 1275(a)(1)),
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(ii) The term “nonqualified publicly offered REIT debt instrument” means any real estate asset which would cease to be a real estate asset if subparagraph (B) were applied without regard to the reference to “debt instruments issued by publicly offered REITs”.
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(II) neither the aggregate issue price nor the aggregate face amount of the issuer’s debt instruments held by the trust exceeds $1,000,000 and not more than 12 months of unaccrued interest can be required to be prepaid thereunder, or
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(ii) the value of any debt instrument shall be the adjusted issue price thereof, as defined in section 1272(a)(4).
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(A) any debt instrument issued by a partnership and not described in paragraph (1) shall not be considered a security to the extent of the trust’s interest as a partner in the partnership, and
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(B) any debt instrument issued by a partnership and not described in paragraph (1) shall not be considered a security if at least 75 percent of the partnership’s gross income (excluding gross income from prohibited transactions) is derived from sources referred to in subsection (c)(3).
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(a) In determining the tax under this chapter of any holder of a regular interest in a REMIC, such interest (if not otherwise a debt instrument) shall be treated as a debt instrument.
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(A) regular interests in such REMIC (if not otherwise debt instruments) shall be treated as indebtedness of such REMIC,
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(C) For purposes of this paragraph, the term “Federal long-term rate” means the Federal long-term rate which would have applied to the residual interest under section 1274(d) (determined without regard to paragraph (2) thereof) if it were a debt instrument.
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(10) The issue price of any regular or residual interest in a REMIC shall be determined under section 1273(b) in the same manner as if such interest were a debt instrument; except that if the interest is issued for property, paragraph (3) of section 1273(b) shall apply whether or not the requirements of such paragraph are met.
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(II) the yield on property described in subclause (I), other than a debt instrument that pays interest described in subparagraph (A), or stock or other property that represents a beneficial interest in the debtor or a related person, or
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(i) The acquisition of a debt instrument or becoming the obligor under a debt instrument.
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(IV) For purposes of clause (iii)(IV), any debt instrument which is a section 988 transaction shall be treated as a commodity.
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(4) The term “debt instrument” means a bond, debenture, note, or certificate or other evidence of indebtedness. To the extent provided in regulations, such term shall include preferred stock.
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(iii) the positions are in debt instruments of a similar maturity or other debt instruments described in regulations prescribed by the Secretary,
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Gain or loss attributable to the cancellation, lapse, expiration, or other termination of—
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(A) the applicable Federal rate determined under section 1274(d) (compounded semiannually) as if the conversion transaction were a debt instrument, or
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(1) Except as provided in paragraph (2), the term “appreciated financial position” means any position with respect to any stock, debt instrument, or partnership interest if there would be gain were such position sold, assigned, or otherwise terminated at its fair market value.
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(2) A taxpayer shall not be treated as having made a constructive sale solely because the taxpayer enters into a contract for sale of any stock, debt instrument, or partnership interest which is not a marketable security (as defined in section 453(f)) if the contract settles within 1 year after the date such contract is entered into.
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(3) For purposes of paragraph (2), the applicable Federal rate is the applicable Federal rate determined under section 1274(d) (compounded semiannually) which would apply to a debt instrument with a term equal to the period the transaction was open.
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(i) any debt instrument, and
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(1) Amounts received by the holder on retirement of any debt instrument shall be considered as amounts received in exchange therefor.
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(A) If at the time of original issue there was an intention to call a debt instrument before maturity, any gain realized on the sale or exchange thereof which does not exceed an amount equal to—(i) the original issue discount, reduced by(ii) the portion of original issue discount previously includible in the gross income of any holder (without regard to section 1272(a)(7) (or the corresponding provisions of prior law)),shall be treated as ordinary income.
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(ii) any holder who has purchased the debt instrument at a premium.
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(1) For purposes of this title, there shall be included in the gross income of the holder of any debt instrument having original issue discount, an amount equal to the sum of the daily portions of the original issue discount for each day during the taxable year on which such holder held such debt instrument.
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(C) Any debt instrument which has a fixed maturity date not more than 1 year from the date of issue.
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(3) For purposes of paragraph (1), the daily portion of the original issue discount on any debt instrument shall be determined by allocating to each day in any accrual period its ratable portion of the increase during such accrual period in the adjusted issue price of the debt instrument. For purposes of the preceding sentence, the increase in the adjusted issue price for any accrual period shall be an amount equal to the excess (if any) of—(A) the product of—(i) the adjusted issue price of the debt instrument at the beginning of such accrual period, and(ii) the yield to maturity (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period), over(B) the sum of the amounts payable as interest on such debt instrument during such accrual period.
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(i) the adjusted issue price of the debt instrument at the beginning of such accrual period, and
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(B) the sum of the amounts payable as interest on such debt instrument during such accrual period.
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(4) For purposes of this subsection, the adjusted issue price of any debt instrument at the beginning of any accrual period is the sum of—(A) the issue price of such debt instrument, plus(B) the adjustments under this subsection to such issue price for all periods before the first day of such accrual period.
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(A) the issue price of such debt instrument, plus
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(5) Except as otherwise provided in regulations prescribed by the Secretary, the term “accrual period” means a 6-month period (or shorter period from the date of original issue of the debt instrument) which ends on a day in the calendar year corresponding to the maturity date of the debt instrument or the date 6 months before such maturity date.
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(A) In the case of any debt instrument to which this paragraph applies, the daily portion of the original issue discount shall be determined by allocating to each day in any accrual period its ratable portion of the excess (if any) of—(i) the sum of (I) the present value determined under subparagraph (B) of all remaining payments under the debt instrument as of the close of such period, and (II) the payments during the accrual period of amounts included in the stated redemption price of the debt instrument, over(ii) the adjusted issue price of such debt instrument at the beginning of such period.
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(i) the sum of (I) the present value determined under subparagraph (B) of all remaining payments under the debt instrument as of the close of such period, and (II) the payments during the accrual period of amounts included in the stated redemption price of the debt instrument, over
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(ii) the adjusted issue price of such debt instrument at the beginning of such period.
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(C) This paragraph applies to—(i) any regular interest in a REMIC or qualified mortgage held by a REMIC,(ii) any other debt instrument if payments under such debt instrument may be accelerated by reason of prepayments of other obligations securing such debt instrument (or, to the extent provided in regulations, by reason of other events), or(iii) any pool of debt instruments the yield on which may be affected by reason of prepayments (or to the extent provided in regulations, by reason of other events).To the extent provided in regulations prescribed by the Secretary, in the case of a small business engaged in the trade or business of selling tangible personal property at retail, clause (iii) shall not apply to debt instruments incurred in the ordinary course of such trade or business while held by such business.
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(ii) any other debt instrument if payments under such debt instrument may be accelerated by reason of prepayments of other obligations securing such debt instrument (or, to the extent provided in regulations, by reason of other events), or
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(iii) any pool of debt instruments the yield on which may be affected by reason of prepayments (or to the extent provided in regulations, by reason of other events).
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(A) For purposes of this subsection, in the case of any purchase after its original issue of a debt instrument to which this subsection applies, the daily portion for any day shall be reduced by an amount equal to the amount which would be the daily portion for such day (without regard to this paragraph) multiplied by the fraction determined under subparagraph (B).
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(I) the cost of such debt instrument incurred by the purchaser, over
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(II) the issue price of such debt instrument, increased by the portion of original issue discount previously includible in the gross income of any holder (computed without regard to this paragraph), and
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(ii) the denominator of which is the sum of the daily portions for such debt instrument for all days after the date of such purchase and ending on the stated maturity date (computed without regard to this paragraph).
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(1) who has purchased the debt instrument at a premium, or
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(A) any acquisition of a debt instrument, where
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(B) the basis of the debt instrument is not determined in whole or in part by reference to the adjusted basis of such debt instrument in the hands of the person from whom acquired.
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(2) The basis of any debt instrument in the hands of the holder thereof shall be increased by the amount included in his gross income pursuant to this section.
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(2) The term “stated redemption price at maturity” means the amount fixed by the last modification of the purchase agreement and includes interest and other amounts payable at that time (other than any interest based on a fixed rate, and payable unconditionally at fixed periodic intervals of 1 year or less during the entire term of the debt instrument).
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(1) In the case of any issue of debt instruments—(A) publicly offered, and(B) not issued for property,the issue price is the initial offering price to the public (excluding bond houses and brokers) at which price a substantial amount of such debt instruments was sold.
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(2) In the case of any issue of debt instruments not issued for property and not publicly offered, the issue price of each such instrument is the price paid by the first buyer of such debt instrument.
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(3) In the case of a debt instrument which is issued for property and which—(A) is part of an issue a portion of which is traded on an established securities market, or(i) is issued for stock or securities which are traded on an established securities market, or(ii) to the extent provided in regulations, is issued for property (other than stock or securities) of a kind regularly traded on an established market,the issue price of such debt instrument shall be the fair market value of such property.
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(4) Except in any case—(A) to which paragraph (1), (2), or (3) of this subsection applies, or(B) to which section 1274 applies,the issue price of a debt instrument which is issued for property shall be the stated redemption price at maturity.
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(2) In the case of any debt instrument and an option, security, or other property issued together as an investment unit—(A) the issue price for such unit shall be determined in accordance with the rules of this subsection and subsection (b) as if it were a debt instrument,(B) the issue price determined for such unit shall be allocated to each element of such unit on the basis of the relationship of the fair market value of such element to the fair market value of all elements in such unit, and(C) the issue price of any debt instrument included in such unit shall be the portion of the issue price of the unit allocated to the debt instrument under subparagraph (B).
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(A) the issue price for such unit shall be determined in accordance with the rules of this subsection and subsection (b) as if it were a debt instrument,
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(C) the issue price of any debt instrument included in such unit shall be the portion of the issue price of the unit allocated to the debt instrument under subparagraph (B).
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(a) In the case of any debt instrument to which this section applies, for purposes of this subpart, the issue price shall be—(1) where there is adequate stated interest, the stated principal amount, or(2) in any other case, the imputed principal amount.
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(1) Except as provided in paragraph (3), the imputed principal amount of any debt instrument shall be equal to the sum of the present values of all payments due under such debt instrument.
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(A) In the case of any potentially abusive situation, the imputed principal amount of any debt instrument received in exchange for property shall be the fair market value of such property adjusted to take into account other consideration involved in the transaction.
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(1) Except as otherwise provided in this subsection, this section shall apply to any debt instrument given in consideration for the sale or exchange of property if—(A) the stated redemption price at maturity for such debt instrument exceeds—(i) where there is adequate stated interest, the stated principal amount, or(ii) in any other case, the imputed principal amount of such debt instrument determined under subsection (b), and(B) some or all of the payments due under such debt instrument are due more than 6 months after the date of such sale or exchange.
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(A) the stated redemption price at maturity for such debt instrument exceeds—(i) where there is adequate stated interest, the stated principal amount, or(ii) in any other case, the imputed principal amount of such debt instrument determined under subsection (b), and
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(ii) in any other case, the imputed principal amount of such debt instrument determined under subsection (b), and
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(B) some or all of the payments due under such debt instrument are due more than 6 months after the date of such sale or exchange.
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(2) For purposes of this section, there is adequate stated interest with respect to any debt instrument if the stated principal amount for such debt instrument is less than or equal to the imputed principal amount of such debt instrument determined under subsection (b).
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(i) Any debt instrument arising from the sale or exchange of a farm (within the meaning of section 6420(c)(2))—(I) by an individual, estate, or testamentary trust,(II) by a corporation which as of the date of the sale or exchange is a small business corporation (as defined in section 1244(c)(3)), or(III) by a partnership which as of the date of the sale or exchange meets requirements similar to those of section 1244(c)(3).
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(B) Any debt instrument arising from the sale or exchange by an individual of his principal residence (within the meaning of section 121).
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(i) Any debt instrument arising from the sale or exchange of property if the sum of the following amounts does not exceed $250,000:(I) the aggregate amount of the payments due under such debt instrument and all other debt instruments received as consideration for the sale or exchange, and(II) the aggregate amount of any other consideration to be received for the sale or exchange.
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(I) the aggregate amount of the payments due under such debt instrument and all other debt instruments received as consideration for the sale or exchange, and
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(ii) For purposes of clause (i), any consideration (other than a debt instrument) shall be taken into account at its fair market value.
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(D) Any debt instrument to which section 1273(b)(3) applies.
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(F) Any debt instrument to the extent section 483(e) (relating to certain land transfers between related persons) applies to such instrument.
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(4) If any person—(A) in connection with the sale or exchange of property, assumes any debt instrument, or(B) acquires any property subject to any debt instrument,in determining whether this section or section 483 applies to such debt instrument, such assumption (or such acquisition) shall not be taken into account unless the terms and conditions of such debt instrument are modified (or the nature of the transaction is changed) in connection with the assumption (or acquisition).
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(A) in connection with the sale or exchange of property, assumes any debt instrument, or
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(B) acquires any property subject to any debt instrument,
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(D) The Secretary may by regulations permit a rate to be used with respect to any debt instrument which is lower than the applicable Federal rate if the taxpayer establishes to the satisfaction of the Secretary that such lower rate is based on the same principles as the applicable Federal rate and is appropriate for the term of such instrument.
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(3) In determining the term of a debt instrument for purposes of this subsection, under regulations prescribed by the Secretary, there shall be taken into account options to renew or extend.
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(1) In the case of any debt instrument to which this subsection applies, the discount rate used under subsection (b)(2)(B) or section 483(b) shall be 110 percent of the applicable Federal rate, compounded semiannually.
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(2) Section 1274A shall not apply to any debt instrument to which this subsection applies.
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(3) This subsection shall apply to any debt instrument given in consideration for the sale or exchange of any property if, pursuant to a plan, the transferor or any related person leases a portion of such property after such sale or exchange.
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(a) In the case of any qualified debt instrument, the discount rate used for purposes of sections 483 and 1274 shall not exceed 9 percent, compounded semiannually.
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(b) For purposes of this section, the term “qualified debt instrument” means any debt instrument given in consideration for the sale or exchange of property (other than new section 38 property within the meaning of section 48(b), as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) if the stated principal amount of such instrument does not exceed $2,800,000.
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(1) In the case of any cash method debt instrument—(A) section 1274 shall not apply, and(B) interest on such debt instrument shall be taken into account by both the borrower and the lender under the cash receipts and disbursements method of accounting.
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(B) interest on such debt instrument shall be taken into account by both the borrower and the lender under the cash receipts and disbursements method of accounting.
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(2) For purposes of paragraph (1), the term “cash method debt instrument” means any qualified debt instrument if—(A) the stated principal amount does not exceed $2,000,000,(B) the lender does not use an accrual method of accounting and is not a dealer with respect to the property sold or exchanged,(C) section 1274 would have applied to such instrument but for an election under this subsection, and(D) an election under this subsection is jointly made with respect to such debt instrument by the borrower and lender.
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(D) an election under this subsection is jointly made with respect to such debt instrument by the borrower and lender.
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(A) Except as provided in subparagraph (B), paragraph (1) shall apply to any successor to the borrower or lender with respect to a cash method debt instrument.
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(B) If the lender (or any successor) transfers any cash method debt instrument to a taxpayer who uses an accrual method of accounting, this paragraph shall not apply with respect to such instrument for periods after such transfer.
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(4) In the case of any cash method debt instrument, section 483 shall be applied as if it included provisions similar to the provisions of section 1274(b)(3).
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(B) all debt instruments arising from the same transaction (or a series of related transactions) shall be treated as 1 debt instrument.
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(2) In the case of any debt instrument arising out of a sale or exchange during any calendar year after 1989, each dollar amount contained in the preceding provisions of this section shall be increased by an amount equal to—(A) such amount, multiplied by(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting “calendar year 1988” for “calendar year 2016” in subparagraph (A)(ii) thereof.Any increase under the preceding sentence shall be rounded to the nearest multiple of $100 (or, if such increase is a multiple of $50, such increase shall be increased to the nearest multiple of $100).
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(3) regulations relating to the treatment of transfers of cash method debt instruments.
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(I) by substituting the lease term for the term of the debt instrument, and
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(1) reasonable amounts of working capital held in cash, cash equivalents, or debt instruments with a term of 18 months or less, or
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(2) debt instruments described in section 1221(a)(4).
Citations to §1275(a)(2)(A)
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(i) Any obligation payable 183 days or less from the date of original issue (without regard to the period held by the taxpayer).
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(i) Any amount includible in gross income as original issue discount (within the meaning of section 1273) on an obligation payable 183 days or less from the date of original issue (without regard to the period held by the company).
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(ii) the number of days after the date of original issue and up to (and including) the date of its maturity.
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(5) Except as otherwise provided in regulations prescribed by the Secretary, the term “accrual period” means a 6-month period (or shorter period from the date of original issue of the debt instrument) which ends on a day in the calendar year corresponding to the maturity date of the debt instrument or the date 6 months before such maturity date.
Citations to §1275(a)(3)
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(II) in the case of any building to which subsection (h)(4)(B) applies, the month in which the tax-exempt obligations are issued.
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(B) A tax-exempt obligation shall not be taken into account under subparagraph (A) if the taxpayer elects to exclude from the eligible basis of the building for purposes of subsection (d) the proceeds of such obligation.
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(C) Subparagraph (A) shall not apply to any tax-exempt obligation used to provide construction financing for any building if—(i) such obligation (when issued) identified the building for which the proceeds of such obligation would be used, and(ii) such obligation is redeemed before such building is placed in service.
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(3) by treating 25 percent of the adjusted basis of any qualified real estate loan as adjusted basis of a tax-exempt obligation described in subsection (b)(4)(B) thereof, and
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(6) For provision relating to deduction of original issue discount on tax-exempt obligation, see section 1288.For special rules in the case of the borrower under certain loans for personal use, see section 1275(b).
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(A) the taxpayer’s average adjusted bases (within the meaning of section 1016) of tax-exempt obligations acquired after August 7, 1986, bears to
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(A) Any qualified tax-exempt obligation acquired after August 7, 1986, shall be treated for purposes of paragraph (2) and section 291(e)(1)(B) as if it were acquired on August 7, 1986.
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(i) For purposes of subparagraph (A), the term “qualified tax-exempt obligation” means a tax-exempt obligation—(I) which is issued after August 7, 1986, by a qualified small issuer,(II) which is not a private activity bond (as defined in section 141), and(III) which is designated by the issuer for purposes of this paragraph.
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(i) For purposes of subparagraph (B), the term “qualified small issuer” means, with respect to obligations issued during any calendar year, any issuer if the reasonably anticipated amount of tax-exempt obligations (other than obligations described in clause (ii)) which will be issued by such issuer during such calendar year does not exceed $10,000,000.
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(i) Not more than $10,000,000 of obligations issued by an issuer during any calendar year may be designated by such issuer for purposes of this paragraph.(ii) Except as provided in clause (iii), in the case of a refunding (or series of refundings) of a qualified tax-exempt obligation, the refunding obligation shall be treated as a qualified tax-exempt obligation (and shall not be taken into account under clause (i)) if—(I) the refunding obligation was not taken into account under subparagraph (C) by reason of clause (ii)(III) thereof,(II) the average maturity date of the refunding obligations issued as part of the issue of which such refunding obligation is a part is not later than the average maturity date of the obligations to be refunded by such issue, and(III) the refunding obligation has a maturity date which is not later than the date which is 30 years after the date the original qualified tax-exempt obligation was issued.Subclause (II) shall not apply if the average maturity of the issue of which the original qualified tax-exempt obligation was a part (and of the issue of which the obligations to be refunded are a part) is 3 years or less. For purposes of this clause, average maturity shall be determined in accordance with section 147(b)(2)(A).(iii) No obligation issued as part of an issue may be designated under this paragraph (or may be treated as designated under clause (ii)) if—(I) any obligation issued as part of such issue is issued to refund another obligation, and(II) the aggregate face amount of such issue exceeds $10,000,000.
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(ii) Except as provided in clause (iii), in the case of a refunding (or series of refundings) of a qualified tax-exempt obligation, the refunding obligation shall be treated as a qualified tax-exempt obligation (and shall not be taken into account under clause (i)) if—(I) the refunding obligation was not taken into account under subparagraph (C) by reason of clause (ii)(III) thereof,(II) the average maturity date of the refunding obligations issued as part of the issue of which such refunding obligation is a part is not later than the average maturity date of the obligations to be refunded by such issue, and(III) the refunding obligation has a maturity date which is not later than the date which is 30 years after the date the original qualified tax-exempt obligation was issued.
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(III) the refunding obligation has a maturity date which is not later than the date which is 30 years after the date the original qualified tax-exempt obligation was issued.
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(F) In the case of an obligation which is issued as part of a direct or indirect composite issue, such obligation shall not be treated as a qualified tax-exempt obligation unless—(i) the requirements of this paragraph are met with respect to such composite issue (determined by treating such composite issue as a single issue), and(ii) the requirements of this paragraph are met with respect to each separate lot of obligations which are part of the issue (determined by treating each such separate lot as a separate issue).
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(II) any obligation issued as a part of such issue shall be treated as a qualified tax-exempt obligation if the requirements of this paragraph are met with respect to each qualified portion of the issue (determined by treating each qualified portion as a separate issue which is issued by the qualified borrower with respect to which such portion relates).
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(B) The term “tax-exempt obligation” means any obligation the interest on which is wholly exempt from taxes imposed by this subtitle. Such term includes shares of stock of a regulated investment company which during the taxable year of the holder thereof distributes exempt-interest dividends.
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(A) If interest on any indebtedness is disallowed under subsection (a) with respect to any tax-exempt obligation—(i) such disallowed interest shall not be taken into account for purposes of applying this subsection, and(ii) for purposes of applying paragraph (2), the adjusted basis of such tax-exempt obligation shall be reduced (but not below zero) by the amount of such indebtedness.
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(ii) for purposes of applying paragraph (2), the adjusted basis of such tax-exempt obligation shall be reduced (but not below zero) by the amount of such indebtedness.
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(A) In applying paragraph (2)(A), there shall not be taken into account tax-exempt obligations issued during 2009 or 2010.
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(B) The amount of tax-exempt obligations not taken into account by reason of subparagraph (A) shall not exceed 2 percent of the amount determined under paragraph (2)(B).
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(B) such rate shall be properly adjusted for differences between rates on long-term taxable and tax-exempt obligations.
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(i) any tax-exempt obligation, or
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(B) 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 has a fixed maturity date not more than 1 year from the date of issue. Such term does not include any tax-exempt obligation.
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(A) Any tax-exempt obligation.
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(C) For purposes of section 1277, the term “market discount bond” shall not include any tax-exempt obligation (as defined in section 1275(a)(3)).
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(B) the aggregate amount of the original issue discount includible in the gross income of all holders for periods before the acquisition of the bond by the taxpayer (determined without regard to section 1272(a)(7)) or, in the case of a tax-exempt obligation, the aggregate amount of the original issue discount which accrued in the manner provided by section 1272(a) (determined without regard to paragraph (7) thereof) during periods before the acquisition of the bond by the taxpayer.
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(B) The term “short-term obligation” shall not include any tax-exempt obligation (as defined in section 1275(a)(3)).
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(1) In the case of any tax-exempt obligation (as defined in section 1275(a)(3)) from which 1 or more coupons have been stripped—(A) the amount of the original issue discount determined under subsection (a) with respect to any stripped bond or stripped coupon—(i) shall be treated as original issue discount on a tax-exempt obligation to the extent such discount does not exceed the tax-exempt portion of such discount, and(ii) shall be treated as original issue discount on an obligation which is not a tax-exempt obligation to the extent such discount exceeds the tax-exempt portion of such discount,(B) subsection (b)(1)(A) shall not apply, and(C) subsection (b)(2) shall be applied by increasing the basis of the bond or coupon by the sum of—(i) the interest accrued but not paid before such bond or coupon was disposed of (and not previously reflected in basis), plus(ii) the amount included in gross income under subsection (b)(1)(B).
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(i) shall be treated as original issue discount on a tax-exempt obligation to the extent such discount does not exceed the tax-exempt portion of such discount, and
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(ii) shall be treated as original issue discount on an obligation which is not a tax-exempt obligation to the extent such discount exceeds the tax-exempt portion of such discount,
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(a) Original issue discount on any tax-exempt obligation shall be treated as accruing—(1) for purposes of section 163, in the manner provided by section 1272(a) (determined without regard to paragraph (7) thereof), and(2) for purposes of determining the adjusted basis of the holder, in the manner provided by section 1272(a) (determined with regard to paragraph (7) thereof).
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(2) The term “tax-exempt obligation” has the meaning given to such term by section 1275(a)(3).
Citations to §1275(b)
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(6) For provision relating to deduction of original issue discount on tax-exempt obligation, see section 1288.For special rules in the case of the borrower under certain loans for personal use, see section 1275(b).
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(3) For special rules in case of the borrower under certain loans for personal use, see section 1275(b).
Citations to §1275(b)(3)
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(A) by an individual of personal use property (within the meaning of section 1275(b)(3)), or
Citations to §1275(c)(1)
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(a) In the case of a failure to set forth on a debt instrument the information required to be set forth on such instrument under section 1275(c)(1), unless it is shown that such failure is due to reasonable cause and not to willful neglect, the issuer shall pay a penalty of $50 for each instrument with respect to which such a failure exists.
Citations to §1275(c)(2)
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(b) Any issuer who fails to furnish information required under section 1275(c)(2) with respect to any issue of debt instruments on the date prescribed therefor (determined with regard to any extension of time for filing) shall pay a penalty equal to 1 percent of the aggregate issue price of such issue, unless it is shown that such failure is due to reasonable cause and not willful neglect. The amount of the penalty imposed under the preceding sentence with respect to any issue of debt instruments shall not exceed $50,000 for such issue.