Page:United States Statutes at Large Volume 100 Part 3.djvu/986

 100 STAT. 2794

PUBLIC LAW 99-514—OCT. 22, 1986 r '; f' '*'

obligations to which section applies) is amended by striking out "or" at the end of subparagraph (D), by striking out the period at the end of subparagraph (E) and inserting in lieu thereof ", or", and by adding at the end thereof the following new subparagraph: "(F) is a stripped bond or stripped coupon held by the person who stripped the bond or coupon (or by any other person whose basis is determined by reference to the basis in the hands of such person)." (8) ACCRUAL OF INTEREST PAYMENTS ON CERTAIN SHORT-TERM OBLIGATIONS.—

(A) Effective with respect to obligations acquired after ^,. September 27, 1985, subsection (a) of section 1281 (relating to current inclusion in income of discount on certain shortterm obligations) is amended to read as follows: "(a) GENERAL RULE.—In the case of any short-term obligation to which this section applies, for purposes of this title— "(1) there shall be included in the gross income of the holder an amount equal to the sum of the daily portions of the acquisi*t tion discount for each day during the taxable year on which such holder held such obligation, and 4 "(2) any interest payable on the obligation (other than inH terest taken into account in determining the amount of the acquisition discount) shall be included in gross income as it accrues." (B) Subsection (a) of section 1282 (relating to deferral of interest deduction allocable to accrued discount) is amended to read as follows: "(a) GENERAL RULE.—Except as otherwise provided in this section, the net direct interest expense with respect to any short-term obligation shall be allowed as a deduction for the taxable year only to the extent such expense exceeds the sum of— "(1) the daily portions of the acquisition discount for each day during the taxable year on which the taxpayer held such obligation, and "(2) the amount of any interest payable on the obligation (other than interest taken into account in determining the amount of the acquisition discount) which accrues during the taxable year while the taxpayer held such obligation (and is not included in the gross income of the taxpayer for such taxable year by reason of the taxpayer's method of accounting)." (9) TREATMENT OF TRANSFERS OF LAND BETWEEN RELATED PAR-

TIES.—In the case of any sale or exchange before July 1, 1985, to which section 483(f) of the Internal Revenue Code of 1954 (as in effect on the day before the date of the enactment of Public Law 99-121) applies, such section shall be treated as providing that the discount rate to be used for purposes of section 483(c)(1) of such Code shall be 6 percent, compounded semiannually. (10)

CLARIFICATION OF TREATMENT OF DEBT INSTRUMENTS ISSUED FOR PUBLICLY TRADED PROPERTY.—Subparagraph (B) of

section 12730t))(3) (relating to debt instruments issued for property where there is public trading) is amended to read as follows: "(B)(i) is issued for stock or securities which are traded on an established securities market, or

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