Page:United States Statutes at Large Volume 100 Part 3.djvu/987

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2795

"(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,". (11) BOND PREMIUMS AMORTIZED AT CONSTANT RATE, ETC.—

(A) IN GENERAL.—Paragraph (3) of section 171(b) (relating to amortizable bond premiums) is amended to read as follows: "(3) METHOD OF DETERMINATION.—

"(A) IN GENERAL.—Except as provided in regulations prescribed by the Secretary, the determinations required under paragraphs (1) and (2) shall be made on the basis of the taxpayer's yield to maturity determined by— "(i) using the taxpayer's basis (for purposes of determining loss on sale or exchange) of the obligation, and "(ii) compounding at the close of each accrual period (as defined in section 1272(a)(5)). "(B) SPECIAL RULE WHERE EARLIER CALL DATE IS USED.—

For purposes of subparagraph (A), if the amount payable on an earlier call date is used under paragraph (l)(B)(ii) in determining the amortizable bond premium attributable to the period before the earlier call date, such bond shall be treated as maturing on such date for the amount so payable and then reissued on such date for the amount so payable." (B) AMORTIZABLE BOND PREMIUM RULES TO APPLY TO OBLIGATIONS ISSUED BY INDIVIDUALS, ETC.—Subsection (d) of

section 171 (defining bond) is amended by striking out "issued by any corporation and bearing interest (including any like obligation issued by a government or political subdivision thereof),". (C) EFFECTIVE DATE.—

(i) The amendments made by this paragraph shall apply to obligations issued after September 27, 1985. (ii) In the case of a taxpayer with respect to whom an election is in effect on the date of the enactment of this Act under section 171(c) of the Internal Revenue Code of 1954, such election shall apply to obligations issued after September 27, 1985, only if the taxpayer chooses (at such time and in such manner as may be prescribed by the Secretary of the Treasury or his delegate) to have such election apply with respect to such obligations. (12) CLARIFICATION OF AMOUNT OF AMORTIZABLE BOND PREIIUM.—

(A) IN GENERAL.—Subsection (b) of section 171 (defining amortizable bond premium) is amended by adding at the end thereof the following new paragraph: "(4) TREATMENT OF CERTAIN BONDS ACQUIRED IN EXCHANGE FOR THER PROPERTY.—

"(A) IN GENERAL.—If—

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"(i) a bond is acquired by any person in exchange for other property, and "(ii) the basis of such bond is determined (in whole or in part) by reference to the basis of such other property, for purposes of applying this subsection to such bond while held by such person, the basis of such bond shall not exceed its fair market value immediately after the exchange. A

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