Page:United States Statutes at Large Volume 56 Part 1.djvu/851

 56 STAT.] 77TH CONG. , 2D SESS.-CH. 619--OCT. 21, 1942 premium (determined under subsection (b)) on the bond for any taxable year beginning after December 31, 1941: "(1) INTEREST WHOLLY OR PARTIALLY TAXABLE.-In the case of a bond (other than a bond the interest on which is excludible from gross income), the amount of the amortizable bond pre- mium for the taxable year shall be allowed as a deduction. "(2) INTEREST WHOLLY TAX-EXEMPT .- In the case of any bond the interest on which is excludible from gross income, no deduc- tion shall be allowed for the amortizable bond premium for the taxable year. "(3) ADJUSTMENT OF CREDIT IN CASE OF INTEREST PARTIALLY TAX-EXEMPT . -In the case of any bond the interest on which is allowable as a credit against net income, the credit provided in section 25 (a) (1) or (2), or section 26 (a), as the case may be, shall be reduced by the amount of the amortizable bond premium for the taxable year. "(For adjustment to basis on account of amortizable bond premium, see section 113 (b) (1) (H)). "(b) AMORTIZABLE BOND PREMIUM.- "(1) AMOUNT OF BOND PREMIUM. -For the purposes of para- graph (2), the amount of bond premium, in the case of the holder of any bond, shall be determined with reference to the amount of the basis (for determining loss on sale or exchange) of such bond, and with reference to the amount payable on maturity or on earlier call date, with adjustments proper to reflect unamortized bond premium with respect to the bond, for the period prior to the date as of which subsection (a) becomes applicable with respect to the taxpayer with respect to such bond. "(2) AMOUNT AMORTIZABLE.-The amortizable bond premium of the taxable year shall be the amount of the bond premium attributable to such year. "(3) METHOD OF DETERMINATION.- The determinations required under paragraphs (1) and (2) shall be made- "(A) in accordance with the method of amortizing bond premium regularly employed by the holder of the bond, if such method is reasonable; "(B) in all other cases, in accordance with regulations prescribing reasonable methods of amortizing bond premium, prescribed by the Commissioner with the approval of the Secretary. "(c) ELECTION ON TAXABLE AND PARTIALLY TAXABLE BONDS.- " (1) ELIGIBILITY TO ELECT AND BONDS WITH RESPECT TO WHICH ELECTION PERMITTED. -This section shall apply with respect to the following classes of taxpayers with respect to the following classes of bonds only if the taxpayer has elected to have this section apply. "(A) Partially Tax-Exempt. - In the case of a taxpayer other than a corporation, bonds with respect to the interest on which the credit provided in section 25 (a) (1) or (2) is allowable; and "(B) Wholly Taxable.-In the case of any taxpayer, bonds the interest on which is not excludible from gross income but with respect to which the credit provided in section 25 (a) (1) or (2), or section 26 (a), as the case may be, is not allowable. "(2) MANNER AND EFFECT OF ELECTION. -The election author- ized under this subsection shall be made in accordance with such regulations as the Commissioner with the approval of the Secre- tary shall prescribe. If such election is made with respect to any 823 53 Stat. 17. 18. 26U. .C.§§25(a) (2), 26 (a). Ante, p. 811; poet, p. 825. Post, p. 824. 53 Stat. 17 . 26 U. . c. 25 (a) (2). Ante, p. 811; pod, p.825. 53 Stat. 18 . 26 U.8.C. 26 (a). Pot, p. 825.

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