Page:United States Statutes at Large Volume 98 Part 1.djvu/580

 98 STAT. 532

PUBLIC LAW 98-369—JULY 18, 1984 "PART V—SPECIAL RULES FOR BONDS AND OTHER DEBT INSTRUMENTS "Subpart "Subpart "Subpart "Subpart

A. Original issue discount. B. Market discount. C. Discount on short-term obligations. D. Miscellaneous provisions.

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"Subpart A—Original Issue Discount

I 26 USC 1271.

"Sec. 1271. Treatment of amounts received on retirement or sale or exchange of debt instruments. "Sec. 1272. Current inclusion in income of original issue discount. "Sec. 1273. Determination of amount of original issue discount. "Sec. 1274. Determination of issue price in the case of certain debt instruments issued for property. "Sec. 1275. Other definitions and special rules.

"SEC. 1271. TREATMENT OF AMOUNTS RECEIVED ON RETIREMENT OR SALE OR EXCHANGE OF DEBT INSTRUMENTS. "(a) GENERAL RULE.—For purposes of this title—

"(1) RETIREMENT.—Amounts received by the holder on retirement of any debt instrument shall be considered as amounts received in exchange therefor. "(2)

ORDINARY INCOME O N SALE OR EXCHANGE W H E R E I N T E N -

TION TO CALL BEFORE MATURITY.—

"(A) IN GENERAL.—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 subsection (a)(6) or (b)(4) of section 1272 (or the corresponding provisions of prior law)), shall be treated as ordinary income. "(B) EXCEPTIONS.—This paragraph (and paragraph (2) of subsection (c)) shall not apply to— "(i) any tax-exempt obligation, or "(ii) any holder who has purchased the debt instrument at a premium.

Post, p. 533.

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"(3) CERTAIN SHORT-TERM GOVERNMENT OBLIGATIONS.—

"(A) IN GENERAL.—On the sale or exchange of any shortterm Government obligation, any gain realized which does not exceed an amount equal to the ratable share of the acquisition discount shall be treated as ordinary income. "(B) SHORT-TERM GOVERNMENT OBLIGATION.—For purposes

i.

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 is— "(i) issued on a discount basis, and "(ii) payable without interest at a fixed maturity date not more than 1 year from the date of issue. Such term does not include any tax-exempt obligation. "(C) ACQUISITION DISCOUNT.—For purposes of this paragraph, the term 'acquisition discount' means the excess of

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