Page:United States Statutes at Large Volume 98 Part 1.djvu/583

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 535

"(5) ACCRUAL PERIOD.—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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"(6) REDUCTION WHERE SUBSEQUENT HOLDER PAYS ACQUISITION PREMIUM.—

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"(A) REDUCTION.—For purposes of this subsection, in the case of any purchase after its original issue of a debt, i n s t r u m e n t to which this subsection applies, the daily portion for any day shall be reduced by a n a m o u n t equal to the a m o u n t which would b e the daily portion for such d a y (without regard to this paragraph) multiplied by the fraction determined under subparagraph (B). "(B) DETERMINATION O F FRACTION.—For purposes of sub-

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paragraph (A), the fraction determined under this subparagraph is a fraction— "(i) the numerator of which is the excess (if any) of^ "(I) the cost of such debt instrument incurred by . ^.j,,,,,^ the purchaser, over ^ "(11) 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 "(ii) the denominator of which is th^ 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). "(b) RATABLE INCLUSION RETAINED FOR CORPORATE DEBT INSTRUMENTS ISSUED BEFORE JULY 2, 1982.— "(1) GENERAL RULE.—There shall be included in the gross

income of the holder of any debt instrument issued by a corporation after May 27, 1969, and before July 2, 1982— --» "(A) the ratable monthly portion of original issue discount, multiplied by "(B) the number of complete months (plus any fractional part of a month determined under paragraph (3)) such holder held such debt instrument during the taxable year. "(2) DETERMINATION OF RATABLE MONTHLY PORTION.—Except

as provided in paragraph (4), the ratable monthly portion of original issue discount shall equal— "(A) the original issue discount, divided by "(B) the number of complete months from the date of original issue to the stated maturity date of the debt instrument. 1 "(3) MONTH DEFINED.—For purposes of this subsection— "(A) COMPLETE MONTH.—A complete month commences with the date of original issue and the corresponding day of each succeeding calendar month (or the last day of a calendar month in which there is no corresponding day). "(B) TRANSFERS DURING MONTH.—In any case where a debt instrument is acquired on any day other than a day s;; determined under subparagraph (A), the ratable monthly portion of original issue discount for the complete month

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