Page:United States Statutes at Large Volume 98 Part 1.djvu/584

 98 STAT. 536

PUBLIC LAW 98-369—JULY 18, 1984 (or partial month) in which such acquisition occurs shall be allocated between the transferor and the transferee in accordance with the number of days in such complete (or partial) month each held the debt instrument. "(4) REDUCTION WHERE SUBSEQUENT HOLDER PAYS ACQUISITION PREMIUM.—

"(A) REDUCTION.—For purposes of this subsection, the ratable monthly portion of original issue discount shall not include its share of the acquisition premium. "(B)

Post, p. 740.

SHARE OF ACQUISITION PREMIUM.—For purposes of

subparagraph (A), any month's share of the acquisition premium is an amount (determined at the time of the purchase) equal to— "(i) the excess of— "(I) the cost of such debt instrument incurred by the holder, over "(II) 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), "(ii) divided by the number of complete months (plus any fractional part of a month) from the date of such purchase to the stated maturity date of such debt instrument. "(c) EXCEPTIONS.—This section shall not apply to any holder— "(1) who has purchased the debt instrument at a premium, or "(2) which is a life insurance company to which section 811(b) applies. "(d) DEFINITION AND SPECIAL RULE.— "(1) PURCHASE DEFINED.—For purposes

26 USC 1273.

of this section, the term 'purchase' means— "(A) any acquisition of a debt instrument, where "(B) the basis of the debt instrument is not determined in whole or in part by reference to the adjusted basis of such debt instrument in the hands of the person from whom acquired. "(2) BASIS ADJUSTMENT.—The basis of any debt instrument in the hands of the holder thereof shall be increased by the amount included in his gross income pursuant to this section. "SEC. 1273. DETERMINATION OF AMOUNT OF ORIGINAL ISSUE DISCOUNT. "(a) GENERAL RULE.—For purposes of this subpart— "(1) IN GENERAL.—The term 'original issue discount' means the excess (if any) of— "(A) the stated redemption price at maturity, over "(B) the issue price. "(2) STATED REDEMPTION PRICE AT MATURITY.—The term 'stated redemption price at maturity' means the amount fixed by the last modification of the purchase agreement and includes interest and other amounts payable at that time (other than any interest based on a fixed rate, and payable unconditionally at fixed periodic intervals of 1 year or less during the entire term of the debt instrument). "(3) V* OF 1 PERCENT DE MINIMIS RULE.—If the Original issue discount determined under paragraph (1) is less than—

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