Page:United States Statutes at Large Volume 98 Part 1.djvu/596

 98 STAT. 548 Ante, p. 543.

PUBLIC LAW 98-369—JULY 18, 1984 taxable years to which it is attributable (as determined under the rules of subsection (b) of section 1276). Except for purposes of sections 871(a), 881, 1441, 1442, and 6049 (and such other provisions as may be specified in regulations), any amount included in gross income under subparagraph (B) shall be treated as interest for purposes of this title. "(2) SCOPE OF ELECTION.—An election under this subsection shall apply to all market discount bonds acquired by the taxpayer on or after the 1st day of the 1st taxable year to which such election applies. "(3) PERIOD TO WHICH ELECTION APPLIES.—An election under this subsection shall apply to the taxable year for which it is made and for all subsequent taxable years, unless the taxpayer secures the consent of the Secretary to the revocation of such election. "(c) REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subpart. "Subpart C—Discount on Short-Term Obligations "Sec. 1281. Current inclusion in income of discount on certain short-term obligations. "Sec. 1282. Deferral of interest deduction allocable to accrued discount. "Sec. 1283. Definitions and special rules.

26 USC 1281.

"SEC. 1281. CURRENT INCLUSION IN INCOME OF DISCOUNT ON CERTAIN SHORT-TERM OBLIGATIONS.

"(a) IN GENERAL.—In the case of any short-term obligation to which this section applies, for purposes of this title, there shall be included in the gross income of the holder an amount equal to the sum of the daily portions of the acquisition discount for each day during the taxable year on which such holder held such obligation. "(b) SHORT-TERM OBLIGATIONS TO WHICH SECTION APPLIES.—

"(1) IN GENERAL.—This section shall apply to any short-term obligation which— "(A) is held by a taxpayer using an accrual method of accounting, "(B) is held primarily for sale to customers in the ordinary course of the taxpayer's trade or business, "(C) is held by a bank (as defined in section 581), "(D) is held by a regulated investment company or a common trust fund, or "(E) is identified by the taxpayer under section 1256(e)(2) as being part of a hedging transaction. "(2) TREATMENT ENTITIES.—

OF

OBLIGATIONS

HELD

BY

PASS-THRU

"(A) IN GENERAL.—This section shall apply also to— "(i) any short-term obligation which is held by a passthru entity which is formed or availed of for purposes of avoiding the provisions of this section, and "(ii) any short-term obligation which is acquired by a pass-thru entity (not described in clause (i)) during the required accrual period. "(B) REQUIRED ACCRUAL PERIOD.—For purposes of subparagraph (A), the term 'required accrual period' means the period— "(i) which begins with the first taxable year for which the ownership test of subparagraph (C) is met

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