Page:United States Statutes at Large Volume 98 Part 1.djvu/701

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 653

(B) EXCEPTION.—Subparagraph (A) shall not apply to any applicable CFC which did not meet requirements which are based on the principles set forth in Revenue Rulings 69-501, 69-377, 70-645, and 73-110. " >

(C) DEFINITIONS.—

(i) The term "applicable CFC" has the meaning given such term by section 121(b)(2)(D) of this Act, except that Ante, p. 638. such section shall be applied by substituting "the date of interest payment" for "March 31, 1984," in clause (i) thereof. (ii) The term "United States affiliate obligation" lox L.'-?J means an obligation described in section 121(b)(2)(F) of this Act which was issued before June 22, 1984. SEC. 128. TREATMENT OF UNITED STATES SOURCE ORIGINAL ISSUE DISCOUNT IN CASE OF FOREIGN PERSONS. ,.,5,,,.„ f

(a) NONRESIDENT A U E N INDIVIDUALS.—

(1) IN GENERAL.—Subparagraph (C) of section 871(a)(1) (relat- 26 USC 871. ing to income not connected with United States business) is amended to read as follows: "(C) in the case of— "(i) a sale or exchange of an original issue discount obligation, the amount of any gain not in excess of the •; original issue discount accruing while such obligation was held by the nonresident alien individual (to the K extent such discount was not theretofore taken into account under clause (ii)), and "(ii) the payment of interest on an original issue discount obligation, an amount equal to the original issue discount accrued on such obligation since the last payment of interest thereon (except that such origmal J,, issue discount shall be taken into account under this clause only to the extent that the tax thereon does not exceed the interest payment less the tax imposed by subparagraph (A) thereon), and". (2) DEFINITIONS AND SPECIAL RULES.—Section 871 is amended

by redesignating subsection (g) as subsection (h) and by inserting after subsection (f) the following new subsection: "(g) SPECIAL RULES FOR ORIGINAL ISSUE DISCOUNT.—For purposes

of this section and section 881—

•'*•' '^ "'* '

"(1) ORIGINAL ISSUE DISCOUNT OBLIGATION.—

•'1

"(A) IN GENERAL.—Except as provided in subparagraph i.3 J f x (B), the term 'original issue discount obligation' means any bond or other evidence of indebtedness having original issue discount (within the meaning of section 1273). Ante, p. 536. "(B) EXCEPTIONS.—The term 'original issue discount obligation' shall not include— "(i) CERTAIN SHORT-TERM OBLIGATIONS.—Any obliga-

tion payable 183 days or less from the date of original issue (without regard to the period held by the taxpaver). '(ii) TAX-EXEMPT OBLIGATIONS.—Any obligation the interest on which is exempt from tax under section 103 or under any other provision of law without regard to the identity of the holder. "(2) DETERMINATION OF PORTION OF ORIGINAL ISSUE DISCOUNT

ACCRUING DURING ANY PERIOD.—The determination of the

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