Page:United States Statutes at Large Volume 98 Part 1.djvu/747

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 699

"(1) any excluded amount under subsection (a) allowed for the purposes of this subtitle (other than section 531 or section 541) shall be allowed whether or not such amount resulted in a reduction of the tax under section 531 or the tax under section 541 for the prior taxable year; and "(2) where any excluded amount under subsection (a) was not allowable as a deduction for the prior taxable year for purposes of this subtitle other than of section 531 or section 541 but was allowable for the same taxable year under section 531 or section 541, then such excluded amount shall be allowable if it did not result in a reduction of the tax under section 531 or the tax under section 541." (b) CLERICAL AMENDMENT.—The table of sections for part III of subchapter B of chapter 1 (relating to items specifically excluded from gross income) is amended by striking out the item relating to section 111 and inserting in lieu thereof: "Sec. 111. Recovery of tax benefit items."

'•- (c) EFFECTIVE DATE.—The amendments made by this section shall apply to amounts recovered after December 31, 1983, in taxable years ending after such date.

26 USC ill note,

SEC. 172. LOANS WITH BELOW-MARKET INTEREST RATES.

(a) GENERAL RULE.—Subchapter C of chapter 80 (relating to provisions affecting more than 1 subtitle) is amended by adding at the end thereof the following new section: "SEC. 7872. TREATMENT OF LOANS WITH BELOW-MARKET INTEREST RATES. "(a) TREATMENT OF GIFT LOANS AND DEMAND LOANS.—

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"(1) IN GENERAL.—For purposes of this title, in the case of any below-market loan to which this section applies and which is a gift loan or a demand loan, the foregone interest shall be treated as— "(A) transferred from the lender to the borrower, and "(B) retransferred by the borrower co the lender as interest. "(2) TIME WHEN TRANSFERS MADE.—Except as otherwise provided in regulations prescribed by the Secretary, any foregone interest attributable to periods during any calendar year shall be treated as transferred (and retransferred) under paragraph (1) on the last day of such calendar year.

, "(b) TREATMENT OF OTHER BELOW-MARKET LOANS.—

"(1) IN GENERAL.—For purposes of this title, in the case of any below-market loan to which this section applies and to which subsection (a)(1) does not apply, the lender shall be treated as having transferred on the date the loan was made (or, if later, on the first day on which this section applies to such loan), and the borrower shall be treated as having received on such date, cash in an amount equal to the excess of— "(A) the amount loaned, over "(B) the present value of all payments which are required to be made under the terms of the loan. "(2)

OBLIGATION TREATED AS HAVING ORIGINAL ISSUE DIS-

COUNT.—For purposes of this title— "(A) IN GENERAL.—Any below-market loan to which paragraph (1) applies shall be treated as having original issue

26 USC 7872.

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