Page:United States Statutes at Large Volume 99 Part 1.djvu/528

 99 STAT. 506

PUBLIC LAW 99-121—OCT. 11, 1985 period selected by the Secretary and ending in the calendar month in which the determination is made) on outstanding marketable obligations of the United States with remaining periods to maturity of 3 years or less. "(ii) FEDERAL MID-TERM AND LONG-TERM RATES.—The

Federal mid-term and long-term rate shall be determined in accordance with the principles of clause (i). "(D) LOWER RATE PERMITTED IN CERTAIN CASES.—The Secretary may by regulations permit a rate to be used with respect to any debt instrument which is lower than the applicable Federal rate if the taxpayer establishes to the satisfaction of the Secretary that such lower rate is based on the same principles as the applicable Federal rate and is appropriate for the term of such instrument." 98 Stat. 538.

26 USC 1274.

(2) R A T E APPLICABLE TO ANY SALE OR EXCHANGE.—Paragraph

(2) of section 1274(d) of such Code (relating to rate applicable to any sale or exchange) is amended to read as follows: "(2) LOWEST 3-MONTH RATE APPLICABLE TO ANY SALE OR EXCHANGE.—

Contracts.

"(A) IN GENERAL.—In the case of any sale or exchange, the applicable Federal rate shall be the lowest 3-month rate. "(B) LowEST 3-MONTH RATE.—For purposes of Subparagraph (A), the term 'lowest 3-month rate' means the lowest of the applicable Federal rates in effect for any month in the 3-calendar-month period ending with the 1st calendar month in which there is a binding contract in writing for such sale or exchange." (c) RATE INCREASED TO 110 PERCENT IN CASE OF SALE-LEASEBACK.—

98 Stat. 538. 26 USC 1274.

Section 1274 of such Code (relating to determination of issue price in the case of certain debt instruments issued for property) is amended by adding at the end thereof the following new subsection: "(e) 110 PERCENT RATE WHERE SALE-LEASEBACK INVOLVED.—

98 Stat. 553. 26 USC 483. Prohibitions. Post, p. 507.

"(1) IN GENERAL.—In the case of any debt instrument to which this subsection applies, the discount rate used under subsection (b)(2)(B) or section 483(b) shall be 110 percent of the applicable Federal rate, compounded semiannually. "(2) Lower discount rates shall not apply.—Section 1274A shall not apply to any debt instrument to which this subsection applies. "(3) Debt instruments to which this subsection applies.—This subsection shall apply to any debt instrument given in consideration for the sale or exchange of any property if, pursuant to a plan, the transferor or any related person leases a portion of such property after such sale or exchange." SEC. 102. LOWER DISCOUNT RATE IN CASE OF CERTAIN SALES WHERE STATED PRINCIPAL AMOUNT DOES NOT EXCEED $2,800,000.

(a) GENERAL RULE.—Subpart A of part V of subchapter P of chapter 1 of the Internal Revenue Code of 1954 (relating to original issue discount) is amended by inserting after section 1274 the following new section:

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