When so provided by regulations promulgated by the Secretary in connection with the issue of obligations of the United States, no gain or loss shall be recognized on the surrender to the United States of obligations of the United States issued under chapter
31 of title
31 in exchange solely for other obligations issued under such chapter.
(b) Application of original issue discount rules
(1) Exchanges involving obligations issued at a discount
In any case in which gain has been realized but not recognized because of the provisions of subsection (a) (or so much of section
1031(b) as relates to subsection (a) of this section), to the extent such gain is later recognized by reason of a disposition or redemption of an obligation received in an exchange subject to such provisions, the first sentence of section
1271(c)(2) shall apply to such gain as though the obligation disposed of or redeemed were the obligation surrendered to the Government in the exchange rather than the obligation actually disposed of or redeemed. For purposes of this paragraph and subpart A of part V of subchapter P, if the obligation surrendered in the exchange is a nontransferable obligation described in subsection (a) or (c) ofsection
(A)the aggregate amount considered, with respect to the obligation surrendered, as ordinary income shall not exceed the difference between the issue price and the stated redemption price which applies at the time of the exchange, and
(B)the issue price of the obligation received in the exchange shall be considered to be the stated redemption price of the obligation surrendered in the exchange, increased by the amount of other consideration (if any) paid to the United States as a part of the exchange.
(2) Exchanges of transferable obligations issued at not less than par
In any case in which subsection (a) (or so much of section
1031(b) or (c) as relates to subsection (a) of this section) has applied to the exchange of a transferable obligation which was issued at not less than par for another transferable obligation, the issue price of the obligation received from the Government in the exchange shall be considered for purposes of applying subpart A of part V of subchapter P to be the same as the issue price of the obligation surrendered to the Government in the exchange, increased by the amount of other consideration (if any) paid to the United States as a part of the exchange.
(c) Cross references
(1)For rules relating to the recognition of gain or loss in a case where subsection (a) would apply except for the fact that the exchange was not made solely for other obligations of the United States, see subsections (b) and (c) ofsection
(2)For rules relating to the basis of obligations of the United States acquired in an exchange for other obligations described in subsection (a), see subsection (d) ofsection
Subsec. (b)(2). Pub. L. 98–369, § 42(a)(11)(B), substituted “subpart A of part V of subchapter P” for “section
1983—Subsec. (a). Pub. L. 97–452substituted “chapter
31 of title
31” and “chapter” for “the Second Liberty Bond Act” and “Act”, respectively.
1976—Subsec. (b)(1). Pub. L. 94–455substituted in introductory provisions “section
1232(a)(2)(B)” for “section
1232(a)(2)(A)” and in subpar. (A) “ordinary income” for “gain from the sale or exchange of property which is not a capital asset”.
Effective Date of 1984 Amendment
Amendment by Pub. L. 98–369applicable to taxable years ending after July 18, 1984, see section 44 ofPub. L. 98–369, set out as an Effective Date note under section
1271 of this title.
Effective Date of 1976 Amendment
Amendment by Pub. L. 94–455effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) ofPub. L. 94–455, set out as a note under section
2 of this title.
Pub. L. 86–346, title II, § 203,Sept. 22, 1959, 73 Stat. 624, provided that: “The amendments made by this title [enacting this section and amending section
1031 of this title and section 742a of former Title 31, Money and Finance] shall be effective for taxable years ending after the date of enactment of this Act [Sept. 22, 1959].”
The table below lists the classification updates, since Jan. 3, 2012, for this section. Updates to a broader range of sections may be found at the update page for containing chapter, title, etc.
The most recent Classification Table update that we have noticed was Tuesday, August 13, 2013
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Description of Change
Statutes at Large
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