26 U.S. Code § 1276 - Disposition gain representing accrued market discount treated as ordinary income
Except as otherwise provided in this section, gain on the disposition of any market discount bond shall be treated as ordinary income to the extent it does not exceed the accrued market discount on such bond. Such gain shall be recognized notwithstanding any other provision of this subtitle.
For purposes of paragraph (1), a person disposing of any market discount bond in any transaction other than a sale, exchange, or involuntary conversion shall be treated as realizing an amount equal to the fair market value of the bond.
Any partial principal payment on a market discount bond shall be included in gross income as ordinary income to the extent such payment does not exceed the accrued market discount on such bond.
If subparagraph (A) applies to any partial principal payment on any market discount bond, for purposes of applying this section to any disposition of (or subsequent partial principal payment on) such bond, the amount of accrued market discount shall be reduced by the amount of such partial principal payment included in gross income under subparagraph (A).
Except for purposes of sections 103, 871(a),, 881, 1441, 1442, and 6049 (and such other provisions as may be specified in regulations), any amount treated as ordinary income under paragraph (1) or (3) shall be treated as interest for purposes of this title.
For purposes of paragraph (1), if the basis of any market discount bond in the hands of a transferee is determined under section 732(a), or 732(b), such property shall be treated as transferred basis property in the hands of such transferee.
 So in original.
1993—Subsec. (a)(4). Pub. L. 103–66, § 13206(b)(2)(B)(i), substituted “sections 103, 871(a),” for “sections 871(a)”.
Subsec. (e). Pub. L. 103–66, § 13206(b)(1)(A), struck out heading and text of subsec. (e). Text read as follows: “This section shall not apply to any market discount bond issued on or before July 18, 1984.”
1988—Subsec. (b)(3). Pub. L. 100–647 designated paragraph relating to special rule where there are partial principal payments as par. (3) and inserted period at end.
1986—Subsec. (a)(3). Pub. L. 99–514, § 1803(a)(13)(A)(i), added par. (3). Former par. (3) redesignated (4).
Subsec. (a)(4). Pub. L. 99–514, § 1803(a)(13)(A)(i), (ii), redesignated par. (3) as (4) and substituted “under paragraph (1) or (3)” for “under paragraph (1)”.
Subsec. (b). Pub. L. 99–514, § 1803(a)(13)(A)(iii), added undesignated par. at end relating to special rule where partial principal payments.
Subsec. (c)(3). Pub. L. 99–514, § 631(e)(15), struck out reference to section 334(c).
Subsec. (d)(1)(C). Pub. L. 99–514, § 1803(a)(5), added subpar. (C).
Subsec. (e). Pub. L. 99–514, § 1899A(28), substituted “July 18, 1984” for “the date of the enactment of this section”.
Amendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.
Amendment by section 631(e)(15) of Pub. L. 99–514 applicable to any distribution in complete liquidation, and any sale or exchange, made by a corporation after July 31, 1986, unless such corporation is completely liquidated before Jan. 1, 1987, any transaction described in section 338 of this title for which the acquisition date occurs after Dec. 31, 1986, and any distribution, not in complete liquidation, made after Dec. 31, 1986, with exceptions and special and transitional rules, see section 633 of Pub. L. 99–514, set out as an Effective Date note under section 336 of this title.
Amendment by section 1803(a)(5) of Pub. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title.
Section applicable to taxable years ending after July 18, 1984, and applicable to obligations issued after July 18, 1984, in taxable years ending after such date, see section 44 of Pub. L. 98–369, set out as a note under section 1271 of this title.
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title.
Written determinations for this section
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- Amount Realized : 2001-05-18
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- Loan or Mortgage v. Sale : 2001-05-18
- Market Discount Bond : 2001-05-18
- Market Discount : 2001-05-18
- Market Discount : 1999-04-16
- Election to Include Market Discount Currently : 1999-04-16
- Accrued Market Discount : 1999-04-16