26 U.S. Code § 1278 - Definitions and special rules
Except as provided in subparagraph (B), the term “market discount bond” means any bond having market discount.
Any obligation with a fixed maturity date not exceeding 1 year from the date of issue.
For purposes of section 1277, the term “market discount bond” shall not include any tax-exempt obligation (as defined in section 1275(a)(3)).
Except as otherwise provided in this subparagraph or in regulations, the term “market discount bond” shall not include any bond acquired by the taxpayer at its original issue.
Clause (i) shall not apply to any bond issued pursuant to a plan of reorganization (within the meaning of section 368(a)(1)) in exchange for another bond having market discount. Solely for purposes of section 1276, the preceding sentence shall not apply if such other bond was issued on or before July 18, 1984 (the date of the enactment of section 1276) and if the bond issued pursuant to such plan of reorganization has the same term and the same interest rate as such other bond had.
For purposes of clause (i), if the adjusted basis of any bond in the hands of the taxpayer is determined by reference to the adjusted basis of such bond in the hands of a person who acquired such bond at its original issue, such bond shall be treated as acquired by the taxpayer at its original issue.
In the case of any bond having original issue discount, for purposes of subparagraph (A), the stated redemption price of such bond at maturity shall be treated as equal to its revised issue price.
The term “bond” means any bond, debenture, note, certificate, or other evidence of indebtedness.
An election under this subsection shall apply to all market discount bonds acquired by the taxpayer on or after the 1st day of the 1st taxable year to which such election applies.
An election under this subsection shall apply to the taxable year for which it is made and for all subsequent taxable years, unless the taxpayer secures the consent of the Secretary to the revocation of such election.
The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subpart, including regulations providing proper adjustments in the case of a bond the principal of which may be paid in 2 or more payments.
 So in original.
1993—Subsec. (a)(1)(B)(ii)–(iv). Pub. L. 103–66, § 13206(b)(2)(A)(i), redesignated cls. (iii) and (iv) as (ii) and (iii), respectively, and struck out heading and text of former cl. (ii). Text read as follows: “Any tax-exempt obligation (as defined in section 1275(a)(3)).”
Subsec. (a)(1)(C), (D). Pub. L. 103–66, § 13206(b)(2)(A)(ii), (iii), added subpar. (C) and redesignated former subpar. (C) as (D).
Subsec. (a)(4)(B). Pub. L. 103–66, § 13206(b)(2)(B)(ii), inserted before period at end “or, in the case of a tax-exempt obligation, the aggregate amount of the original issue discount which accrued in the manner provided by section 1272(a) (determined without regard to paragraph (7) thereof) during periods before the acquisition of the bond by the taxpayer”.
Subsec. (b)(1). Pub. L. 103–66, § 13206(b)(2)(B)(i), substituted “sections 103, 871(a),” for “sections 871(a)” in last sentence.
1988—Subsec. (a)(4)(B). Pub. L. 100–647, § 1006(u)(2), substituted “section 1272(a)(7)” for “section 1272(a)(6)”.
Subsec. (b)(4). Pub. L. 100–647, § 1018(c)(3), added par. (4).
Subsec. (c). Pub. L. 100–647, § 1018(c)(2), inserted before period at end “, including regulations providing proper adjustments in the case of a bond the principal of which may be paid in 2 or more payments”.
Subsec. (a)(1)(C). Pub. L. 99–514, § 1803(a)(6), added subpar. (C).
Subsec. (a)(4). Pub. L. 99–514, § 1899A(32), substituted “means” for “means of” in introductory provisions.
1984—Subsec. (a)(1)(B)(i). Pub. L. 98–369, § 1001(b)(24), as added by Pub. L. 99–514, § 1878(a), substituted “6 months” for “1 year”, applicable to property acquired after June 22, 1984, and before Jan. 1, 1988. See Effective Date of 1984 Amendment note below.
Amendments by Pub. L. 103–66 applicable to obligations purchased (within the meaning of section 1272(d)(1) of this title) after Apr. 30, 1993, see section 13206(b)(3) of Pub. L. 103–66, set out as a note under section 1276 of this title.
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 sections 1803(a)(6) and 1878(a) 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.
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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- Bad Debts : 2001-05-18
- Adjusted Basis for Determining Gain or Loss : 2001-05-18
- Loan or Mortgage v. Sale : 2001-05-18
- Market Discount Bond : 2001-05-18
- Market Discount : 2001-05-18
- Definitions and Special Rules : 1999-07-16
- Market Discount : 1999-04-16
- Election to Include Market Discount Currently : 1999-04-16
- Accrued Market Discount : 1999-04-16
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