26 U.S. Code § 1281 - Current inclusion in income of discount on certain short-term obligations
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(a) General rule
In the case of any short-term obligation to which this section applies, for purposes of this title—
(1) there shall be included in the gross income of the holder an amount equal to the sum of the daily portions of the acquisition discount for each day during the taxable year on which such holder held such obligation, and
(b) Short-term obligations to which section applies
(1) In general
This section shall apply to any short-term obligation which—
(B) is held primarily for sale to customers in the ordinary course of the taxpayer’s trade or business,
(C) is held by a bank (as defined in section 581),
(E) is identified by the taxpayer under section 1256 (e)(2) as being part of a hedging transaction, or
(2) Treatment of obligations held by pass-thru entities
(A) In general
This section shall apply also to—
(i) any short-term obligation which is held by a pass-thru entity which is formed or availed of for purposes of avoiding the provisions of this section, and
(B) Required accrual period
For purposes of subparagraph (A), the term “required accrual period” means the period—
(i) which begins with the first taxable year for which the ownership test of subparagraph (C) is met with respect to the pass-thru entity (or a predecessor), and
(C) Ownership test
The ownership test of this subparagraph is met for any taxable year if, on at least 90 days during the taxable year, 20 percent or more of the value of the interests in the pass-thru entity are held by persons described in paragraph (1) or by other pass-thru entities to which subparagraph (A) applies.
Source(Added Pub. L. 98–369, div. A, title I, § 41(a),July 18, 1984, 98 Stat. 548; amended Pub. L. 99–514, title XVIII, § 1803(a)(7), (8)(A),Oct. 22, 1986, 100 Stat. 2793, 2794.)
1986—Subsec. (a). Pub. L. 99–514, § 1803(a)(8), amended subsec. (a) generally, designating existing provisions as par. (1) and adding par. (2).
Subsec. (b)(1)(F). Pub. L. 99–514, § 1803(a)(7), added subpar. (F).
Effective Date of 1986 Amendment
Amendment by section 1803(a)(7) ofPub. L. 99–514effective, 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 ofPub. L. 99–514, set out as a note under section 48 of this title.
Section 1803(a)(8)(A) ofPub. L. 99–514, as amended by Pub. L. 100–647, title I, § 1018(c)(1),Nov. 10, 1988, 102 Stat. 3578, provided that the amendment made by section 1803(a)(8)(A) ofPub. L. 99–514is effective with respect to obligations acquired after Dec. 31, 1985.
Section applicable to taxable years ending after July 18, 1984, and applicable to obligations acquired after that date, with certain elections available, see section 44 ofPub. L. 98–369, set out as a note under section 1271 of this title.
Plan Amendments Not Required Until January 1, 1989
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. 99–514require 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 ofPub. L. 99–514, as amended, set out as a note under section 401 of this title.