(a) General rule
(b) Holders must use accrual method
(c) Portion of gain treated as ordinary incomeGain on the disposition of a regular interest shall be treated as ordinary income to the extent such gain does not exceed the excess (if any) of—
the amount which would have been includible in the gross income of the taxpayer with respect to such interest if the yield on such interest were 110 percent of the applicable Federal rate (as defined in section 1274(d) without regard to paragraph (2) thereof) as of the beginning of the taxpayer’s holding period, over
(d) Cross reference
For special rules in determining inclusion of original issue discount on regular interests, see section 1272(a)(6).