Source: https://www.law.cornell.edu/uscode/text/26/1277
Timestamp: 2019-03-19 17:43:27
Document Index: 119441349

Matched Legal Cases: ['§ 1277', '§\u202f1277', '§\u202f41', '§\u202f901', '§\u202f902', '§\u202f1899', '§\u202f1018', '§\u202f13206', '§\u202f1616', '§\u202f1899', '§\u202f1899', '§\u202f901', '§\u202f902', '§\u202f1899']

26 U.S. Code § 1277 - Deferral of interest deduction allocable to accrued market discount | U.S. Code | US Law | LII / Legal Information Institute
Part V. SPECIAL RULES FOR BONDS AND OTHER DEBT INSTRUMENTS
Subpart B. Market Discount on Bonds
Section 1277. Deferral of interest deduction allocable to accrued market discount
26 U.S. Code § 1277. Deferral of interest deduction allocable to accrued market discount
there is net interest income for any taxable year with respect to any market discount bond, and
the taxpayer makes an election under this subparagraph with respect to such bond,
(B) Determination of disallowed interest expenseFor purposes of subparagraph (A), the amount of the disallowed interest expense—
shall be determined as of the close of the preceding taxable year, and
shall not include any amount previously taken into account under subparagraph (A).
For purposes of this paragraph, the term “net interest income” means the excess of the amount determined under paragraph (2) of subsection (c) over the amount determined under paragraph (1) of subsection (c).
(B) Nonrecognition transactionsIf any market discount bond is disposed of in a nonrecognition transaction—
the disallowed interest expense with respect to such bond shall be treated as interest paid or accrued in the year of disposition only to the extent of the amount of gain recognized on such disposition, and
(ii) the disallowed interest expense with respect to such property (to the extent not so treated) shall be treated as disallowed interest expense—
in the case of a transaction described in section 1276(c)(1), of the transferee with respect to the transferred basis property, or
in the case of a transaction described in section 1276(c)(2), with respect to the exchanged basis property.
For purposes of this subsection, the term “disallowed interest expense” means the aggregate amount disallowed under subsection (a) with respect to the market discount bond.
(c) Net direct interest expenseFor purposes of this section, the term “net direct interest expense” means, with respect to any market discount bond, the excess (if any) of—
the amount of interestpaid or accrued during the taxable year on indebtedness which is incurred or continued to purchase or carry such bond, over
the aggregate amount of interest (including original issue discount) includible in gross income for the taxable year with respect to such bond.
(Added Pub. L. 98–369, div. A, title I, § 41(a), July 18, 1984, 98 Stat. 545; amended Pub. L. 99–514, title IX, §§ 901(d)(4)(F), § 902(e)(2), title XVIII, § 1899A(29)–(31), Oct. 22, 1986, 100 Stat. 2380, 2382, 2960; Pub. L. 100–647, title I, § 1018(u)(31), Nov. 10, 1988, 102 Stat. 3592; Pub. L. 103–66, title XIII, § 13206(b)(1)(B), Aug. 10, 1993, 107 Stat. 465; Pub. L. 104–188, title I, § 1616(b)(14), Aug. 20, 1996, 110 Stat. 1857.)
1996—Subsec. (c). Pub. L. 104–188 struck out “or to which section 593 applies” after “585(a)(2))” in closing provisions.
1993—Subsec. (d). Pub. L. 103–66 struck out heading and text of subsec. (d). Text read as follows: “In the case of a market discount bond issued on or before July 18, 1984, any gain recognized by the taxpayer on any disposition of such bond shall be treated as ordinary income to the extent the amount of such gain does not exceed the amount allowable with respect to such bond under subsection (b)(2) for the taxable year in which such bond is disposed of.”
1988—Subsec. (c). Pub. L. 100–647 inserted a closing parenthesis after “section 585(a)(2)”.
1986—Subsec. (b)(1)(C). Pub. L. 99–514, § 1899A(29), substituted “this paragraph” for “this paragaph”.
Subsec. (b)(2)(C). Pub. L. 99–514, § 1899A(30), substituted “paragraph (1)” for “paragraph 1” in heading.
Subsec. (c). Pub. L. 99–514, § 901(d)(4)(F), substituted “which is a bank (as defined in section 585(a)(2) or to which section 593 applies” for “to which section 585 or 593 applies”.
Pub. L. 99–514, § 902(e)(2), substituted “section 265(a)(5)” for “section 265(5)”.
Subsec. (d). Pub. L. 99–514, § 1899A(31), substituted “July 18, 1984” for “the date of the enactment of this section”.
Amendment 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.