Source: https://www.law.cornell.edu/uscode/text/26/1286?quicktabs_8=4
Timestamp: 2015-03-31 12:40:24
Document Index: 597676253

Matched Legal Cases: ['§ 1286', '§ 41', '§ 1803', '§ 1018', '§ 831', '§ 1803', '§ 1803', '§ 1879', '§ 1018', '§ 1879']

26 U.S. Code § 1286 - Tax treatment of stripped bonds | LII / Legal Information Institute
Inclusion in income as if bond and coupons were original issue discount bonds If any person purchases after July 1, 1982, a stripped bond or a stripped coupon, then such bond or coupon while held by such purchaser (or by any other person whose basis is determined by reference to the basis in the hands of such purchaser) shall be treated for purposes of this part as a bond originally issued on the purchase date and having an original issue discount equal to the excess (if any) of—
Tax treatment of person stripping bond For purposes of this subtitle, if any person strips 1 or more coupons from a bond and after July 1, 1982, disposes of the bond or such coupon—
such person shall include in gross income an amount equal to the sum of—
Retention of existing law for stripped bonds purchased before July 2, 1982 If a bond issued at any time with interest coupons—
then the gain on the sale or other disposition of such bond by such purchaser (or by a person whose basis is determined by reference to the basis in the hands of such purchaser) shall be considered as ordinary income to the extent that the fair market value (determined as of the time of the purchase) of the bond with coupons attached exceeds the purchase price. If this subsection and section 1271
(a)(2)(A) apply with respect to gain realized on the sale or exchange of any evidence of indebtedness, then section 1271
(a)(2)(A) shall apply with respect to that part of the gain to which this subsection does not apply.
Special rules for tax-exempt obligations (1)
In general In the case of any tax-exempt obligation (as defined in section 1275
(a)(3)) from which 1 or more coupons have been stripped—
the amount of the original issue discount determined under subsection (a) with respect to any stripped bond or stripped coupon—
subsection (b)(2) shall be applied by increasing the basis of the bond or coupon by the sum of—
Tax-exempt portion For purposes of paragraph (1), the tax-exempt portion of the original issue discount determined under subsection (a) is the excess of—
an issue price which would produce a yield to maturity as of the purchase date equal to the lower of—
Bond The term “bond” means a bond, debenture, note, or certificate or other evidence of indebtedness.
Stripped bond The term “stripped bond” means a bond issued at any time with interest coupons where there is a separation in ownership between the bond and any coupon which has not yet become payable.
Stripped coupon The term “stripped coupon” means any coupon relating to a stripped bond.
Stated redemption price at maturity The term “stated redemption price at maturity” has the meaning given such term by section 1273
Coupon The term “coupon” includes any right to receive interest on a bond (whether or not evidenced by a coupon). This paragraph shall apply for purposes of subsection (c) only in the case of purchases after July 1, 1982.
Purchase The term “purchase” has the meaning given such term by section 1272
Treatment of stripped interests in bond and preferred stock funds, etc. In the case of an account or entity substantially all of the assets of which consist of bonds, preferred stock, or a combination thereof, the Secretary may by regulations provide that rules similar to the rules of this section and 305(e),
as appropriate, shall apply to interests in such account or entity to which (but for this subsection) this section or section 305
(e), as the case may be, would not apply.
Regulation authority The Secretary may prescribe regulations providing that where, by reason of varying rates of interest, put or call options, or other circumstances, the tax treatment under this section does not accurately reflect the income of the holder of a stripped coupon or stripped bond, or of the person disposing of such bond or coupon, as the case may be, for any period, such treatment shall be modified to require that the proper amount of income be included for such period.
So in original. Probably should be “section 305(e),”.
(Added Pub. L. 98–369, div. A, title I, § 41(a),July 18, 1984, 98 Stat. 551; amended Pub. L. 99–514, title XVIII, §§ 1803(a)(13)(B), 1879(s)(1),Oct. 22, 1986, 100 Stat. 2796, 2912; Pub. L. 100–647, title I, § 1018(q)(4)(A),Nov. 10, 1988, 102 Stat. 3585; Pub. L. 108–357, title VIII, § 831(a),Oct. 22, 2004, 118 Stat. 1587.)
2004—Subsecs. (f), (g). Pub. L. 108–357added subsec. (f) and redesignated former subsec. (f) as (g).
1988—Subsec. (d). Pub. L. 100–647amended subsec. (d) generally. Prior to amendment, subsec. (d) read as follows: “In the case of any tax-exempt obligation (as defined in section 1275
1986—Subsec. (b)(1). Pub. L. 99–514, § 1803(a)(13)(B)(i), amended par. (1) generally, designating existing provisions as subpar. (A) and adding subpar. (B).
Subsec. (b)(2). Pub. L. 99–514, § 1803(a)(13)(B)(ii), substituted “the amount included in gross income under paragraph (1)” for “the amount of the accrued interest described in paragraph (1)”.
Subsec. (d). Pub. L. 99–514, § 1879(s)(1), amended subsec. (d) generally. Prior to amendment, subsec. (d) read as follows: “In the case of any tax-exempt obligation (as defined in section 1275
(a)(3))—
Amendment by Pub. L. 108–357applicable to purchases and dispositions after Oct. 22, 2004, see section 831(c) ofPub. L. 108–357, set out as a note under section 305 of this title.
Pub. L. 100–647, title I, § 1018(q)(4)(B),Nov. 10, 1988, 102 Stat. 3586, provided that:
“(i) Except as provided in clause (ii), the amendment made by subparagraph (A) [amending this section] shall apply to any purchase or sale after June 10, 1987, of any stripped tax-exempt obligation or stripped coupon from such an obligation.
“(I) any person held any obligation or coupon in stripped form on June 10, 1987, and
“(II) such obligation or coupon was held by such person on such date for sale in the ordinary course of such person’s trade or business,
Amendment by section 1803(a)(13)(B) ofPub. L. 99–514applicable to obligations acquired after Oct. 22, 1986, see section 1803(a)(13)(C) ofPub. L. 99–514, set out as a note under section 1276 of this title.
Pub. L. 99–514, title XVIII, § 1879(s)(2),Oct. 22, 1986, 100 Stat. 2913, provided that: “The amendment made by paragraph (1) [amending this section] shall apply to any purchase or sale of any stripped tax-exempt obligation or stripped coupon from such an obligation after the date of the enactment of this Act [Oct. 22, 1986].”