§ 1288 Treatment of original issue discount on tax-exempt obligations
(a) General rule
Original issue discount on any tax-exempt obligation shall be treated as accruing—
(1) for purposes of section , in the manner provided by section (determined without regard to paragraph (7) thereof), and
(2) for purposes of determining the adjusted basis of the holder, in the manner provided by section (determined with regard to paragraph (7) thereof).
(b) Definitions and special rules
For purposes of this section—
(1) Original issue discount
The term “original issue discount” has the meaning given to such term by section without regard to paragraph (3) thereof. In applying section or , under regulations prescribed by the Secretary, appropriate adjustments shall be made to the applicable Federal rate to take into account the tax exemption for interest on the obligation.
(2) Tax-exempt obligation
The term “tax-exempt obligation” has the meaning given to such term by section .
(3) Short-term obligations
In applying this section to obligations with maturity of 1 year or less, rules similar to the rules of section shall apply.
(Added Pub. L. 98–369, div. A, title I, § 41(a), July 18, 1984, 98 Stat. 553; amended Pub. L. 100–647, title I, § 1006(u)(3), Nov. 10, 1988, 102 Stat. 3427.)
Operative text only. Editorial notes, amendment history, and effective dates: official OLRC text of § 1288