PUBLIC LAW 99-514—OCT. 22, 1986
100 STAT. 2793
tion' means any obligation of the United States or any of its possessions, or of a State or any political subdivision thereof, or of the District of Columbia, which has a fixed maturity date not more than 1 year from the date of issue. Such term does not include any tax-exempt obligation." (4) DEDUCTION OF ORIGINAL ISSUE DISCOUNT ON SHORT-TERM
OBLIGATIONS.—Paragraph (2) of section 163(e) (relating to original issue discount) is amended by adding at the end thereof the following new subparagraph: "(C) SHORT-TERM OBLIGATIONS.—In the case of an obligor of a short-term obligation (as defined in section 1283(a)(l)(A)) who uses the cash receipts and disbursements method of accounting, the original issue discount (and any other interest payable) on such obligation shall be deductible only when paid." (5) TREATMENT OF CERTAIN TRANSFERS OF MARKET DISCOUNT
BONDS.—Paragraph (1) of section 1276(d) (relating to special rules) is amended by striking out "and" at the end of subparagraph (A) and by inserting after subparagraph (B) the following new subparagraph: "(C) paragraph (3) of section 12450t)) shall be applied as if it did not contain a reference to section 351, and". (6) TREATMENT OF BONDS ACQUIRED AT ORIGINAL ISSUE FOR PURPOSES OF MARKET DISCOUNT RULES.—Paragraph (1) of section
1278(a) (defining market discount bond) is amended by adding at the end thereof the following new subparagraph: "(C) TREATMENT OF BONDS ACQUIRED AT ORIGINAL ISSUE.—
"(i) IN GENERAL.—Except as otherwise provided in this subparagraph or in regulations, the term 'market discount bond' shall not include any bond acquired by the taxpayer at its original issue. "(ii) TREATMENT OF BONDS ACQUIRED FOR LESS THAN
ISSUE PRICE.—Clause (i) shall not apply to any bond if— "(I) the basis of the taxpayer in such bond is determined under section 1012, and "(II) such basis is less them the issue price of such bond determined under subpart A of this part. "(iii) BONDS ACQUIRED IN CERTAIN REORGANIZATIONS.—Clause (i) shall not apply to any bond issued pursuant to a plan of reorganization (within the meaning of section 368(a)(l)) in exchange for another bond having market discount. Solely for purposes of section 1276, the preceding sentence shall not apply if such other bond was issued on or before July 18, 1984 (the date of the enactment of section 1276) and if the bond issued pursuant to such plan of reorganization has the same term and the same interest rate as such other bond had. "(iv) TREATMENT OF CERTAIN TRANSFERRED BASIS PROP-
ERTY.—For purposes of clause (i), if the adjusted basis of any bond in the hands of the taxpayer is determined by reference to the adjusted basis of such bond in the hands of a person who acquired such bond at its original issue, such bond shall be treated as acquired by the taxpayer at its original issue." (7) TREATMENT OF CERTAIN STRIPPED BONDS OR STRIPPED COU-
PONS.—Paragraph (1) of section 12810b) (relating to short-term
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