PUBLIC LAW 103-66 —AUG. 10, 1993 107 STAT. 465 (i) substantially all of the limited partner's (or limited entrepreneurs) expected return from the entity is attributable to the time value of the partnei^s (or entrepreneur's) net investment in such entity, (ii) the transaction (or the interest in the entity) was marketed or sold as producing capital gains treatment from a transaction described in subsection (c)(D, or "(iii) the transaction (or the interest in the entity) is a transaction (or interest) specified in regulations prescribed by the Secretary." (2) CLERICAL AMENDMENT.— The table of sections for part IV of subchapter P of chapter 1 is amended by adding at the end thereof the following new item: "Sec. 1258. Recharacterization of gain from certain financial transactions." (3) EFFECTIVE DATE. — The amendments made by this sec- 26 USC 1258 tion shall apply to conversion transactions entered into after ^°^- April 30, 1993. (b) REPEAL OF CERTAIN EXCEPTIONS TO MARKET DISCOUNT RULES.— (1) MARKET DISCOUNT BONDS ISSUED ON OR BEFORE JULY 18, 1984. — The following provisions sire hereby repealed: (A) Section 1276(e). 26 USC 1276. (B) Section 1277(d). (2) TAX-EXEMPT OBLIGATIONS. — (A) IN GENERAL.—Paragraph (1) of section 1278(a) (defining market discount bond) is amended— (i) by striking clause (ii) of subparagraph (B) and redesignating clauses (iii) and (iv) of such subparagraph as clauses (ii) and (iii), respectively, (ii) by redesignating subparagraph (C) as subparagraph (D), and (iii) by inserting after subparagraph (B) the following new subparagraph: "(C) SECTION 1277 NOT APPLICABLE TO TAX-EXEMPT OBLIGATIONS.— For purposes of section 1277, the term 'market discount bond' shall not include any tax-exempt obligation (as defined in section 1275(a)(3)). (B) CONFORMING AMENDMENTS.— (i) Sections 1276(a)(4) and 1278(b)(l) are each amended by striking "sections 871(a) and inserting "se ctions 103, 871(a),. (ii) Subparagraph (B) of section 1278(a)(4) is amended by inserting before the period at the end thereof the following: "or, in the case of a tax-exempt obligation, the aggregate amount of the original issue discount which accrued in the manner provided by section 1272(a) (determined without regard to paragraph (7) thereof) during periods before the acquisition of the bond by the taxpayer". (3) EFFECTIVE DATE.— The amendments made by this sec- 26 USC 1276 tion shall apply to obligations purchased (within the meaning "°*® of section 1272(d)(l) of the Internal Revenue Code of 1986) after April 30, 1993. (c) TREATMENT OF STRIPPED PREFERRED STOCK.—
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