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26 U.S.C. § 1278 — Definitions and special rules
Federal law — U.S. Code and appendices · legal_authorities
**(a) In general** For purposes of this part—
(1) **Market discount bond**
(A) *In general* — Except as provided in subparagraph (B), the term “market discount bond” means any bond having market discount.
(B) *Exceptions* — The term “market discount bond” shall not include—
(i) *Short-term obligations* — Any obligation with a fixed maturity date not exceeding 1 year from the date of issue.
(ii) *United States savings bonds* — Any United States savings bond.
(iii) *Installment obligations* — Any installment obligation to which section 453B applies.
(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)).
(D) *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 than 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)(1)) 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
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Source location: Title 26, Chapter 1, § 1278; chapter-001-normal-taxes-and-surtaxes.md
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**(a) In general** For purposes of this part—
(1) **Market discount bond**
(A) *In general* — Except as provided in subparagraph (B), the term “market discount bond” means any bond having market discount.
(B) *Exceptions* — The term “market discount bond” shall not include—
(i) *Short-term obligations* — Any obligation with a fixed maturity date not exceeding 1 year from the date of issue.
(ii) *United States savings bonds* — Any United States savings bond.
(iii) *Installment obligations* — Any installment obligation to which section 453B applies.
(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)).
(D) *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 than 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)(1)) 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 property* — 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.
(2) **Market discount**
(A) *In general* — The term “market discount” means the excess (if any) of—
(i) the stated redemption price of the bond at maturity, over
(ii) the basis of such bond immediately after its acquisition by the taxpayer.
(B) *Coordination where bond has original issue discount* — In the case of any bond having original issue discount, for purposes of subparagraph (A), the stated redemption price of such bond at maturity shall be treated as equal to its revised issue price.
(C) *De minimis rule* — If the market discount is less than ¼ of 1 percent of the stated redemption price of the bond at maturity multiplied by the number of complete years to maturity (after the taxpayer acquired the bond), then the market discount shall be considered to be zero.
(3) **Bond** — The term “bond” means any bond, debenture, note, certificate, or other evidence of indebtedness.
(4) **Revised issue price** — The term “revised issue price” means the sum of—
(A) the issue price of the bond, and
(B) the aggregate amount of the original issue discount includible in the gross income of all holders for periods before the acquisition of the bond by the taxpayer (determined without regard to section 1272(a)(7)) 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.
(5) **Original issue discount, etc.** — The terms “original issue discount”, “stated redemption price at maturity”, and “issue price” have the respective meanings given such terms by subpart A of this part.
**(b) Election to include market discount currently**
(1) **In general** — If the taxpayer makes an election under this subsection—
(A) sections 1276 and 1277 shall not apply, and
(B) market discount on any market discount bond shall be included in the gross income of the taxpayer for the taxable years to which it is attributable (as determined under the rules of subsection (b) of section 1276).
Except for purposes of sections 103, 871(a), 881, 1441, 1442, and 6049 (and such other provisions as may be specified in regulations), any amount included in gross income under subparagraph (B) shall be treated as interest for purposes of this title.
(2) **Scope of election** — An election under this subsection shall apply to all market discount bonds acquired by the taxpayer on or after the 1st day of the 1st taxable year to which such election applies.
(3) **Period to which election applies** — An election under this subsection shall apply to the taxable year for which it is made and for all subsequent taxable years, unless the taxpayer secures the consent of the Secretary to the revocation of such election.
(4) **Basis adjustment** — The basis of any bond in the hands of the taxpayer shall be increased by the amount included in gross income pursuant to this subsection.
**(c) Regulations** The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subpart, including regulations providing proper adjustments in the case of a bond the principal of which may be paid in 2 or more payments.
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** There shall be allowed as a deduction all interest paid or accrued within the taxable year on indebtedness.
**(b) Installment purchases where interest charge is not separately stated**
(1) **General rule** — If personal property or educational services are purchased under a contract—
(A) which provides that payment of part or all of the purchase price is to be made in installments, and
(B) in which carrying charges are separately stated but the interest charge cannot be ascertained,
then the payments made during the taxable year under the contract shall be treated for purposes of this section as if they included interest equal to 6 percent of the average unpaid balance under the contract during the taxable year. For purposes of the preceding sentence, the average unpaid balance is the sum of the unpaid balance outstanding on the first day of each month beginning during the taxable year, divided by 12. For purposes of this paragraph, the term “educational services” means any service (including lodging) which is purchased from an educational organization described in section 170(b)(1)(A)(ii) and which is provided for a student of such organization.
(2) **Limitation** — In the case of any contract to which paragraph (1) applies, the amount treated as interest for any taxable year shall not exceed the aggregate carrying charges which are properly attributable to such taxable year.
**(c) Redeemable ground rents** For purposes of this subtitle, any annual or periodic rental under a redeemable ground rent (excluding amounts in redemption thereof) shall be treated as interest on an indebtedness secured by a mortgage.
**(d) Limitation on investment interest**
(1) **In general** — In the case of a taxpayer other than a corporation, the amount al
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** For purposes of this title—
(1) **Retirement** — Amounts received by the holder on retirement of any debt instrument shall be considered as amounts received in exchange therefor.
(2) **Ordinary income on sale or exchange where intention to call before maturity**
(A) *In general* — If at the time of original issue there was an intention to call a debt instrument before maturity, any gain realized on the sale or exchange thereof which does not exceed an amount equal to—
(i) the original issue discount, reduced by
(ii) the portion of original issue discount previously includible in the gross income of any holder (without regard to section 1272(a)(7) (or the corresponding provisions of prior law)),
shall be treated as ordinary income.
(B) *Exceptions* — This paragraph shall not apply to—
(i) any tax-exempt obligation, or
(ii) any holder who has purchased the debt instrument at a premium.
(3) **Certain short-term Government obligations**
(A) *In general* — On the sale or exchange of any short-term Government obligation, any gain realized which does not exceed an amount equal to the ratable share of the acquisition discount shall be treated as ordinary income.
(B) *Short-term Government obligation* — For purposes of this paragraph, the term “short-term Government obligation” 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.
(C) *Acquisition discount* — For purposes of this paragraph, the term “acquisition discount” means the excess of the stated redemption price at maturity over the t
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Married individuals filing joint returns and surviving spouses** There is hereby imposed on the taxable income of—
(1) every married individual (as defined in section 7703) who makes a single return jointly with his spouse under section 6013, and
(2) every surviving spouse (as defined in section 2(a)),
a tax determined in accordance with the following table: If taxable income is:The tax is: Not over $36,90015% of taxable income. Over $36,900 but not over $89,150$5,535, plus 28% of the excess over $36,900. Over $89,150 but not over $140,000$20,165, plus 31% of the excess over $89,150. Over $140,000 but not over $250,000$35,928.50, plus 36% of the excess over $140,000. Over $250,000$75,528.50, plus 39.6% of the excess over $250,000.
**(b) Heads of households** There is hereby imposed on the taxable income of every head of a household (as defined in section 2(b)) a tax determined in accordance with the following table: If taxable income is:The tax is: Not over $29,60015% of taxable income. Over $29,600 but not over $76,400$4,440, plus 28% of the excess over $29,600. Over $76,400 but not over $127,500$17,544, plus 31% of the excess over $76,400. Over $127,500 but not over $250,000$33,385, plus 36% of the excess over $127,500. Over $250,000$77,485, plus 39.6% of the excess over $250,000.
**(c) Unmarried individuals (other than surviving spouses and heads of households)** There is hereby imposed on the taxable income of every individual (other than a surviving spouse as defined in section 2(a) or the head of a household as defined in section 2(b)) who is not a married individual (as defined in section 7703) a tax determined in accordance with the following table: If taxable income is:The tax is: Not over $22,10015% of taxable income. Over $22,100 but not over $53,50
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Energy credit**
(1) **In general** — For purposes of section 46, except as provided in paragraphs (1)(B), (2)(B), and (3)(B) of subsection (c), the energy credit for any taxable year is the energy percentage of the basis of each energy property placed in service during such taxable year.
(2) **Energy percentage**
(A) *In general* — Except as provided in paragraphs (6) and (7), the energy percentage is—
(i) 6 percent in the case of—
(I) qualified fuel cell property,
(II) energy property described in clause (i) or (iii) of paragraph (3)(A) but only with respect to property the construction of which begins before January 1, 2025,
(III) energy property described in paragraph (3)(A)(ii),
(IV) qualified small wind energy property,
(V) waste energy recovery property,
(VI) energy storage technology,
(VII) qualified biogas property,
(VIII) microgrid controllers, and
(IX) energy property described in clauses (v) and (vii) of paragraph (3)(A), and
(ii) in the case of any energy property to which clause (i) does not apply, 0 percent.
(B) *Coordination with rehabilitation credit* — The energy percentage shall not apply to that portion of the basis of any property which is attributable to qualified rehabilitation expenditures.
(C) *Nonapplication of increases to energy percentage* — For purposes of energy property described in subparagraph (A)(ii), the energy percentage applicable to such property pursuant to such subparagraph shall not be increased or otherwise adjusted by any provision of this section.
(3) **Energy property** — For purposes of this subpart, the term “energy property” means any property—
(A) which is—
(i) equipment which uses solar energy to generate electricity, to he
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Ordinary income**
(1) **In general** — Except as otherwise provided in this section, gain on the disposition of any market discount bond shall be treated as ordinary income to the extent it does not exceed the accrued market discount on such bond. Such gain shall be recognized notwithstanding any other provision of this subtitle.
(2) **Dispositions other than sales, etc.** — For purposes of paragraph (1), a person disposing of any market discount bond in any transaction other than a sale, exchange, or involuntary conversion shall be treated as realizing an amount equal to the fair market value of the bond.
(3) **Treatment of partial principal payments**
(A) *In general* — Any partial principal payment on a market discount bond shall be included in gross income as ordinary income to the extent such payment does not exceed the accrued market discount on such bond.
(B) *Adjustment* — If subparagraph (A) applies to any partial principal payment on any market discount bond, for purposes of applying this section to any disposition of (or subsequent partial principal payment on) such bond, the amount of accrued market discount shall be reduced by the amount of such partial principal payment included in gross income under subparagraph (A).
(4) **Gain treated as interest for certain purposes** — Except for purposes of sections 103, 871(a), 881, 1441, 1442, and 6049 (and such other provisions as may be specified in regulations), any amount treated as ordinary income under paragraph (1) or (3) shall be treated as interest for purposes of this title.
**(b) Accrued market discount** For purposes of this section—
(1) **Ratable accrual** — Except as otherwise provided in this subsection or subsection (c), the accrued market discount on any bond shall be an amount whi
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 1276
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule**
(1) **Wholly worthless debts** — There shall be allowed as a deduction any debt which becomes worthless within the taxable year.
(2) **Partially worthless debts** — When satisfied that a debt is recoverable only in part, the Secretary may allow such debt, in an amount not in excess of the part charged off within the taxable year, as a deduction.
**(b) Amount of deduction** For purposes of subsection (a), the basis for determining the amount of the deduction for any bad debt shall be the adjusted basis provided in section 1011 for determining the loss from the sale or other disposition of property.
**(c) Repealed. Pub. L. 99–514, title VIII, § 805(a), Oct. 22, 1986, 100 Stat. 2361]**
**(d) Nonbusiness debts**
(1) **General rule** — In the case of a taxpayer other than a corporation—
(A) subsection (a) shall not apply to any nonbusiness debt; and
(B) where any nonbusiness debt becomes worthless within the taxable year, the loss resulting therefrom shall be considered a loss from the sale or exchange, during the taxable year, of a capital asset held for not more than 1 year.
(2) **Nonbusiness debt defined** — For purposes of paragraph (1), the term “nonbusiness debt” means a debt other than—
(A) a debt created or acquired (as the case may be) in connection with a trade or business of the taxpayer; or
(B) a debt the loss from the worthlessness of which is incurred in the taxpayer’s trade or business.
**(e) Worthless securities** This section shall not apply to a debt which is evidenced by a security as defined in section 165(g)(2)(C).
**(f) Cross references**
(1) For disallowance of deduction for worthlessness of debts owed by political parties and similar organizations, see section 271.
(2) For special rule for banks with respect
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Requirements for qualification** A trust created or organized in the United States and forming part of a stock bonus, pension, or profit-sharing plan of an employer for the exclusive benefit of his employees or their beneficiaries shall constitute a qualified trust under this section—
(1) if contributions are made to the trust by such employer, or employees, or both, or by another employer who is entitled to deduct his contributions under section 404(a)(3)(B) (relating to deduction for contributions to profit-sharing and stock bonus plans), or by a charitable remainder trust pursuant to a qualified gratuitous transfer (as defined in section 664(g)(1)), for the purpose of distributing to such employees or their beneficiaries the corpus and income of the fund accumulated by the trust in accordance with such plan;
(2) if under the trust instrument it is impossible, at any time prior to the satisfaction of all liabilities with respect to employees and their beneficiaries under the trust, for any part of the corpus or income to be (within the taxable year or thereafter) used for, or diverted to, purposes other than for the exclusive benefit of his employees or their beneficiaries (but this paragraph shall not be construed, in the case of a multiemployer plan, to prohibit the return of a contribution within 6 months after the plan administrator determines that the contribution was made by a mistake of fact or law (other than a mistake relating to whether the plan is described in section 401(a) or the trust which is part of such plan is exempt from taxation under section 501(a), or the return of any withdrawal liability payment determined to be an overpayment within 6 months of such determination));
(3) if the plan of which such trust is a part satisfies the requireme
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Federal law — U.S. Code and appendices · legal_authorities
Page 2399
TITLE 26—INTERNAL REVENUE CODE
§ 1278
PLAN AMENDMENTS NOT REQUIRED UNTIL
JANUARY 1, 1989
For provisions directing that if any amendments
made by subtitle A or subtitle C of title XI [§§ 1101–1147
and 1171–1177] or title XVIII [§§ 1800–1899A] of Pub. L.
99–514 require an amendment to any plan, such plan
amendment shall not be required to be made before the
first plan year beginning on or after Jan. 1, 1989, see
section 1140 of Pub. L. 99–514, as amended, set out as a
note under section 401 of this title.
§ 1278. Definitions and special rules
(a) In general
For purposes of this part—
(1) Market discount bond
(A) In general
Except as provided in subparagraph (B),
the term ‘‘market discount bond’’ means any
bond having market discount.
(B) Exceptions
The term ‘‘market discount bond’’ shall
not include—
(i) Short-term obligations
Any obligation with a fixed maturity
date not exceeding 1 year from the date of
issue.
(ii) United States savings bonds
Any United States savings bond.
(iii) Installment obligations
Any installment obligation to which sec-
tion 453B applies.
(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 sec-
tion 1275(a)(3)).
(D) Treatment of bonds acquired at original
issue
(i) In general
Except as otherwise provided in this sub-
paragraph 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 than the is
Source: Supplied 2024 U.S. Code historical extraction · 26 U.S.C. § 1278
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