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26 U.S.C. § 1287 — Denial of capital gain treatment for gains on certain obligations not in registered form
Federal law — U.S. Code and appendices · legal_authorities
**(a) In general** If any registration-required obligation is not in registered form, any gain on the sale or other disposition of such obligation shall be treated as ordinary income (unless the issuance of such obligation was subject to tax under section 4701).
**(b) Definitions** For purposes of subsection (a)—
(1) **Registration-required obligation** — The term “registration-required obligation” has the meaning given to such term by section 163(f)(2).
(2) **Registered form** — The term “registered form” has the same meaning as when used in section 163(f).
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Source file: Laws/federal/codes/united-states-code/title-26/section-1287-denial-of-capital-gain-treatment-for-gains-on-certain-obligations-not-in--bc027da024.md
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Source location: Title 26, Chapter 1, § 1287; chapter-001-normal-taxes-and-surtaxes.md
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**(a) In general** If any registration-required obligation is not in registered form, any gain on the sale or other disposition of such obligation shall be treated as ordinary income (unless the issuance of such obligation was subject to tax under section 4701).
**(b) Definitions** For purposes of subsection (a)—
(1) **Registration-required obligation** — The term “registration-required obligation” has the meaning given to such term by section 163(f)(2).
(2) **Registered form** — The term “registered form” has the same meaning as when used in section 163(f).
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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) Bonds must be registered to be tax exempt**
(1) **General rule** — Nothing in section 103(a) or in any other provision of law shall be construed to provide an exemption from Federal income tax for interest on any registration-required bond unless such bond is in registered form.
(2) **Registration-required bond** — For purposes of paragraph (1), the term “registration-required bond” means any bond other than a bond which—
(A) is not of a type offered to the public, or
(B) has a maturity (at issue) of not more than 1 year.
(3) **Special rules**
(A) *Book entries permitted* — For purposes of paragraph (1), a book entry bond shall be treated as in registered form if the right to the principal of, and stated interest on, such bond may be transferred only through a book entry consistent with regulations prescribed by the Secretary.
(B) *Nominees* — The Secretary shall prescribe such regulations as may be necessary to carry out the purpose of paragraph (1) where there is a nominee or chain of nominees.
**(b) Federally guaranteed bond is not tax exempt**
(1) **In general** — Section 103(a) shall not apply to any State or local bond if such bond is federally guaranteed.
(2) **Federally guaranteed defined** — For purposes of paragraph (1), a bond is federally guaranteed if—
(A) the payment of principal or interest with respect to such bond is guaranteed (in whole or in part) by the United States (or any agency or instrumentality thereof),
(B) such bond is issued as part of an issue and 5 percent or more of the proceeds of such issue is to be—
(i) used in making loans the payment of principal or interest with respect to which are to be guaranteed (in whole or in part) by the United States (or any agency or instrumentality thereof), or
(ii)
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Federal law — U.S. Code and appendices · legal_authorities
Page 2405
TITLE 26—INTERNAL REVENUE CODE
§ 1287
Subsec. (g). Pub. L. 115–141, § 401(c)(2)(A), redesignated
subsec. (g) as (f).
2004—Subsecs. (f), (g). Pub. L. 108–357 added subsec. (f)
and redesignated former subsec. (f) as (g).
1988—Subsec. (d). Pub. L. 100–647 amended subsec. (d)
generally. Prior to amendment, subsec. (d) read as fol-
lows: ‘‘In the case of any tax-exempt obligation (as de-
fined in section 1275(a)(3)) from which 1 or more cou-
pons have been stripped—
‘‘(1) the amount of original issue discount deter-
mined under subsection (a) with respect to any
stripped bond or stripped coupon from such obliga-
tion shall be the amount which produces a yield to
maturity (as of the purchase date) equal to the lower
of—
‘‘(A) the coupon rate of interest on such obliga-
tion before the separation of coupons, or
‘‘(B) the yield to maturity (on the basis of pur-
chase price) of the stripped obligation or coupon,
‘‘(2) the amount of original issue discount deter-
mined under paragraph (1) shall be taken into ac-
count in determining the adjusted basis of the holder
under section 1288,
‘‘(3) subsection (b)(1) shall not apply, and
‘‘(4) subsection (b)(2) shall be applied by increasing
the basis of the bond or coupon by the interest ac-
crued but not paid before the time such bond or cou-
pon was disposed of (and not previously reflected in
basis).’’
1986—Subsec. (b)(1). Pub. L. 99–514, § 1803(a)(13)(B)(i),
amended par. (1) generally, designating existing provi-
sions as subpar. (A) and adding subpar. (B).
Subsec. (b)(2). Pub. L. 99–514, § 1803(a)(13)(B)(ii), sub-
stituted ‘‘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 s
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