26 U.S.C. § 483 — Interest on certain deferred payments

Page 1657 TITLE 26—INTERNAL REVENUE CODE § 483 made within six months after Sept. 2, 1958. Claims for refunds of overpayments of tax resulting from the elec- tion were to be filed within one year after the date of the election. Such an election was to be considered a consent to an assessment of a deficiency resulting from the election, where the assessment is made within one year after the date of the election. § 482. Allocation of income and deductions among taxpayers In any case of two or more organizations, trades, or businesses (whether or not incor- porated, whether or not organized in the United States, and whether or not affiliated) owned or controlled directly or indirectly by the same in- terests, the Secretary may distribute, appor- tion, or allocate gross income, deductions, cred- its, or allowances between or among such orga- nizations, trades, or businesses, if he determines that such distribution, apportionment, or allo- cation is necessary in order to prevent evasion of taxes or clearly to reflect the income of any of such organizations, trades, or businesses. In the case of any transfer (or license) of intangible property (within the meaning of section 367(d)(4)), the income with respect to such trans- fer or license shall be commensurate with the income attributable to the intangible. For pur- poses of this section, the Secretary shall require the valuation of transfers of intangible property (including intangible property transferred with other property or services) on an aggregate basis or the valuation of such a transfer on the basis of the realistic alternatives to such a transfer, if the Secretary determines that such basis is the most reliable means of valuation of such trans- fers. (Aug. 16, 1954, ch. 736, 68A Stat. 162; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 99–514, title XII, § 1231(e)(1), Oct. 22, 1986, 100 Stat. 2562; Pub. L. 115–97, title I, § 14221(b)(2), Dec. 22, 2017, 131 Stat. 2219; Pub. L. 115–141, div. U, title IV, § 401(d)(1)(D)(viii)(III), Mar. 23, 2018, 132 Stat. 1207.) Editorial Notes AMENDMENTS 2018—Pub. L. 115–141 substituted ‘‘section 367(d)(4)’’ for ‘‘section 936(h)(3)(B)’’. 2017—Pub. L. 115–97 inserted at end ‘‘For purposes of this section, the Secretary shall require the valuation of transfers of intangible property (including intangible property transferred with other property or services) on an aggregate basis or the valuation of such a trans- fer on the basis of the realistic alternatives to such a transfer, if the Secretary determines that such basis is the most reliable means of valuation of such trans- fers.’’ 1986—Pub. L. 99–514 inserted at end ‘‘In the case of any transfer (or license) of intangible property (within the meaning of section 936(h)(3)(B)), the income with respect to such transfer or license shall be commensu- rate with the income attributable to the intangible.’’ 1976—Pub. L. 94–455 struck out ‘‘or his delegate’’ after ‘‘Secretary’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2017 AMENDMENT Amendment by Pub. L. 115–97 applicable to transfers in taxable years beginning after Dec. 31, 2017, see sec- tion 14221(c)(1) of Pub. L. 115–97, set out as a note under section 367 of this title. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, but only with re- spect to transfers after Nov. 16, 1985, or licenses granted after such date, or before such date with respect to property not in existence or owned by the taxpayer on such date, except that for purposes of [former] section 936(h)(5)(C) of this title, such amendment applicable to taxable years beginning after Dec. 31, 1986, without re- gard to when the transfer or license was made, see sec- tion 1231(g)(2) of Pub. L. 99–514, set out as a note under section 367 of this title. REGULATIONS For requirement that, not later than 180 days after July 18, 1984, the Secretary of the Treasury modify the safe harbor interest rates applicable under the regula- tions prescribed under this section so that such rates are consistent with the rates applicable under section 483 of this title by reason of the amendments made by Pub. L. 98–369, see section 44(b)(2) of Pub. L. 98–369, set out as an Effective Date note under section 1271 of this title. SAVINGS PROVISION For provisions that nothing in amendment by Pub. L. 115–141 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Mar. 23, 2018, for purposes of determining li- ability for tax for periods ending after Mar. 23, 2018, see section 401(e) of Pub. L. 115–141, set out as a note under section 23 of this title. STUDY OF APPLICATION AND ADMINISTRATION OF THIS SECTION Pub. L. 101–508, title XI, § 11316, Nov. 5, 1990, 104 Stat. 1388–458, directed Secretary of the Treasury or his dele- gate to conduct a study of the application and adminis- tration of section 482 of the Internal Revenue Code of 1986 and not later than Mar. 1, 1992, submit to Com- mittee on Ways and Means of House of Representatives and Committee on Finance of Senate a report on the study, together with such recommendations as he deemed advisable. § 483. Interest on certain deferred payments (a) Amount constituting interest For purposes of this title, in the case of any payment— (1) under any contract for the sale or ex- change of any property, and (2) to which this section applies, there shall be treated as interest that portion of the total unstated interest under such contract which, as determined in a manner consistent with the method of computing interest under section 1272(a), is properly allocable to such pay- ment. (b) Total unstated interest For purposes of this section, the term ‘‘total unstated interest’’ means, with respect to a con- tract for the sale or exchange of property, an amount equal to the excess of— (1) the sum of the payments to which this section applies which are due under the con- tract, over (2) the sum of the present values of such pay- ments and the present values of any interest payments due under the contract. For purposes of the preceding sentence, the present value of a payment shall be determined under the rules of section 1274(b)(2) using a dis- Page 1658 TITLE 26—INTERNAL REVENUE CODE § 483 count rate equal to the applicable Federal rate determined under section 1274(d). (c) Payments to which subsection (a) applies (1) In general Except as provided in subsection (d), this section shall apply to any payment on account of the sale or exchange of property which con- stitutes part or all of the sales price and which is due more than 6 months after the date of such sale or exchange under a contract— (A) under which some or all of the pay- ments are due more than 1 year after the date of such sale or exchange, and (B) under which there is total unstated in- terest. (2) Treatment of other debt instruments For purposes of this section, a debt instru- ment of the purchaser which is given in con- sideration for the sale or exchange of property shall not be treated as a payment, and any payment due under such debt instrument shall be treated as due under the contract for the sale or exchange. (3) Debt instrument defined For purposes of this subsection, the term ‘‘debt instrument’’ has the meaning given such term by section 1275(a)(1). (d) Exceptions and limitations (1) Coordination with original issue discount rules This section shall not apply to any debt in- strument for which an issue price is deter- mined under section 1273(b) (other than para- graph (4) thereof) or section 1274. (2) Sales prices of $3,000 or less This section shall not apply to any payment on account of the sale or exchange of property if it can be determined at the time of such sale or exchange that the sales price cannot exceed $3,000. (3) Carrying charges In the case of the purchaser, the tax treat- ment of amounts paid on account of the sale or exchange of property shall be made without regard to this section if any such amounts are treated under section 163(b) as if they included interest. (4) Certain sales of patents In the case of any transfer described in sec- tion 1235(a) (relating to sale or exchange of patents), this section shall not apply to any amount contingent on the productivity, use, or disposition of the property transferred. (e) Maximum rate of interest on certain transfers of land between related parties (1) In general In the case of any qualified sale, the dis- count rate used in determining the total unstated interest rate under subsection (b) shall not exceed 6 percent, compounded semi- annually. (2) Qualified sale For purposes of this subsection, the term ‘‘qualified sale’’ means any sale or exchange of land by an individual to a member of such in- dividual’s family (within the meaning of sec- tion 267(c)(4)). (3) $500,000 limitation Paragraph (1) shall not apply to any quali- fied sale between individuals made during any calendar year to the extent that the sales price for such sale (when added to the aggre- gate sales price for prior qualified sales be- tween such individuals during the calendar year) exceeds $500,000. (4) Nonresident alien individuals Paragraph (1) shall not apply to any sale or exchange if any party to such sale or exchange is a nonresident alien individual. (f) Regulations The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section including regula- tions providing for the application of this sec- tion in the case of— (1) any contract for the sale or exchange of property under which the liability for, or the amount or due date of, a payment cannot be determined at the time of the sale or ex- change, or (2) any change in the liability for, or the amount or due date of, any payment (includ- ing interest) under a contract for the sale or exchange of property. (g) Cross references (1) For treatment of assumptions, see section l274(c)(4). (2) For special rules for certain transactions where stated principal amount does not exceed $2,800,000, see section 1274A. (3) For special rules in case of the borrower under certain loans for personal use, see section 1275(b). (Added Pub. L. 88–272, title II, § 224(a), Feb. 26, 1964, 78 Stat. 77; amended Pub. L. 94–455, title XIX, §§ 1901(b)(3)(B), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1792, 1834; Pub. L. 97–34, title I, § 126(a), Aug. 13, 1981, 95 Stat. 202; Pub. L. 97–448, title I, § 101(g), Jan. 12, 1983, 96 Stat. 2367; Pub. L. 98–369, div. A, title I, § 41(b), July 18, 1984, 98 Stat. 553; Pub. L. 99–121, title I, §§ 101(a)(2), 102(c)(1)–(3), Oct. 11, 1985, 99 Stat. 505, 508; Pub. L. 99–514, title XVIII, § 1803(a)(14)(B), Oct. 22, 1986, 100 Stat. 2797.) Editorial Notes AMENDMENTS 1986—Subsec. (d)(3). Pub. L. 99–514 substituted ‘‘for which an issue price is determined under section 1273(b) (other than paragraph (4) thereof) or section 1274’’ for ‘‘to which section 1272 applies’’. 1985—Subsec. (b). Pub. L. 99–121, § 101(a)(2)(A), struck out ‘‘120 percent of’’ after ‘‘discount rate equal to’’ in closing provisions. Subsec. (c)(1)(B). Pub. L. 99–121, § 101(a)(2)(B), amend- ed subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: ‘‘under which, using a discount rate equal to 110 percent of the applicable Federal rate de- termined under section 1274(d), there is total unstated interest.’’ Subsec. (e). Pub. L. 99–121, § 102(c)(1), (2), redesignated subsec. (f) as (e), and as so redesignated substituted ‘‘6 percent’’ for ‘‘7 percent’’ in par. (1). Former subsec. (e), which related to the interest rates in the case of the Page 1659 TITLE 26—INTERNAL REVENUE CODE § 483 sales of principal residences or farm lands, was struck out. Subsec. (f). Pub. L. 99–121, § 102(c)(1), redesignated subsec. (g) as (f). Former subsec. (f) redesignated (e). Subsecs. (g), (h). Pub. L. 99–121, § 102(c)(1), (3), redesig- nated subsec. (h) as (g) and amended it generally, desig- nating existing undesignated cross reference as par. (3), and adding pars. (1) and (2). Former subsec. (g) redesig- nated (f). 1984—Subsec. (a). Pub. L. 98–369 amended subsec. (a) generally, substituting ‘‘For purposes of this title, in the case of any payment (1) under any contract for the sale or exchange of any property, and (2) to which this section applies, there shall be treated as interest that portion of the total unstated interest under such con- tract which, as determined in a manner consistent with the method of computing interest under section 1272(a), is properly allocable to such payment’’ for ‘‘For pur- poses of this title, in the case of any contract for the sale or exchange of property there shall be treated as interest that part of a payment to which this section applies which bears the same ratio to the amount of such payment as the total unstated interest under such contract bears to the total of the payments to which this section applies which are due under such con- tract’’. Subsec. (b). Pub. L. 98–369 amended subsec. (b) gen- erally, substituting provisions directing that the present value of a payment be determined under the rules of section 1274(b)(2) using a discount rate equal to 120 percent of the applicable Federal rate determined under section 1274(d) for provisions which had directed that the present value of a payment be determined, as of the date of the sale or exchange, by discounting such payment at the rate, and in the manner, provided in regulations prescribed by the Secretary and that such regulations provide for discounting on the basis of 6- month brackets and provide that the present value of any interest payment due not more than 6 months after the date of the sale or exchange was to have been an amount equal to 100 percent of such payment. Subsec. (c). Pub. L. 98–369 substituted ‘‘subsection (a) applies’’ for ‘‘section applies’’ in heading. Subsec. (c)(1). Pub. L. 98–369 substituted ‘‘under which, using a discount rate equal to 110 percent of the applicable Federal rate determined under section 1274(d), there is total unstated interest’’ for ‘‘under which, using a rate provided by regulations prescribed by the Secretary for purposes of this subparagraph, there is total unstated interest’’, in subpar. (B), and struck out provision formerly set out following subpar. (B) which had directed that any rate prescribed for de- termining whether there was total unstated interest for purposes of subpar. (B) be at least one percentage point lower than the rate prescribed for purposes of subsec. (b)(2). Subsec. (c)(2). Pub. L. 98–369 substituted ‘‘Treatment of other debt instruments’’ for ‘‘Treatment of other evidence of indebtedness’’ in heading and, in text, sub- stituted ‘‘a debt instrument of the purchaser which is given in consideration for the sale or exchange of prop- erty shall not be treated as a payment, and any pay- ment due under such debt instrument’’ for ‘‘an evidence of indebtedness of the purchaser given in consideration for the sale or exchange of property shall not be consid- ered a payment, and any payment due under such evi- dence of indebtedness’’. Subsec. (c)(3). Pub. L. 98–369 added par. (3). Subsec. (d). Pub. L. 98–369 amended subsec. (d) gen- erally, substituting provisions relating to exceptions and limitations for provisions which related to pay- ments indefinite as to time, liability, or amount. Subsec. (e). Pub. L. 98–369 amended subsec. (e) gen- erally, substituting provisions relating to interest rates in case of sale of principal residence or farm land for provision relating to changes in terms of contract. Subsec. (f). Pub. L. 98–369 amended subsec. (f) gen- erally, substituting provisions relating to maximum rate of interest on certain transfers of land between re- lated parties for provisions which related to exceptions and limitations now covered in subsec. (d) of this sec- tion. Subsec. (g). Pub. L. 98–369 amended subsec. (g) gen- erally, substituting provisions which related to calling for the promulgation of regulations by the Secretary for provisions which related to the maximum rate of in- terest on certain transfers of land between related par- ties now covered in subsec. (f) of this section. Subsec. (h). Pub. L. 98–369 added subsec. (h). 1983—Subsec. (g)(4). Pub. L. 97–448 substituted ‘‘Para- graph (1)’’ for ‘‘This section’’. 1981—Subsec. (g). Pub. L. 97–34 added subsec. (g). 1976—Subsecs. (b), (c)(1)(B), (e). Pub. L. 94–455, § 1906(b)(13)(A), struck out ‘‘or his delegate’’ after ‘‘Sec- retary’’. Subsec. (f)(3). Pub. L. 94–455, § 1901(b)(3)(B), sub- stituted ‘‘all of the gain, if any, on such’’ for ‘‘no part of any gain on such’’ and ‘‘ordinary income’’ for gain from the sale or exchange of property other than a cap- ital asset’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99–514 effective, except as oth- erwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title. EFFECTIVE DATE OF 1985 AMENDMENT Amendment by Pub. L. 99–121 applicable to sales and exchanges after June 30, 1985, in taxable years ending after such date, see section 105(a)(1) of Pub. L. 99–121, set out as a note under section 1274 of this title. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98–369 applicable to taxable years ending after July 18, 1984, and applicable to sales or exchanges after Dec. 31, 1984, but not applicable to any sale or exchange pursuant to a written contract which was binding on Mar. 1, 1984, and at all times thereafter before the sale or exchange, see section 44 of Pub. L. 98–369, set out as an Effective Date note under section 1271 of this title. EFFECTIVE DATE OF 1983 AMENDMENT Amendment by Pub. L. 97–448 effective, except as oth- erwise provided, as if it had been included in the provi- sion of the Economic Recovery Tax Act of 1981, Pub. L. 97–34, to which such amendment relates, see section 109 of Pub. L. 97–448, set out as a note under section 1 of this title. EFFECTIVE DATE OF 1981 AMENDMENT Pub. L. 97–34, title I, § 126(b), Aug. 13, 1981, 95 Stat. 202, provided that: ‘‘The amendment made by subsection (a) [amending this section] shall apply to payments made after June 30, 1981, pursuant to sales or exchanges after such date.’’ EFFECTIVE DATE OF 1976 AMENDMENT Amendment by section 1901(b)(3)(B) of Pub. L. 94–455 effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94–455, set out as a note under section 2 of this title. EFFECTIVE DATE Section applicable to payments made after Dec. 31, 1963, on account of sales or exchanges of property after June 30, 1963, other than a sale or exchange pursuant to written contract, including an irrevocable written op- tion, entered into before July 1, 1963, see section 224(d) of Pub. L. 88–272, set out as an Effective Date of 1964 Amendment note under section 163 of this title. 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 Page 1660 TITLE 26—INTERNAL REVENUE CODE § 501 1 So in original. Probably should be ‘‘Certain savings entities.’’ 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. TREATMENT OF TRANSFERS OF LAND BETWEEN RELATED PARTIES Pub. L. 99–514, title XVIII, § 1803(a)(9), Oct. 22, 1986, 100 Stat. 2794, provided that: ‘‘In the case of any sale or ex- change before July 1, 1985, to which section 483(f) of the Internal Revenue Code of 1954 [now 1986] (as in effect on the day before the date of the enactment of Public Law 99–121 [Oct. 11, 1985]) applies, such section shall be treated as providing that the discount rate to be used for purposes of section 483(c)(1) of such Code shall be 6 percent, compounded semiannually.’’ TRANSITIONAL RULE FOR PURPOSES OF IMPUTED INTEREST RULES Provisions, respecting treatment of debt instruments received in exchange for property, relating to special rules for sales after Dec. 31, 1984, and before July 1, 1985, general rule for assumptions of loans, exception for as- sumptions of loans made on or before Oct. 15, 1984, and exception for assumptions of loans with respect to cer- tain property, see section 44(b)(4)–(7) of Pub. L. 98–369, as amended, set out as an Effective Date note under section 1271 of this title. Subchapter F—Exempt Organizations Part I. General rule. II. Private foundations. III. Taxation of business income of certain ex- empt organizations. IV. Farmers’ cooperatives. V. Shipowners’ protection and indemnity asso- ciations. VI. Political organizations. VII. Certain homeowners associations. VIII. Certain Savings Entities 1 Editorial Notes AMENDMENTS 2018—Pub. L. 115–141, div. U, title IV, § 401(a)(121), Mar. 23, 2018, 132 Stat. 1190, substituted ‘‘Certain Sav- ings Entities’’ for ‘‘Certain Savings Entities.’’ in part VIII heading. 2014—Pub. L. 113–295, div. B, title I, § 102(e)(5), Dec. 19, 2014, 128 Stat. 4062, substituted ‘‘Certain Savings Enti- ties’’ for ‘‘Higher education savings entities’’ in part VIII heading. 1997—Pub. L. 105–34, title II, § 211(e)(1)(B), Aug. 5, 1997, 111 Stat. 812, substituted ‘‘Higher education savings en- tities’’ for ‘‘Qualified State tuition programs’’ in part VIII heading. 1996—Pub. L. 104–188, title I, § 1806(b)(2), Aug. 20, 1996, 110 Stat. 1898, added part VIII heading. 1976—Pub. L. 94–455, title XXI, § 2101(d), Oct. 4, 1976, 90 Stat. 1899, added part VII heading. 1975—Pub. L. 93–625, § 10(d), Jan. 3, 1975, 88 Stat. 2119, added part VI heading. 1969—Pub. L. 91–172, title I, § 101(j)(58), Dec. 30, 1969, 83 Stat. 532, added part II heading, and redesignated former parts II, III and IV as parts III, IV and V, respec- tively. PART I—GENERAL RULE Sec. 501. Exemption from tax on corporations, certain trusts, etc. 502. Feeder organizations. Sec. 503. Requirements for exemption. 504. Status after organization ceases to qualify for exemption under section 501(c)(3) because of substantial lobbying or because of political activities. 505. Additional requirements for organizations de- scribed in paragraph (9) or (17) of section 501(c). 506. Organizations required to notify Secretary of intent to operate under 501(c)(4). Editorial Notes AMENDMENTS 2018—Pub. L. 115–141, div. U, title IV, § 401(b)(21)(I), Mar. 23, 2018, 132 Stat. 1203, substituted ‘‘Additional re- quirements for organizations described in paragraph (9) or (17) of section 501(c)’’ for ‘‘Additional requirements for organizations described in paragraph (9), (17), or (20) of section 501(c)’’ in item 505. 2015—Pub. L. 114–113, div. Q, title IV, § 405(d), Dec. 18, 2015, 129 Stat. 3119, added item 506. 1987—Pub. L. 100–203, title X, § 10711(b)(2)(B), Dec. 22, 1987, 101 Stat. 1330–464, substituted ‘‘substantial lob- bying or because of political activities’’ for ‘‘substan- tial lobbying’’ in item 504. 1984—Pub. L. 98–369, div. A, title V, § 513(b), July 18, 1984, 98 Stat. 865, added item 505. 1976—Pub. L. 94–455, title XIII, § 1307(d)(3)(B), Oct. 4, 1976, 90 Stat. 1728, added item 504. 1969—Pub. L. 91–172, title I, § 101(j)(61), Dec. 30, 1969, 83 Stat. 532, struck out item 504 ‘‘Denial of exemption’’. § 501. Exemption from tax on corporations, cer- tain trusts, etc. (a) Exemption from taxation An organization described in subsection (c) or (d) or section 401(a) shall be exempt from tax- ation under this subtitle unless such exemption is denied under section 502 or 503. (b) Tax on unrelated business income and cer- tain other activities An organization exempt from taxation under subsection (a) shall be subject to tax to the ex- tent provided in parts II, III, and VI of this sub- chapter, but (notwithstanding parts II, III, and VI of this subchapter) shall be considered an or- ganization exempt from income taxes for the purpose of any law which refers to organizations exempt from income taxes. (c) List of exempt organizations The following organizations are referred to in subsection (a): (1) Any corporation organized under Act of Congress which is an instrumentality of the United States but only if such corporation— (A) is exempt from Federal income taxes— (i) under such Act as amended and sup- plemented before July 18, 1984, or (ii) under this title without regard to any provision of law which is not con- tained in this title and which is not con- tained in a revenue Act, or (B) is described in subsection (l). (2) Corporations organized for the exclusive purpose of holding title to property, collecting income therefrom, and turning over the entire amount thereof, less expenses, to an organiza- tion which itself is exempt under this section. Rules similar to the rules of subparagraph (G)