Internal Revenue Code · 26 U.S.C.
§ 1272. Current inclusion in income of original issue discount
Official text, no changes From the Office of the Law Revision Counsel, release point 119-121 (current through Public Law 119-121 (October 9, 2026)). Compare it with the official text at uscode.house.gov (external site).
Cite as 26 U.S.C. § 1272
At a glance
Read from the text, the source credit and the official notes. Not part of the law.
- Status
- In force
- Added
- July 18, 1984 by Pub. L. 98–369
- Last amended
- March 23, 2018 by Pub. L. 115–141
- Amendments
- 3 dated changes in the source credit
- Length
- 3 subsections · 1,201 words · about 5 min to read
- Defines
- 2 terms
- Cross-references
- cites 1; cited by 15 Code sections and 32 other regulations
- Regulations
- 3 issued under this section
For purposes of this title, there shall be included in the gross income of the holder of any debt instrument having original issue discount, an amount equal to the sum of the daily portions of the original issue discount for each day during the taxable year on which such holder held such debt instrument.
Any debt instrument which has a fixed maturity date not more than 1 year from the date of issue.
Clause (i) shall not apply if the loan has as 1 of its principal purposes the avoidance of any Federal tax.
For purposes of this subparagraph, a husband and wife shall be treated as 1 person. The preceding sentence shall not apply where the spouses lived apart at all times during the taxable year in which the loan is made.
Except as otherwise provided in regulations prescribed by the Secretary, the term “accrual period” means a 6-month period (or shorter period from the date of original issue of the debt instrument) which ends on a day in the calendar year corresponding to the maturity date of the debt instrument or the date 6 months before such maturity date.
For purposes of this subsection, in the case of any purchase after its original issue of a debt instrument to which this subsection applies, the daily portion for any day shall be reduced by an amount equal to the amount which would be the daily portion for such day (without regard to this paragraph) multiplied by the fraction determined under subparagraph (B).
The basis of any debt instrument in the hands of the holder thereof shall be increased by the amount included in his gross income pursuant to this section.
(Added Pub. L. 98–369, div. A, title I, § 41(a), July 18, 1984, 98 Stat. 533; amended Pub. L. 99–514, title VI, § 672, Oct. 22, 1986, 100 Stat. 2318; Pub. L. 105–34, title X, § 1004(a), Aug. 5, 1997, 111 Stat. 911; Pub. L. 115–141, div. U, title IV, § 401(c)(1)(B), (F), (3)(A), Mar. 23, 2018, 132 Stat. 1205, 1206.)
Terms defined here
Where the text says “the term … means”. Select a term to jump to its definition.
Regulations under this section
Treasury regulations (26 CFR) issued under § 1272
Cross-references
Computed from the citations in the text of Title 26 and 26 CFR.
This section cites 1 other section
Cited by 15 Code sections
- § 163(e)(2)(B) Interest
- § 171(b)(3)(A)(ii) Amortizable bond premium
- § 305(c)(3) Distributions of stock and stock rights
- § 483(a)(2) Interest on certain deferred payments
- § 856(m)(2)(B)(i)(I) Definition of real estate investment trust
- § 860B(d) Taxation of holders of regular interests
- § 871(g)(2) Tax on nonresident alien individuals
- § 1271(a)(2)(A)(ii) Treatment of amounts received on retirement or sale or exchange of debt instruments
- § 1275(c)(3) Other definitions and special rules
- § 1276(b)(2)(A) Disposition gain representing accrued market discount treated as ordinary income
- § 1278(a)(4)(B) Definitions and special rules
- § 1286(d)(6) Tax treatment of stripped bonds
- § 1288(a)(1) Treatment of original issue discount on tax-exempt obligations
- § 6049(d)(6)(A)(i) Returns regarding payments of interest
- § 7872(d)(1)(E)(iii) Treatment of loans with below-market interest rates
Cited in 32 regulations not issued under it
- § 1.108-2 Acquisition of indebtedness by a person related to the debtor.
- § 1.108(i)-3 Rules for the deduction of OID.
- § 1.163-7 Deduction for OID on certain debt instruments.
- § 1.163-13 Treatment of bond issuance premium.
- § 1.171-1 Bond premium.
- § 1.221-1 Deduction for interest paid on qualified education loans after December 31, 2001.
- § 1.305-3 Disproportionate distributions.
- § 1.305-5 Distributions on preferred stock.
- § 1.446-2 Method of accounting for interest.
- § 1.451-3 Timing of income inclusion for taxpayers with an applicable financial statement using an accrual method of accounting.
- § 1.671-5 Reporting for widely held fixed investment trusts.
- § 1.860D-1 Definition of a REMIC.
- § 1.860E-1 Treatment of taxable income of a residual interest holder in excess of daily accruals.
- § 1.860E-2 Tax on transfers of residual interests to certain organizations.
- § 1.860G-1 Definition of regular and residual interests.
- § 1.860G-2 Other rules.
- § 1.860G-3 Treatment of foreign persons.
- § 1.965-7 Elections, payment, and other special rules.
- § 1.988-2 Recognition and computation of exchange gain or loss.
- § 1.988-5 Section 988(d) hedging transactions.
- § 1.1271-1 Special rules applicable to amounts received on retirement, sale, or exchange of debt instruments.
- § 1.1274-2 Issue price of debt instruments to which section 1274 applies.
- § 1.1274A-1 Special rules for certain transactions where stated principal amount does not exceed $2,800,000.
- § 1.1275-1 Definitions.
Show 8 more
- § 1.1275-2 Special rules relating to debt instruments.
- § 1.1275-3 OID information reporting requirements.
- § 1.1275-4 Contingent payment debt instruments.
- § 1.1275-6 Integration of qualifying debt instruments.
- § 1.1275-7 Inflation-indexed debt instruments.
- § 1.6045-1 Returns of information of brokers and barter exchanges.
- § 1.6049-7 Returns of information with respect to REMIC regular interests and collateralized debt obligations.
- § 1.6049-10 Reporting of original issue discount on a tax-exempt obligation.
Amendment history
From the source credit and the official notes, newest first.
Where it sits in the Code
- Subtitle A Income Taxes
- Chapter 1 NORMAL TAXES AND SURTAXES
- Subchapter P Capital Gains and Losses
- Part V SPECIAL RULES FOR BONDS AND OTHER DEBT INSTRUMENTS
- Subpart A Original Issue Discount
Nearby sections
- § 1271 Treatment of amounts received on retirement or sale or exchange of debt instruments
- § 1272 Current inclusion in income of original issue discount
- § 1273 Determination of amount of original issue discount
- § 1274 Determination of issue price in the case of certain debt instruments issued for property
- § 1274A Special rules for certain transactions where stated principal amount does not exceed $2,800,000
- § 1275 Other definitions and special rules
Official notes
Show the Law Revision Counsel's notes (amendments, effective dates)
Editorial Notes
Amendments
2018—Subsec. (a). Pub. L. 115–141, § 401(c)(1)(F)(i), struck out “on debt instruments issued after July 1, 1982,” after “discount” in heading.
Subsec. (a)(1). Pub. L. 115–141, § 401(c)(1)(F)(ii), struck out “issued after July 1, 1982” before “, an amount equal to”.
Subsec. (a)(2)(D), (E). Pub. L. 115–141, § 401(c)(3)(A), redesignated subpar. (E) as (D) and struck out former subpar. (D). Prior to amendment, text of subpar. (D) read as follows: “Any obligation issued by a natural person before March 2, 1984.”
Subsecs. (b) to (d). Pub. L. 115–141, § 401(c)(1)(B), redesignated subsecs. (c) and (d) as (b) and (c), respectively, and struck out former subsec. (b) which related to ratable inclusion retained for corporate debt instruments issued before July 2, 1982.
1997—Subsec. (a)(6)(C). Pub. L. 105–34 added cl. (iii) and concluding provisions.
1986—Subsec. (a)(6), (7). Pub. L. 99–514 added par. (6) and redesignated former par. (6) as (7).
Statutory Notes and Related Subsidiaries
Effective Date of 2018 Amendment
Amendment by section 401(c)(1)(B), (F) of Pub. L. 115–141 applicable to debt instruments issued on or after July 2, 1982, see section 401(c)(1)(H) of Pub. L. 115–141, set out as a note under section 163 of this title.
Amendment by section 401(c)(3)(A) of Pub. L. 115–141 applicable to obligations issued on or after Mar. 2, 1984, see section 401(c)(3)(C) of Pub. L. 115–141, set out as a note under section 163 of this title.
Effective Date of 1997 Amendment
Pub. L. 105–34, title X, § 1004(b)(1), Aug. 5, 1997, 111 Stat. 911, provided that: “The amendment made by this section [amending this section] shall apply to taxable years beginning after the date of the enactment of this Act [Aug. 5, 1997].”
Effective Date of 1986 Amendment
Amendment by Pub. L. 99–514 applicable to debt instruments issued after Dec. 31, 1986, in taxable years ending after such date, see section 675(b) of Pub. L. 99–514, set out as an Effective Date note under section 860A of this title.
Effective Date
Section applicable to taxable years ending after July 18, 1984, but not applicable to any obligation issued on or before Dec. 31, 1984, which is not a capital asset in the hands of the taxpayer, and subsec. (a)(6) of this section not applicable to any purchase on or before July 18, 1984, see section 44 of Pub. L. 98–369, as amended, set out as a note under section 1271 of this title.
Change in Method of Accounting
Pub. L. 105–34, title X, § 1004(b)(2), Aug. 5, 1997, 111 Stat. 911, provided that:
“In the case of any taxpayer required by this section [amending this section and enacting provisions set out as a note above] to change its method of accounting for its first taxable year beginning after the date of the enactment of this Act [Aug. 5, 1997]—“(A) such change shall be treated as initiated by the taxpayer,“(B) such change shall be treated as made with the consent of the Secretary of the Treasury, and“(C) the net amount of the adjustments required to be taken into account by the taxpayer under section 481 of the Internal Revenue Code of 1986 shall be taken into account ratably over the 4-taxable year period beginning with such first taxable year.”