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Internal Revenue Code · 26 U.S.C.

§ 454. Obligations issued at discount

In force Text current through Public Law 119-121 (October 9, 2026) release point 119-121

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. § 454

At a glance

Read from the text, the source credit and the official notes. Not part of the law.

Status
In force
Enacted
September 22, 1959 by Pub. L. 86–346
Last amended
January 12, 1983 by Pub. L. 97–452
Amendments
2 dated changes in the source credit
Length
3 subsections · 612 words · about 3 min to read
Cross-references
cites 2; cited by 4 Code sections and 8 other regulations
Regulations
1 issued under this section
(a) Non-interest-bearing obligations issued at a discount

If, in the case of a taxpayer owning any non-interest-bearing obligation issued at a discount and redeemable for fixed amounts increasing at stated intervals or owning an obligation described in paragraph (2) of subsection (c), the increase in the redemption price of such obligation occurring in the taxable year does not (under the method of accounting used in computing his taxable income) constitute income to him in such year, such taxpayer may, at his election made in his return for any taxable year, treat such increase as income received in such taxable year. If any such election is made with respect to any such obligation, it shall apply also to all such obligations owned by the taxpayer at the beginning of the first taxable year to which it applies and to all such obligations thereafter acquired by him and shall be binding for all subsequent taxable years, unless on application by the taxpayer the Secretary permits him, subject to such conditions as the Secretary deems necessary, to change to a different method. In the case of any such obligations owned by the taxpayer at the beginning of the first taxable year to which his election applies, the increase in the redemption price of such obligations occurring between the date of acquisition (or, in the case of an obligation described in paragraph (2) of subsection (c), the date of acquisition of the series E bond involved) and the first day of such taxable year shall also be treated as income received in such taxable year.

(b) Short-term obligations issued on discount basis In the case of any obligation—
(1) of the United States; or
(2) of a State or a possession of the United States, or any political subdivision of any of the foregoing, or of the District of Columbia,
which is issued on a discount basis and payable without interest at a fixed maturity date not exceeding 1 year from the date of issue, the amount of discount at which such obligation is originally sold shall not be considered to accrue until the date on which such obligation is paid at maturity, sold, or otherwise disposed of.
(c) Matured United States savings bonds In the case of a taxpayer who—
(1) holds a series E United States savings bond at the date of maturity, and
(2) pursuant to regulations prescribed under chapter 31 of title 31 (A) retains his investment in such series E bond in an obligation of the United States, other than a current income obligation, or (B) exchanges such series E bond for another nontransferable obligation of the United States in an exchange upon which gain or loss is not recognized because of section 1037 (or so much of section 1031 as relates to section 1037),
the increase in redemption value (to the extent not previously includible in gross income) in excess of the amount paid for such series E bond shall be includible in gross income in the taxable year in which the obligation is finally redeemed or in the taxable year of final maturity, whichever is earlier. This subsection shall not apply to a corporation, and shall not apply in the case of any taxable year for which the taxpayer’s taxable income is computed under an accrual method of accounting or for which an election made by the taxpayer under subsection (a) applies.

(Aug. 16, 1954, ch. 736, 68A Stat. 156; Pub. L. 86–346, title I, § 102, Sept. 22, 1959, 73 Stat. 621; Pub. L. 94–455, title XIX, §§ 1901(c)(2), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1803, 1834; Pub. L. 97–452, § 2(c)(2), Jan. 12, 1983, 96 Stat. 2478.)

Regulations under this section

Treasury regulations (26 CFR) issued under § 454

Cross-references

Computed from the citations in the text of Title 26 and 26 CFR.

This section cites 2 other sections

Cited by 4 Code sections

Cited in 8 regulations not issued under it

Amendment history

From the source credit and the official notes, newest first.

  1. Amended by Pub. L. 97–452Parts changed in 1983: (c)(2)
  2. Amended by Pub. L. 94–455Parts changed in 1976: (a) (b)(2)
  3. Enacted by Pub. L. 86–346Parts changed in 1959: (c)(2)

Where it sits in the Code

  1. Subtitle A Income Taxes
  2. Chapter 1 NORMAL TAXES AND SURTAXES
  3. Subchapter E Accounting Periods and Methods of Accounting
  4. Part II METHODS OF ACCOUNTING
  5. Subpart B Taxable Year for Which Items of Gross Income Included

Nearby sections

Official notes

Show the Law Revision Counsel's notes (amendments, effective dates)

Editorial Notes

Amendments

1983—Subsec. (c)(2). Pub. L. 97–452 substituted “chapter 31 of title 31” for “the Second Liberty Bond Act”.

1976—Subsec. (a). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary” in two places.

Subsec. (b)(2). Pub. L. 94–455, § 1901(c)(2), struck out “, a Territory,” after “a State”.

1959—Subsec. (c)(2). Pub. L. 86–346 designated existing provisions as cl. (A), inserted “of the United States” after “an obligation” and struck out “the maturity value of” before “such series E bond” and “which matures not more than 10 years from the date of maturity of such series E bond” after “income obligation” in such cl. (A), and added cl. (B).