Internal Revenue Code · 26 U.S.C.

§ 75. Dealers in tax-exempt securities

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. § 75

At a glance

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

Status: In force
Enacted: September 2, 1958 by Pub. L. 85–866
Length: 2 subsections · 599 words · about 3 min to read
Defines: 2 terms
Cross-references: cites 2; cited by 2 Code sections and 3 other regulations
Regulations: 1 issued under this section

¶(a) Adjustment for bond premium In computing the gross income of a taxpayer who holds during the taxable year a municipal bond (as defined in subsection (b)(1)) primarily for sale to customers in the ordinary course of his trade or business—

¶(1) if the gross income of the taxpayer from such trade or business is computed by the use of inventories and his inventories are valued on any basis other than cost, the cost of securities sold (as defined in subsection (b)(2)) during such year shall be reduced by an amount equal to the amortizable bond premium which would be disallowed as a deduction for such year by section 171(a)(2) (relating to deduction for amortizable bond premium) if the definition in section 171(d) of the term “bond” did not exclude such municipal bond; or

¶(2) if the gross income of the taxpayer from such trade or business is computed without the use of inventories, or by use of inventories valued at cost, and the municipal bond is sold or otherwise disposed of during such year, the adjusted basis (computed without regard to this paragraph) of the municipal bond shall be reduced by the amount of the adjustment which would be required under section 1016(a)(5) (relating to adjustment to basis for amortizable bond premium) if the definition in section 171(d) of the term “bond” did not exclude such municipal bond.

Notwithstanding the provisions of paragraph (1), no reduction to the cost of securities sold during the taxable year shall be made in respect of any obligation described in subsection (b)(1)(A)(ii) which is held by the taxpayer at the close of the taxable year; but in the taxable year in which any such obligation is sold or otherwise disposed of, if such obligation is a municipal bond (as defined in subsection (b)(1)), the cost of securities sold during such year shall be reduced by an amount equal to the adjustment described in paragraph (2), without regard to the fact that the taxpayer values his inventories on any basis other than cost.

¶(b) Definitions For purposes of subsection (a)—

¶(1) The term “municipal bond” means any obligation issued by a government or political subdivision thereof if the interest on such obligation is excludable from gross income; but such term does not include such an obligation if—

¶(A)

¶(i) it is sold or otherwise disposed of by the taxpayer within 30 days after the date of its acquisition by him, or

¶(ii) its earliest maturity or call date is a date more than 5 years from the date on which it was acquired by the taxpayer; and

¶(B) when it is sold or otherwise disposed of by the taxpayer—

¶(i) in the case of a sale, the amount realized, or

¶(ii) in the case of any other disposition, its fair market value at the time of such disposition,

is higher than its adjusted basis (computed without regard to this section and section 1016(a)(6)).

Determinations under subparagraph (B) shall be exclusive of interest.

¶(2) The term “cost of securities sold” means the amount ascertained by subtracting the inventory value of the closing inventory of a taxable year from the sum of—

¶(A) the inventory value of the opening inventory for such year, and

¶(B) the cost of securities and other property purchased during such year which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year.

(Aug. 16, 1954, ch. 736, 68A Stat. 25; Pub. L. 85–866, title I, § 2(a), Sept. 2, 1958, 72 Stat. 1606.)

Terms defined here

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cost of securities sold § 75(b)(2)
municipal bond § 75(b)(1)

Regulations under this section

Treasury regulations (26 CFR) issued under § 75

§ 1.75-1 Treatment of bond premiums in case of dealers in tax-exempt securities.

Cross-references

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

This section cites 2 other sections

Cited by 2 Code sections

Cited in 3 regulations not issued under it

Amendment history

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

September 2, 1958Enacted by Pub. L. 85–866Parts changed in 1958: (a) (b)(1)

Where it sits in the Code

Nearby sections

Official notes

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Editorial Notes

Amendments

1958—Subsec. (a). Pub. L. 85–866, § 2(a)(2), (3), struck out “short-term” each place it appeared, and inserted sentence to provide that no reduction to cost of securities sold during taxable year shall be made in respect of subsec. (b)(1)(A)(ii) obligations held at close of year, and to permit reduction in cost of securities sold in taxable year sold if obligation is municipal bond.

Subsec. (b)(1). Pub. L. 85–866, § 2(a)(1), substituted “municipal bond” for “short-term municipal bond”, designated former subpars. (A) and (B) as (A)(i) and (ii), respectively, and added subpar. (B).

Effective Date of 1958 Amendment

Pub. L. 85–866, § 2(c), Sept. 2, 1958, 72 Stat. 1607, provided that: “The amendments made by subsections (a) and (b) [amending this section and section 1016 of this title] shall apply with respect to taxable years ending after December 31, 1957, but only with respect to obligations acquired after such date.”