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United States Code (Last Updated: May 24, 2014) |
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Title 26. INTERNAL REVENUE CODE |
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SubTitle A. Income Taxes |
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Chapter 1. NORMAL TAXES AND SURTAXES |
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SubChapter B. Computation of Taxable Income |
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Part VI. ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS |
§ 163. Interest
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(a) General rule There shall be allowed as a deduction all interest paid or accrued within the taxable year on indebtedness.
(b) Installment purchases where interest charge is not separately stated (1) General rule If personal property or educational services are purchased under a contract— (A) which provides that payment of part or all of the purchase price is to be made in installments, and (B) in which carrying charges are separately stated but the interest charge cannot be ascertained, then the payments made during the taxable year under the contract shall be treated for purposes of this section as if they included interest equal to 6 percent of the average unpaid balance under the contract during the taxable year. For purposes of the preceding sentence, the average unpaid balance is the sum of the unpaid balance outstanding on the first day of each month beginning during the taxable year, divided by 12. For purposes of this paragraph, the term “educational services” means any service (including lodging) which is purchased from an educational organization described in section 170(b)(1)(A)(ii) and which is provided for a student of such organization. (2) Limitation In the case of any contract to which paragraph (1) applies, the amount treated as interest for any taxable year shall not exceed the aggregate carrying charges which are properly attributable to such taxable year.
(c) Redeemable ground rents For purposes of this subtitle, any annual or periodic rental under a redeemable ground rent (excluding amounts in redemption thereof) shall be treated as interest on an indebtedness secured by a mortgage.
(d) Limitation on investment interest (1) In general In the case of a taxpayer other than a corporation, the amount allowed as a deduction under this chapter for investment interest for any taxable year shall not exceed the net investment income of the taxpayer for the taxable year.
(2) Carryforward of disallowed interest The amount not allowed as a deduction for any taxable year by reason of paragraph (1) shall be treated as investment interest paid or accrued by the taxpayer in the succeeding taxable year.
(3) Investment interest For purposes of this subsection— (A) In general The term “investment interest” means any interest allowable as a deduction under this chapter (determined without regard to paragraph (1)) which is paid or accrued on indebtedness properly allocable to property held for investment.
(B) Exceptions The term “investment interest” shall not include— (i) any qualified residence interest (as defined in subsection (h)(3)), or (ii) any interest which is taken into account under section 469 in computing income or loss from a passive activity of the taxpayer. (C) Personal property used in short sale For purposes of this paragraph, the term “interest” includes any amount allowable as a deduction in connection with personal property used in a short sale.
(4) Net investment income For purposes of this subsection— (A) In general The term “net investment income” means the excess of— (i) investment income, over (ii) investment expenses. (B) Investment income The term “investment income” means the sum of— (i) gross income from property held for investment (other than any gain taken into account under clause (ii)(I)), (ii) the excess (if any) of— (I) the net gain attributable to the disposition of property held for investment, over (II) the net capital gain determined by only taking into account gains and losses from dispositions of property held for investment, plus (iii) so much of the net capital gain referred to in clause (ii)(II) (or, if lesser, the net gain referred to in clause (ii)(I)) as the taxpayer elects to take into account under this clause. Such term shall include qualified dividend income (as defined in section 1(h)(11)(B)) only to the extent the taxpayer elects to treat such income as investment income for purposes of this subsection. (C) Investment expenses The term “investment expenses” means the deductions allowed under this chapter (other than for interest) which are directly connected with the production of investment income.
(D) Income and expenses from passive activities Investment income and investment expenses shall not include any income or expenses taken into account under section 469 in computing income or loss from a passive activity.
(E) Reduction in investment income during phase-in of passive loss rules Investment income of the taxpayer for any taxable year shall be reduced by the amount of the passive activity loss to which section 469(a) does not apply for such taxable year by reason of section 469(m). The preceding sentence shall not apply to any portion of such passive activity loss which is attributable to a rental real estate activity with respect to which the taxpayer actively participates (within the meaning of section 469(i)(6)) during such taxable year.
(5) Property held for investment For purposes of this subsection— (A) In general The term “property held for investment” shall include— (i) any property which produces income of a type described in section 469(e)(1), and (ii) any interest held by a taxpayer in an activity involving the conduct of a trade or business— (I) which is not a passive activity, and (II) with respect to which the taxpayer does not materially participate. (B) Investment expenses In the case of property described in subparagraph (A)(i), expenses shall be allocated to such property in the same manner as under section 469.
(C) Terms For purposes of this paragraph, the terms “activity”, “passive activity”, and “materially participate” have the meanings given such terms by section 469.
(6) Phase-in of disallowance In the case of any taxable year beginning in calendar years 1987 through 1990— (A) In general The amount of interest paid or accrued during any such taxable year which is disallowed under this subsection shall not exceed the sum of— (i) the amount which would be disallowed under this subsection if— (I) paragraph (1) were applied by substituting “the sum of the ceiling amount and the net investment income” for “the net investment income”, and (II) paragraphs (4)(E) and (5)(A)(ii) did not apply, and (ii) the applicable percentage of the excess of— (I) the amount which (without regard to this paragraph) is not allowable as a deduction under this subsection for the taxable year, over (II) the amount described in clause (i). The preceding sentence shall not apply to any interest treated as paid or accrued during the taxable year under paragraph (2). (B) Applicable percentage For purposes of this paragraph, the applicable percentage shall be determined in accordance with the following table:
In the case of taxable
years beginning in:
The applicable
percentage is:
1987
35
1988
60
1989
80
1990
90.
(C) Ceiling amount For purposes of this paragraph, the term “ceiling amount” means— (i) $10,000 in the case of a taxpayer not described in clause (ii) or (iii), (ii) $5,000 in the case of a married individual filing a separate return, and (iii) zero in the case of a trust. (e) Original issue discount (1) In general In the case of any debt instrument issued after
July 1, 1982 , the portion of the original issue discount with respect to such debt instrument which is allowable as a deduction to the issuer for any taxable year shall be equal to the aggregate daily portions of the original issue discount for days during such taxable year.(2) Definitions and special rules For purposes of this subsection— (A) Debt instrument The term “debt instrument” has the meaning given such term by section 1275(a)(1).
(B) Daily portions The daily portion of the original issue discount for any day shall be determined under section 1272(a) (without regard to paragraph (7) thereof and without regard to section 1273(a)(3)).
(C) Short-term obligations In the case of an obligor of a short-term obligation (as defined in section 1283(a)(1)(A)) who uses the cash receipts and disbursements method of accounting, the original issue discount (and any other interest payable) on such obligation shall be deductible only when paid.
(3) Special rule for original issue discount on obligation held by related foreign person (A) In general If any debt instrument having original issue discount is held by a related foreign person, any portion of such original issue discount shall not be allowable as a deduction to the issuer until paid. The preceding sentence shall not apply to the extent that the original issue discount is effectively connected with the conduct by such foreign related person of a trade or business within the United States unless such original issue discount is exempt from taxation (or is subject to a reduced rate of tax) pursuant to a treaty obligation of the United States.
(B) Special rule for certain foreign entities (i) In general In the case of any debt instrument having original issue discount which is held by a related foreign person which is a controlled foreign corporation (as defined in section 957) or a passive foreign investment company (as defined in section 1297), a deduction shall be allowable to the issuer with respect to such original issue discount for any taxable year before the taxable year in which paid only to the extent such original issue discount is includible (determined without regard to properly allocable deductions and qualified deficits under section 952(c)(1)(B)) during such prior taxable year in the gross income of a United States person who owns (within the meaning of section 958(a)) stock in such corporation.
(ii) Secretarial authority The Secretary may by regulation exempt transactions from the application of clause (i), including any transaction which is entered into by a payor in the ordinary course of a trade or business in which the payor is predominantly engaged.
(C) Related foreign person For purposes of subparagraph (A), the term “related foreign person” means any person— (i) who is not a United States person, and (ii) who is related (within the meaning of section 267(b)) to the issuer. (4) Exceptions This subsection shall not apply to any debt instrument described in— (A) subparagraph (D) of section 1272(a)(2) (relating to obligations issued by natural persons before March 2, 1984 ), and(B) subparagraph (E) of section 1272(a)(2) (relating to loans between natural persons). (5) Special rules for original issue discount on certain high yield obligations (A) In general In the case of an applicable high yield discount obligation issued by a corporation— (i) no deduction shall be allowed under this chapter for the disqualified portion of the original issue discount on such obligation, and (ii) the remainder of such original issue discount shall not be allowable as a deduction until paid. For purposes of this paragraph, rules similar to the rules of subsection (i)(3)(B) shall apply in determining the amount of the original issue discount and when the original issue discount is paid. (B) Disqualified portion treated as stock distribution for purposes of dividend received deduction (i) In general Solely for purposes of sections 243, 245, 246, and 246A, the dividend equivalent portion of any amount includible in gross income of a corporation under section 1272(a) in respect of an applicable high yield discount obligation shall be treated as a dividend received by such corporation from the corporation issuing such obligation.
(ii) Dividend equivalent portion For purposes of clause (i), the dividend equivalent portion of any amount includible in gross income under section 1272(a) in respect of an applicable high yield discount obligation is the portion of the amount so includible— (I) which is attributable to the disqualified portion of the original issue discount on such obligation, and (II) which would have been treated as a dividend if it had been a distribution made by the issuing corporation with respect to stock in such corporation. (C) Disqualified portion (i) In general For purposes of this paragraph, the disqualified portion of the original issue discount on any applicable high yield discount obligation is the lesser of— (I) the amount of such original issue discount, or (II) the portion of the total return on such obligation which bears the same ratio to such total return as the disqualified yield on such obligation bears to the yield to maturity on such obligation. (ii) Definitions For purposes of clause (i), the term “disqualified yield” means the excess of the yield to maturity on the obligation over the sum referred to is not met.
(n) Cross references (1) For disallowance of certain amounts paid in connection with insurance, endowment, or annuity contracts, see section 264. (2) For disallowance of deduction for interest relating to tax-exempt income, see section 265(a)(2). (3) For disallowance of deduction for carrying charges chargeable to capital account, see section 266. (4) For disallowance of interest with respect to transactions between related taxpayers, see section 267. (5) For treatment of redeemable ground rents and real property held subject to liabilities under redeemable ground rents, see section 1055.
References In Text
The date of the enactment of this subparagraph, referred to in subsec. (h)(4)(E)(ii), is the date of enactment of Pub. L. 109–432, which was approved
Section 6664(d)(2)(A), referred to in subsec. (m), was redesignated as section 6664(d)(3)(A) by Pub. L. 111–152, title I, § 1409(c)(2)(A),
Amendments
2013—Subsec. (h)(3)(E)(iv)(I). Pub. L. 112–240, § 204(a), substituted “
Subsec. (h)(4)(E)(i). Pub. L. 112–240, § 204(b), substituted “Department of Veterans Affairs” for “Veterans Administration” and “Rural Housing Service” for “Rural Housing Administration”.
2010—Subsec. (f)(2)(A)(ii) to (iv). Pub. L. 111–147, § 502(a)(2)(B), inserted “or” at end of cl. (ii), substituted period for “, or” in cl. (iii), and struck out cl. (iv), which read as follows: “is described in subparagraph (B).”
Subsec. (f)(2)(B). Pub. L. 111–147, § 502(a)(1), (2)(C)(i), redesignated subpar. (C) as (B), struck out “, and subparagraph (B),” after “subparagraph (A)” in introductory provisions, and struck out former subpar. (B) which related to certain obligations not included as registration-required obligations.
Subsec. (f)(2)(B)(i). Pub. L. 111–147, § 502(a)(2)(C)(ii), amended cl. (i) generally. Prior to amendment, cl. (i) read as follows: “in the case of—
“(I) subparagraph (A), such obligation is of a type which the Secretary has determined by regulations to be used frequently in avoiding Federal taxes, or
“(II) subparagraph (B), such obligation is of a type specified by the Secretary in regulations, and”.
Subsec. (f)(2)(C). Pub. L. 111–147, § 502(a)(1), redesignated subpar. (C) as (B).
Subsec. (f)(3). Pub. L. 111–147, § 502(c), inserted before period at end “, except that a dematerialized book entry system or other book entry system specified by the Secretary shall be treated as a book entry system described in such section”.
Subsec. (h)(3)(E)(iv)(I). Pub. L. 111–312 substituted “
2009—Subsec. (e)(5)(F), (G). Pub. L. 111–5, § 1232(a), added subpar. (F) and redesignated former subpar. (F) as (G).
Subsec. (i)(1). Pub. L. 111–5, § 1232(b), in concluding provisions, inserted “(i)” before “permit a rate” and “, or (ii) permit, on a temporary basis, a rate to be used with respect to any debt instrument which is higher than the applicable Federal rate if the Secretary determines that such rate is appropriate in light of distressed conditions in the debt capital markets” before period at end.
2007—Subsec. (h)(3)(E)(iv)(I). Pub. L. 110–142 substituted “
2006—Subsec. (h)(3)(E). Pub. L. 109–432, § 419(a), added subpar. (E).
Subsec. (h)(4)(E), (F). Pub. L. 109–432, § 419(b), added subpars. (E) and (F).
Subsec. (j)(8). Pub. L. 109–222, § 501(a), added par. (8). Former par. (8) redesignated (9).
Subsec. (j)(9). Pub. L. 109–222 redesignated par. (8) as (9) and added subpar. (D).
2005—Subsec. (j)(6)(A)(i)(III), (IV). Pub. L. 109–135 added subcl. (III) and redesignated former subcl. (III) as (IV).
2004—Subsec. (e)(3)(B), (C). Pub. L. 108–357, § 841(a), added subpar. (B) and redesignated former subpar. (B) as (C).
Subsec. (l)(2). Pub. L. 108–357, § 845(a), inserted “or equity held by the issuer (or any related party) in any other person” after “or a related party”.
Subsec. (l)(3). Pub. L. 108–357, § 845(d), substituted “or any other person” for “or a related party” in introductory provisions.
Subsec. (l)(4) to (7). Pub. L. 108–357, § 845(b), (c), added pars. (4) and (5) and redesignated former pars. (4) and (5) as (6) and (7), respectively.
Subsecs. (m), (n). Pub. L. 108–357, § 838(a), added subsec. (m) and redesignated former subsec. (m) as (n).
2003—Subsec. (d)(4)(B). Pub. L. 108–27 inserted at end “Such term shall include qualified dividend income (as defined in section 1(h)(11)(B)) only to the extent the taxpayer elects to treat such income as investment income for purposes of this subsection.”
1999—Subsec. (j)(3)(C). Pub. L. 106–170 added subpar. (C).
1998—Subsec. (h)(2)(F). Pub. L. 105–277 added subpar. (F).
1997—Subsec. (h)(2)(E). Pub. L. 105–34, § 503(b)(2)(B), struck out “or 6166 or under section 6166A (as in effect before its repeal by the Economic Recovery Tax Act of 1981)” after “section 6163”.
Subsec. (h)(4)(A)(i)(I). Pub. L. 105–34, § 312(d)(1), substituted “section 121” for “section 1034”.
Subsec. (j)(2)(B)(iii). Pub. L. 105–34, § 1604(g)(1), substituted “clause (ii)” for “clause (i)” in introductory provisions.
Subsec. (k). Pub. L. 105–34, § 503(b)(2)(A), added subsec. (k). Former subsec. (k) redesignated (l).
Subsec. (l). Pub. L. 105–34, § 1005(a), added subsec. (l). Former subsec. (l) redesignated (m).
Pub. L. 105–34, § 503(b)(2)(A), redesignated subsec. (k) as (l).
Subsec. (m). Pub. L. 105–34, § 1005(a), redesignated subsec. (l) as (m).
1996—Subsec. (j)(1)(B). Pub. L. 104–188, § 1704(f)(2)(A), inserted before period at end “(and clause (ii) of paragraph (2)(A) shall not apply for purposes of applying this subsection to the amount so treated)”.
Subsec. (j)(6)(E)(ii). Pub. L. 104–188, § 1703(n)(4), which directed that cl. (ii) be amended by substituting “which is” for “which is a”, could not be executed, because “which is a” does not appear.
Subsec. (j)(7), (8). Pub. L. 104–188, § 1704(f)(2)(B), added par. (7) and redesignated former par. (7) as (8).
1993—Subsec. (d)(4)(B). Pub. L. 103–66, § 13206(d)(1), amended heading and text of subpar. (B) generally. Prior to amendment, text read as follows: “The term ‘investment income’ means the sum of—
“(i) gross income (other than gain taken into account under clause (ii)) from property held for investment, and
“(ii) any net gain attributable to the disposition of property held for investment.”
Subsec. (j). Pub. L. 103–66, § 13228(c)(2), substituted “for interest on certain indebtedness” for “for certain interest paid by corporation to related person” in heading.
Subsec. (j)(3). Pub. L. 103–66, § 13228(a), amended heading and text of par. (3) generally. Prior to amendment, text read as follows: “For purposes of this subsection—
“(A) In general.—Except as provided in subparagraph (B), the term ‘disqualified interest’ means any interest paid or accrued by the taxpayer (directly or indirectly) to a related person if no tax is imposed by this subtitle with respect to such interest.
“(B) Exception for certain existing indebtedness.—The term ‘disqualified interest’ does not include any interest paid or accrued under indebtedness with a fixed term—
“(i) which was issued on or before
“(ii) which was issued after such date pursuant to a written binding contract in effect on such date and all times thereafter before such indebtedness was issued.”
Subsec. (j)(5)(B). Pub. L. 103–66, § 13228(c)(1), struck out “to a related person” after “by the taxpayer” in introductory provisions.
Subsec. (j)(6)(D), (E). Pub. L. 103–66, § 13228(b), added subpars. (D) and (E).
1990—Subsec. (e)(5)(A). Pub. L. 101–508, § 11701(b)(1), amended last sentence generally. Prior to amendment, last sentence read as follows: “For purposes of clause (ii), rules similar to the rules of subsection (i)(3)(B) shall apply in determining the time when the original issue discount is paid.”
Subsec. (i)(3). Pub. L. 101–508, § 11701(b)(2)(B), inserted sentence at end.
Subsec. (i)(3)(B). Pub. L. 101–508, § 11701(b)(2)(A), struck out “(or stock)” after “obligation” wherever appearing.
Subsec. (j)(2)(A)(ii). Pub. L. 101–508, § 11701(c)(2), substituted “or on any other day” for “and on such other days”.
Subsec. (j)(2)(C). Pub. L. 101–508, § 11701(c)(1), substituted “reduced (but not below zero) by such” for “less such” in introductory provisions.
1989—Subsec. (e)(5), (6). Pub. L. 101–239, § 7202(a), added par. (5) and redesignated former par. (5) as (6).
Subsec. (i). Pub. L. 101–239, § 7202(b), added subsec. (i). Former subsec. (i) redesignated (j).
Subsec. (j). Pub. L. 101–239, § 7210(a), added subsec. (j). Former subsec. (j) redesignated (k).
Pub. L. 101–239, § 7202(b), redesignated subsec. (i) as (j).
Subsec. (k). Pub. L. 101–239, § 7210(a), redesignated subsec. (j) as (k).
1988—Subsec. (d)(3)(A). Pub. L. 100–647, § 1005(c)(1), substituted “properly allocable to” for “incurred or continued to purchase or carry”.
Subsec. (d)(4)(B). Pub. L. 100–647, § 1005(c)(2), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: “The term ‘investment income’ means the sum of—
“(i) gross income (other than gain described in clause (ii)) from property held for investment, and
“(ii) any net gain attributable to the disposition of property held for investment,
but only to the extent such amounts are not derived from the conduct of a trade or business.”
Subsec. (d)(6)(A). Pub. L. 100–647, § 1005(c)(3), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: “The amount of interest disallowed under this subsection for any such taxable year shall be equal to the sum of—
“(i) the applicable percentage of the amount which (without regard to this paragraph) is not allowed as a deduction under this subsection for the taxable year to the extent such amount does not exceed the ceiling amount,
“(ii) the amount which (without regard to this paragraph) is not allowed as a deduction under this subsection in excess of the ceiling amount, plus
“(iii) the amount of any carryforward to such taxable year under paragraph (2) with respect to which a deduction was disallowed under this subsection for a preceding taxable year.
For purposes of this subparagraph, the amount under clause (i) or (ii) shall be computed without regard to the amount described in clause (iii).”
Subsec. (e)(2)(B). Pub. L. 100–647, § 1006(u)(1), substituted “paragraph (7)” for “paragraph (6)”.
Subsec. (h)(2)(A). Pub. L. 100–647, § 1005(c)(4), substituted “properly allocable to” for “incurred or continued in connection with the conduct of”.
Subsec. (h)(2)(E). Pub. L. 100–647, § 1005(c)(12), inserted “or under section 6166A (as in effect before its repeal by the Economic Recovery Tax Act of 1981)” before period at end.
Subsec. (h)(3)(C). Pub. L. 100–647, § 1005(c)(5), effective as if enacted immediately before enactment of Pub. L. 100–203 (see 1987 Amendment note below), amended subpar. (C) generally. Prior to amendment, subpar. (C) read as follows: “The amount under subparagraph (B)(ii)(I) at any time after
Subsec. (h)(4). Pub. L. 100–647, § 1005(c)(6)(A), effective as if enacted immediately before enactment of Pub. L. 100–203 (redesignating par. (5) as (4), see 1987 Amendment note below), amended heading by substituting “Other definitions and special rules—For purposes of this subsection—” for “Other definitions and special rules”.
Subsec. (h)(4)(A). Pub. L. 100–647, § 1005(c)(6)(B)(i), (7), effective as if enacted immediately before enactment of Pub. L. 100–203 (redesignating par. (5) as (4), see 1987 Amendment note below), amended subpar. (A) by striking out “For purposes of this subsection—” after “Qualified residence” in introductory provisions, “used or” after “Residence not” in cl. (iii) heading, and “or use” after “does not rent” in cl. (iii) text.
Subsec. (h)(4)(B). Pub. L. 100–647, § 1005(c)(6)(B)(ii), effective as if enacted immediately before enactment of Pub. L. 100–203 (redesignating par. (5) as (4), see 1987 Amendment note below), amended subpar. (B) by substituting “Any” for “For purposes of this paragraph, any”.
Subsec. (h)(4)(C), (D). Pub. L. 100–647, § 1005(c)(8), effective as if enacted immediately before enactment of Pub. L. 100–203 (redesignating par. (5) as (4), see 1987 Amendment note below), par. (4) added subpars. (C) and (D).
Subsec. (h)(5). Pub. L. 100–647, § 2004(b)(1), redesignated par. (6) as (5).
Subsec. (h)(6). Pub. L. 100–647, § 2004(b)(1), redesignated par. (6) as (5).
Pub. L. 100–647, § 1005(c)(9), substituted “but for this paragraph” for “but for this subsection”.
Subsec. (i)(2). Pub. L. 100–647, § 1009(b)(6), made technical correction to directory language of Pub. L. 99–514, § 902(e)(1), see 1986 Amendment note below.
1987—Subsec. (d)(4)(E). Pub. L. 100–203, § 10212(b), substituted “section 469(m)” for “section 469(l)”.
Subsec. (h)(3). Pub. L. 100–203, § 10102(a), amended par. (3) generally. Prior to amendment (see 1988 Amendment note above), par. (3) read as follows: “For purposes of this subsection—
“(A) In general.—The term ‘qualified residence interest’ means interest which is paid or accrued during the taxable year on indebtedness which is secured by any property which (at the time such interest is paid or accrued) is a qualified residence of the taxpayer.
“(B) Limitation on amount of interest.—The term ‘qualified residence interest’ shall not include any interest paid or accrued on indebtedness secured by any qualified residence which is allocable to that portion of the principal amount of such indebtedness which, when added to the outstanding aggregate principal amount of all other indebtedness previously incurred and secured by such qualified residence, exceeds the lesser of—
“(i) the fair market value of such qualified residence, or
“(ii) the sum of—
“(I) the taxpayer’s basis in such qualified residence (adjusted only by the cost of any improvements to such residence), plus
“(II) the aggregate amount of qualified indebtedness of the taxpayer with respect to such qualified residence.
“(C) Cost not less than balance of indebtedness incurred on or before
“(i) In general.—The amount under subparagraph (B)(ii)(I) at any time after
“(I) which was incurred on or before
“(II) which is secured by the qualified residence and was incurred after
“(ii) Limitation on period of refinancing.—Subclause (II) of clause (i) shall not apply to any indebtedness after—
“(I) the expiration of the term of the indebtedness described in clause (i)(I), or
“(II) if the principal of the indebtedness described in clause (i)(I) is not amortized over its term, the expiration of the term of the 1st refinancing of such indebtedness (or if earlier, the date which is 30 years after the date of such refinancing).
“(D) Time for determination.—Except as provided in regulations, any determination under subparagraph (B) shall be made as of the time the indebtedness is incurred.”
Subsec. (h)(4), (5). Pub. L. 100–203, § 10102(b), redesignated par. (5) as (4) and struck out former par. (4) which defined “qualified indebtedness” for purposes of this subsection.
1986—Subsec. (d). Pub. L. 99–514, § 511(a), substituted “Limitation on investment interest” for “Limitation on interest on investment indebtedness” in heading, and amended text generally, revising and restating as pars. (1) to (6) provisions of former pars. (1) to (7).
Subsec. (e)(2)(C). Pub. L. 99–514, § 1803(a)(4), added subpar. (C).
Subsec. (e)(3)(A). Pub. L. 99–514, § 1810(e)(1)(A), inserted “The preceding sentence shall not apply to the extent that the original issue discount is effectively connected with the conduct by such foreign related person of a trade or business within the United States unless such original issue discount is exempt from taxation (or is subject to a reduced rate of tax) pursuant to a treaty obligation of the United States.”
Subsec. (e)(5). Pub. L. 99–514, § 1810(e)(1)(B), redesignated par. (4), relating to cross references, as (5).
Subsec. (f)(3). Pub. L. 99–514, § 1301(j)(3), substituted “section 149(a)(3)” for “section 103(j)(3)”.
Subsec. (h). Pub. L. 99–514, § 511(b), added subsec. (h). Former subsec. (h) redesignated (i).
Subsec. (i)(2). Pub. L. 99–514, § 902(e)(1), as amended by Pub. L. 100–647, § 1009(b)(6), substituted “section 265(a)(2)” for “section 265(2)”.
Pub. L. 99–514, § 511(b), redesignated former subsec. (h) as (i).
1984—Subsec. (d)(3)(D). Pub. L. 98–369, § 56(b), designated existing provisions as cl. (i) and added cl. (ii).
Subsec. (e)(1). Pub. L. 98–369, § 42(a)(3), substituted “debt instrument” for “bond” in two places and struck out “by an issuer (other than a natural person)” before “, the portion of the original issue”.
Subsec. (e)(2). Pub. L. 98–369, § 42(a)(3), substituted provisions relating to debt instruments for provisions relating to bonds.
Subsec. (e)(3). Pub. L. 98–369, § 128(c), added par. (3) relating to special rule for original issue discount on obligation held by related foreign person. Former par. (3), relating to exceptions, redesignated (4).
Pub. L. 98–369, § 42(a)(3), added par. (3) relating to exceptions.
Subsec. (e)(4). Pub. L. 98–369, § 128(c), redesignated par. (3), relating to exceptions, as (4).
Pub. L. 98–369, § 42(a)(3), added par. (4) relating to cross references.
Subsec. (f)(2)(C)(i). Pub. L. 98–369, § 127(f), redesignated existing provision as subcl. (I), and in subcl. (I) as so redesignated, inserted reference to subpar. (A) and substituted “or” for “and”, and added subcl. (II).
Subsecs. (g), (h). Pub. L. 98–369, § 612(c), added subsec. (g) and redesignated former subsec. (g) as (h).
1982—Subsec. (d)(4). Pub. L. 97–354 redesignated subpar. (D) as (B). Former subpars. (B) and (C), relating to partnerships and shareholders of electing small business corporations, respectively, were struck out.
Subsec. (e). Pub. L. 97–248, § 231(b), added subsec. (e) relating to original issue discount. Former subsec. (e), setting forth cross references, redesignated (f).
Pub. L. 97–248, § 231(b), redesignated former subsec. (e), setting forth cross references, as (f).
Subsec. (f). Pub. L. 97–248, § 310(b)(2), added subsec. (f) relating to the requirement that obligations be in registered form to be tax-exempt. Former subsec. (f), setting forth cross references, redesignated (g).
Subsec. (g). Pub. L. 97–248, § 310(b)(2), redesignated former subsec. (f), setting forth cross references, as (g).
1976—Subsec. (b)(1). Pub. L. 94–455, § 1901(b)(8)(C), substituted “organization described in section 170(b)(1)(A)(ii) and which is provided for a student of such organization” for “institution (as defined in section 151(e)(4)) and which is provided for a student of such institution”.
Subsec. (d)(1). Pub. L. 94–455, § 209(a)(1), among other changes, substituted in subpar. (A) “$10,000” for “$25,000” and “$5,000” for “$12,500”, struck out subpar. (C) relating to the excess of net long-term capital gain over short-term capital loss and subpar. (D) relating to the excess of investment interest over amounts in subpar. (A), and in provisions following lettered paragraphs substituted “$10,000” for “$25,000” and struck out provisions relating to the determination of the amount referred to in subpar. (C).
Subsec. (d)(2). Pub. L. 94–455, § 209(a)(1), among other changes, struck out provisions relating to the limitation on the amount of interest allowable by this par. and to reduction of disallowed investment interest for capital gain deduction purposes.
Subsec. (d)(3)(A). Pub. L. 94–455, § 209(a)(2), inserted provision relating to determination of the amount of net investment income where taxpayer has investment interest for taxable year to which this subsection applies.
Subsec. (d)(3)(B)(iii). Pub. L. 94–455, §§ 205(c)(3), 1901(b)(3)(K), substituted “1250, and 1254” for “and 1250”, and “ordinary income” for “gain from the sale or exchange of property which is neither a capital asset nor property described in section 1231”. Section 205(c)(3) of Pub. L. 94–455, which directed the amendment of subsec. (d)(3)(A)(iii), was executed by amending subsec. (d)(3)(B)(iii) to reflect the probable intent of Congress.
Subsec. (d)(3)(E). Pub. L. 94–455, § 209(a)(3), substituted “limitation in paragraph (1)” for “limitations in paragraphs (1) and (2)(A)”.
Subsec. (d)(4)(B), (C). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.
Subsec. (d)(5). Pub. L. 94–455, § 209(a)(4), (5), redesignated par. (6) as (5) and inserted provision relating to the application of this paragraph after
Pub. L. 94–455, § 1901(b)(3)(K), directed the amendment of par. (5) by substituting “ordinary income” for “gain from the sale or exchange of property which is neither a capital asset nor property described in section 1231”, such par. (5) having been struck out by Pub. L. 94–455, § 209(a)(4).
Subsec. (d)(6). Pub. L. 94–455, §§ 209(a)(4), 1906(b)(13)(A), redesignated par. (7) as (6) and struck out in provision following subpar. (B) “or his delegate” after “Secretary”. Former par. (6) redesignated (5).
Subsec. (d)(7). Pub. L. 94–455, § 209(a)(6), added par. (7). Former par. (7) redesignated (6).
1971—Subsec. (d)(1)(B). Pub. L. 92–178, § 304(b)(2), inserted “the amount (if any) by which the deductions allowable under this section (determined without regard to this subsection) and sections 162, 164(a)(1) or (2), or 212 attributable to property of the taxpayer subject to a net lease exceeds the rental income produced by such property for the property year, plus” after “plus”.
Subsec. (d)(3)(C). Pub. L. 92–178, § 304(d), inserted reference to section 162.
Subsec. (d)(4)(A)(i). Pub. L. 92–178, § 304(a)(2)(A), inserted “of the lessor” after “deductions” and “(other than rents and reimbursed amounts with respect to such property)” after “section 162”.
Subsec. (d)(7). Pub. L. 92–178, § 304(a)(2)(B), added par. (7).
1969—Subsecs. (d), (e). Pub. L. 91–172 added subsec. (d). Former subsec. (d) redesignated (e).
1964—Subsec. (b)(1). Pub. L. 88–272 included the purchase of educational services, and defined “educational services”.
1963—Subsecs. (c), (d). Pub. L. 88–9, § 1(a), (c), added subsec. (c), redesignated former subsec. (c) as (d) and added par. (5).
Change Of Name
The Veterans’ Administration was redesignated the Department of Veterans Affairs by Pub. L. 100–527 which also provided that references to the Veterans’ Administration were deemed to refer to the Department of Veterans Affairs. See sections 2 and 10 of Pub. L. 100–527, set out in a Department of Veterans Affairs Act note under section 301 of Title 38, Veterans’ Benefits.
Effective Date Of Amendment
Pub. L. 112–240, title II, § 204(c),
Pub. L. 111–312, title VII, § 759(b),
Amendment by Pub. L. 111–147 applicable to obligations issued after the date which is 2 years after
Pub. L. 111–5, div. B, title I, § 1232(c),
Pub. L. 110–142, § 3(b),
Pub. L. 109–432, div. A, title IV, § 419(d),
Pub. L. 109–222, title V, § 501(c),
Amendment by Pub. L. 109–135 effective as if included in the provision of the American Jobs Creation Act of 2004, Pub. L. 108–357, to which such amendment relates, see section 403(nn) of Pub. L. 109–135, set out as a note under section 26 of this title.
Pub. L. 108–357, title VIII, § 838(b),
Pub. L. 108–357, title VIII, § 841(c),
Pub. L. 108–357, title VIII, § 845(e),
Amendment by Pub. L. 108–27 applicable, except as otherwise provided, to taxable years beginning after
Amendment by Pub. L. 106–170 applicable to taxable years beginning after
Amendment by Pub. L. 105–277 effective as if included in the provision of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates, see section 4003(l) of Pub. L. 105–277, set out as a note under section 86 of this title.
Amendment by section 312(d)(1) of Pub. L. 105–34 applicable to sales and exchanges after
Pub. L. 105–34, title V, § 503(d),
Pub. L. 105–34, title X, § 1005(b),
Amendment by section 1703(n)(4) of Pub. L. 104–188 effective as if included in the provision of the Revenue Reconciliation Act of 1993, Pub. L. 103–66, §§ 13001–13444, to which such amendment relates, see section 1703(o) of Pub. L. 104–188, set out as a note under section 39 of this title.
Pub. L. 104–188, title I, § 1704(f)(2)(C),
Amendment by section 13206(d)(1) of Pub. L. 103–66 applicable to taxable years beginning after
Pub. L. 103–66, title XIII, § 13228(d),
Amendment by Pub. L. 101–508 effective, except as otherwise provided, as if included in the provision of the Revenue Reconciliation Act of 1989, Pub. L. 101–239, title VII, to which such amendment relates, see section 11701(n) of Pub. L. 101–508, set out as a note under section 42 of this title.
Pub. L. 101–239, title VII, § 7202(c),
Pub. L. 101–239, title VII, § 7210(b),
Pub. L. 100–647, title I, § 1005(c)(13),
Amendment by sections 1006(u)(1) and 1009(b)(6) of Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.
Amendment by section 2004(b)(1) of Pub. L. 100–647 effective, except as otherwise provided, as if included in the provisions of the Revenue Act of 1987, Pub. L. 100–203, title X, to which such amendment relates, see section 2004(u) of Pub. L. 100–647, set out as a note under section 56 of this title.
Pub. L. 100–203, title X, § 10102(c),
Amendment by section 10212(b) of Pub. L. 100–203 effective as if included in the amendments made by section 501 of the Tax Reform Act of 1986, Pub. L. 99–514, see section 10212(c) of Pub. L. 100–203, set out as a note under section 58 of this title.
Pub. L. 99–514, title V, § 511(e),
Amendment by section 902(e)(1) of Pub. L. 99–514 applicable to taxable years ending after
Amendment by section 1301(j)(3) of Pub. L. 99–514 applicable to bonds issued after
Amendment by sections 1803(a)(4) and 1810(e)(1) of Pub. L. 99–514 effective, except as otherwise 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.
Amendment by section 42(a)(3) of Pub. L. 98–369 applicable to taxable years ending after
Pub. L. 98–369, div. A, title I, § 56(d),
Amendment by section 127(f) of Pub. L. 98–369 applicable to interest received after
Amendment by section 128(c) of Pub. L. 98–369 applicable to obligations issued after
Amendment by section 612(c) of Pub. L. 98–369 applicable to interest paid or accrued after
Amendment by Pub. L. 97–354 applicable to taxable years beginning after
Amendment by Pub. L. 97–248 applicable to obligations issued after
Amendment by section 205(c)(3) of Pub. L. 94–455 applicable with respect to taxable years ending after
Pub. L. 94–455, title II, § 209(b),
Amendment by section 1901(b)(8)(C), (3)(K) of Pub. L. 94–455 applicable with respect to taxable years beginning after
Pub. L. 92–178, title III, § 304(e),
Pub. L. 91–172, title II, § 221(b),
Pub. L. 88–272, title II, § 224(d),
Subsec. (c) effective as of
Miscellaneous
Pub. L. 100–647, title I, § 1005(c)(14),
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 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
Pub. L. 98–369, div. A, title X, § 1066,
For provision that, for purposes of amendments by section 231(b) of Pub. L. 97–248, any evidence of indebtedness issued pursuant to a written commitment which was binding on