26 U.S.C. § 1274A: Special rules for certain transactions where stated principal amount does not exceed $2,800,000

In the case of any qualified debt instrument, the discount rate used for purposes of sections 483 and 1274 shall not exceed 9 percent, compounded semiannually. For purposes of this section, the term “qualified debt instrument” means any debt instrument given in consideration for the sale or exchange of property (other than new section 38 property within the meaning of section 48(b), as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) if the stated principal amount of such instrument does not exceed $2,800,000. section 1274 shall not apply, and interest on such debt instrument shall be taken into account by both the borrower and the lender under the cash receipts and disbursements method of accounting. the stated principal amount does not exceed $2,000,000, the lender does not use an accrual method of accounting and is not a dealer with respect to the property sold or exchanged, section 1274 would have applied to such instrument but for an election under this subsection, and an election under this subsection is jointly made with respect to such debt instrument by the borrower and lender. Except as provided in subparagraph (B), paragraph (1) shall apply to any successor to the borrower or lender with respect to a cash method debt instrument. If the lender (or any successor) transfers any cash method debt instrument to a taxpayer who uses an accrual method of accounting, this paragraph shall not apply with respect to such instrument for periods after such transfer. In the case of any cash method debt instrument, section 483 shall be applied as if it included provisions similar to the provisions of section 1274(b)(3). all sales or exchanges which are part of the same transaction (or a series of related transactions) shall be treated as 1 sale or exchange, and all debt instruments arising from the same transaction (or a series of related transactions) shall be treated as 1 debt instrument. such amount, multiplied by the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting “calendar year 1988” for “calendar year 2016” in subparagraph (A)(ii) thereof. regulations coordinating the provisions of this section with other provisions of this title, regulations necessary to prevent the avoidance of tax through the abuse of the provisions of subsection (c), and regulations relating to the treatment of transfers of cash method debt instruments.