26 U.S.C. § 1283: Definitions and special rules

Except as provided in subparagraph (B), the term “short-term obligation” means any bond, debenture, note, certificate, or other evidence of indebtedness which has a fixed maturity date not more than 1 year from the date of issue. The term “short-term obligation” shall not include any tax-exempt obligation (as defined in section 1275(a)(3)). the stated redemption price at maturity (as defined in section 1273), over the taxpayer’s basis for the obligation. the amount of such discount, divided by the number of days after the day on which the taxpayer acquired the obligation and up to (and including) the day of its maturity. the taxpayer’s yield to maturity based on the taxpayer’s cost of acquiring the obligation, and compounding daily. An election under subparagraph (A), once made with respect to any obligation, shall be irrevocable. sections 1281 and 1282 shall be applied by taking into account original issue discount in lieu of acquisition discount, and appropriate adjustments shall be made in the application of subsection (b) of this section. A taxpayer may make an election under this paragraph to have paragraph (1) not apply to all obligations acquired by the taxpayer on or after the first day of the first taxable year to which such election applies. An election under this paragraph shall apply to the taxable year for which it is made and for all subsequent taxable years, unless the taxpayer secures the consent of the Secretary to the revocation of such election. The basis of any short-term obligation in the hands of the holder thereof shall be increased by the amount included in his gross income pursuant to section 1281. Section 1281 shall not require the inclusion of any amount previously includible in gross income. Section 454(b) and paragraphs (3) and (4) of section 1271(a) shall not apply to any short-term obligation to which section 1281 applies.