Definitions and special rules

For purposes of this subpart— 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 term “acquisition discount” means the excess of— For purposes of this subpart— Except as otherwise provided in this subsection, the daily portion of the acquisition discount is an amount equal to— At the election of the taxpayer with respect to any obligation, the daily portion of the acquisition discount for any day is the portion of the acquisition discount accruing on such day determined (under regulations prescribed by the Secretary) on the basis of— An election under subparagraph (A), once made with respect to any obligation, shall be irrevocable. In the case of any short-term obligation which is not a short-term Government obligation (as defined in section 1271(a)(3)(B))— 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.