§1275 Other definitions and special rules

Summary

Sets out simple definitions and rules about debt and original issue discount (OID). Debt instrument means bonds, notes, debentures, certificates, or other proof of debt, but does not include certain annuity contracts that are covered by section 72 and that depend on life expectancy or come from an insurance company (including some tax‑exempt entities) in specific cash, beneficiary, or pension-plan situations. Date of original issue means the first public issue date for public offerings, the sale date for debt covered by section 1273(b)(2), or otherwise the date it was issued in a sale or exchange. Tax-exempt obligation means any debt whose interest is excluded from income under section 103 or another law. Debt given by a corporation in a stock distribution is treated as issued for property. Personal use property means property mostly used for personal reasons, not for a trade or business or an activity under section 212, and that status is fixed when the debt is issued. Says when OID and timing rules do not apply and what must be reported. Sections 1274 and 483 do not apply if the debt was given for personal use property. If debt was taken on to buy or hold personal use property, has OID, and the obligor uses the cash receipts and disbursements accounting method, special rules apply. The IRS (the Secretary) can require the OID amount and issue date to be shown or reported. For publicly offered debt with OID, the issuer must give the IRS the OID amount, the issue date, and other required details. These reporting rules do not apply to obligations listed in section 1272(a)(2). A penalty under section 6706 can apply for failing to meet the reporting rules. The IRS may also write rules that change tax treatment when features like varying interest rates, put or call options, indefinite maturities, contingent payments, or debt assumptions would otherwise defeat the purpose of these rules (including under section 163(e)).