§1282 Deferral of interest deduction allocable to accrued discount

Summary

You can only deduct interest costs on a short-term debt for the year if those costs are bigger than two things added together: the daily parts of the acquisition discount for each day you held the debt that year, and any interest that accrued while you held it but wasn’t counted as income under your accounting method. The rule does not apply to short-term obligations covered by section 1281. You can choose to have section 1281 apply to all short-term obligations you buy on or after the 1st day of the 1st taxable year the choice starts. That choice covers that year and later years unless the IRS lets you cancel it. Similar rules from section 1277(b) and (c) apply, and special limits for nongovernmental original-issue discount are in section 1283(c).