§1037 Certain Exchanges of United States Obligations

Summary

Under rules the Treasury Secretary writes, you do not have to report a gain or loss when you give back certain U.S. obligations issued under chapter 31 of title 31 and get only other obligations from that same chapter in return. If a gain was not reported because of that rule but is later reported when you sell or redeem the obligation you received, special tax rules apply. The gain is treated as if it came from the obligation you originally gave back. For certain nontransferable obligations listed in section 454(a) or 454(c), the ordinary income counted cannot be more than the difference between the issue price and the stated redemption price at the exchange, and the issue price of what you receive equals that stated redemption price plus any extra money paid. For transferable obligations issued at not less than par, the issue price of what you receive equals the issue price of what you surrendered plus any extra money paid. Related rules appear in section 1031 and section 1271(c)(2).