§1282 Deferral of Interest Deduction Allocable to Accrued Discount

Summary

Limits how much interest on short-term debt a taxpayer can deduct in a tax year. The taxpayer can only deduct the net interest that is more than two amounts combined: the daily parts of any acquisition discount for the days the taxpayer held the debt, and any interest that accrues while held but is not included in the taxpayer’s gross income because of the taxpayer’s accounting method. Does not apply to short-term obligations covered by section 1281. A taxpayer can choose to have section 1281 apply to all short-term obligations bought on or after the 1st day of the 1st taxable year for which the choice is made. That choice stays in effect for that year and later years unless the taxpayer gets the Secretary’s consent to revoke it. Rules like section 1277(b) and (c) and the special limits in section 1283(c) also apply.