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TITLE 26-INTERNAL REVENUE CODE parental rights and duties in respect of the child. (d) Cross reference For assessment of tax against parent in certain cases, see section 6201(c). (Aug. 16, 1954, ch. 736, 68A Stat. 24.) SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 6201 of this title. § 74. Prizes and awards (a) General rule Except as provided in subsection (b) and in section 117 (relating to scholarships and fellow- ship grants), gross income includes amounts re- ceived as prizes and awards. (M) Exception Gross income does not include amounts re- ceived as prizes and awards made primarily in recognition of religious, charitable, scientific, educational, artistic, literary, or civic achieve- ment, but only if- (1) the recipient was selected without any action on his part to enter the contest or pro- ceeding; and (2) the recipient is not required to render substantial future services as a condition to receiving the prize or award. (Aug. 16, 1954, ch. 736, 68A Stat. 24.) SECTION RETrnuun TO IN OTHER SECTIONS This section is referred to in sections 4941, 4945 of this title. § 75. Dealers in tax-exempt securities (a) Adjustment for bond premium In computing the gross income of a taxpayer who holds during the taxable year a short-term municipal bond (as defined in subsection (b)(1) primarily for sale to customers in the ordinary course of his trade or business- (1) if the gross income of the taxpayer from such trade or business is computed by the use of inventories and his inventories are valued on any basis other than cost, the cost of secu- rities sold (as defined in subsection (b)(2) during such year shall be reduced by an amount equal to the amortizable bond premi- um which would be disallowed as a deduction for such year by section 171(a)(2) (relating to deduction for amortizable bond premium) if the definition in section 171(d) of the term "bond" did not exclude such municipal bond; or (2) if the gross income of the taxpayer from such trade or business is computed without the use of inventories, or by use of inven- tories valued at cost, and the municipal bond is sold or otherwise disposed of during such year, the adjusted basis (computed without regard to this paragraph) of the municipal bond shall be reduced by the amount of the adjustment which would be required under section 1016(a)(5) (relating to adjustment to basis for amortizable bond premium) if the definition in section 171(d) of the term "bond" did not exclude such municipal bond. Notwithstanding the provisions of paragraph (1), no reduction to the cost of securities sold during the taxable year shall be made in re- spect of any obligation described in subsection (b)(1)(A)(ii) which is held by the taxpayer at the close of the taxable year; but in the taxable year in which any such obligation is sold or otherwise disposed of, if such obligation is a municipal bond (as defined in subsection (b)(1)), the cost of securities sold during such year shall be reduced by an amount equal to the adjustment described in paragraph (2), without regard to the fact that the taxpayer values his inventories on any basis other than cost. (b) Definitions For purposes of subsection (a)- (1) The term "municipal bond" means any obligation issued by a government or political subdivision thereof if the interest on such ob- " ligation is excludable from gross income; but such term does not include such an obligation if- A)(i) it is sold or otherwise disposed of by the taxpayer within 30 days after the date of its acquisition by him, or (ii)t its earliest maturity or call date is a dat; more than 5 years from the date on which it, wa-s acquired by the taxpayer; and (B) when it is sold or otherwise disposed of by the taxpayer- (i) in the case of a sale, the amount real- ized, or (ii) in the case of any other disposition, its fair market value at the time of such disposition, is higher than its adjusted basis (computed without regard to this section and section 1016(a)(6)). Determinations under subparagraph (B) shall be exclusive of interest. (2) The term "cost of securities sold" means the amount ascertained by subtracting the in- ventory value of the closing inventory of a taxable year from the sum of- (A) the inventory value of the opening in- ventory for such year, and (B) the cost of securities and other prop- erty purchased during such year wlch would properly be included in the invenfory of the taxpayer if on hand at the close of the taxable year. (Aug. 16, 1954, ch. 736, 68A Stat. 25; Sept. 2, 1958, Pub. L. 85-866, title I, §2(a), 72 Stat. 1606.) AMENDMENTS 1958-Subsec. (a). Pub. L. 85-866, § 2(a)(2), (3). elimi- nated "short-term" each place it appeared, and added sentence to provide that no reduction to cost of securi- ties sold during taxable year shall be made in respect of subsec. (b)(1)(A)(ii) obligations held at close of year, and to permit reduction in cost of securities sold in taxable year sold if obligation is municipal bond. Subsec. (b)(1). Pub. L. 85-866, § 2(a)(1), substituted "municipal bond" for "short-term municipal bond", designated former subpars. (A) and (B) as (A)() and (i), respectively, and added subpar. (B). EFFECTIVE DATE OF 1958 AmENDMENT Section 2(c) of Pub. L. 85-866 provided that: "The amendments made by subsections (a) and (b) [to sub- sees. (a) and (b)(1) of this section and to section 1016(a)(6) of this title] shall apply with respect to tax- Page 104