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TITLE 26-INTERNAL REVENUE CODE then the deduction shall be allowed for the tax- able year of the transfer. This subsection shall not apply in respect of the deduction for income, war profits, and excess profits taxes im- posed by the authority of any foreign country or possession of the United States. (g) Prepaid interest (1) In general If the taxable income of the taxpayer is computed under the cash receipts and dis- bursements method of accounting, interest paid by the taxpayer which, under regula- tions prescribed by the Secretary, is properly allocable to any period- (A) with respect to which the interest rep- resents a charge for the use or forbearance of money, and (B) which is after the close of the taxable year in which paid, shall be charged to cap- ital account and shall be treated as paid in the period to which so allocable. (2) Exception This subsection shall not apply to points paid in respect of any indebtedness incurred in connection with the purchase or improve- ment of, and secured by, the principal resi- dence of the taxpayer to the extent that, under regulations prescribed by the Secre- tary, such payment of points is an established business practice in the area in which such in- debtedness is incurred, and the amount of such payment does not exceed the amount generally charged in such area. (Aug. 16, 1954, ch. 736, 68A Stat. 157; Sept. 14, 1960, Pub. L. 86-781, § 6(a), 74 Stat. 1020; Oct. 24, 1962, Pub. L. 87-876, § 3(a), 76 Stat. 1199; Feb. 26, 1964, Pub. L. 88-272, title II, § 223(a)(1), 78 Stat. 76; Oct. 4, 1976, Pub. L. 94-455, title II, § 208(a), title XIX, §§ 1901(a)(69), 1906(b) (13)(A), 90 Stat. 1541, 1776, 1834.) AMENDNuTs 1976-Subsec. (c)(2). Pub. L. 94-455, §§ 1901(a)(69) (A), (B), 1906(b)(13)(A), redesignated former subsec. (c)(3) as (c)(2), and as so redesignated, substituted "in which he" for "which begins after December 31, 1953, and ends after the date of the enactment of this title In which the taxpayer" and struck out "or his dele- gate" following "Secretary" wherever appearing. Former subsee. (c)(2), which related to special limita- tions on the applicability of subsec. (c)(1), was struck out. Subsec. (c)(3). Pub. L. 94-455, § 1901(a)(69)(A), rede- signated (c)(3) as (c)(2). Subsec. d). Pub. L. 94455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary" wherever appearing. Subsec. (e. Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary" wherever appearing. Subsec. (g). Pub. L. 94-455, § 208(a), added subsec. (g). 1964-Subsec. (fM. Pub. L. 88-272 added subsec (f). 1962-Subsec. (e). Pub. L. 87-876 added subsec. (e). 1960-Subsec. (d). Pub. L. 86-781 added subsec. (d). E' ncTivz DATE oF 1976 AwmsxENT Amendment of subsec. (c)(2), (3) by section 1901(a)(69) of Pub. L. 94-455 effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94455, set out as an Effective Date of 1976 Amendment note under section 2 of this title. Section 208(b) of Pub. L. 94455 provided that: "(1) In general.-Except as provided In paragraph (2), the amendment made by subsection (a) (enact- ing subsec. (g) of this section] shall apply to amounts paid after December 31, 1975, in taxable years ending after such date. "(2) Certain amounts paid before 1977.-The amendment made by subsection (a) (enacting subsec. (g) of this section] shall not apply to amounts paid before January 1, 1977, pursuant to a binding con- tract or written loan commitment which existed on September 16, 1975 (and at all times thereafter), and which required prepayment of such amounts by the taxpayer." EcrxvEx DATE OF 1964 AMENDMENT Section 223(b) of Pub. L. 88-272 provided that: "Except as provided in subsections (c) and (d) (set out as notes under this section]- "(1) the amendment made by subsection (a)(1) [to this section] shall apply to taxable years beginning nfter December 31, 1953, and ending after August 16, 1054, and '(2) the amendment made by subsection (a)(2) [to sectlan 43, Internal Revenue Code of 1939) shall apply to taxable years to which the Internal Rev- enue Code of 1939 applies." E.%YEcT'vE DATE OF 1962 AMENDMENT Section 3(b) of Pub. L. 87-876 provided that: "The amendment made by subsection (a) [adding subsec. (e) of this section] shall apply only with respect to tax- able years ending after December 31, 1902." EFFECTIVE DATE OF 1960 AMENDMENT Section 8(b) of Pub. L. 86-781 provided that: "The amendment made by subsection (a) [adding subsec. (d) of this section] shall apply to taxable years ending after December 31, 1960." ELECTION AS TO TRANSFERS IN TAXABLE YEARs BEGINNING BEFORE JAN. 1, 1964 Section 223(c) of Pub. L. 88-272 provided that: "(1) The amendments made by subsection (a) [to this section, and section 43, Internal Revenue Code of 1939] shall not apply to any transfer of money or other property described in subsection (a) made in a taxable year beginning before January 1, 1964, If the taxpayer elects, in the manner provided by regulations prescribed by the Secretary of the Treasury or his del- egate, to have this paragraph apply. Such an elec- tion- "(A) must be made within one year after the date of the enactment of this Act [Feb. 26, 1964], "(B) may not be revoked after the expiration of such one-year period, and "(C) shall apply to all transfers described in the first sentence of this paragraph (other than trans- fers described in paragraph (2)). In the case of any transfer to which this paragraph applies, the deduction shall be allowed only for the taxable year in which the contest with respect to such transfer is settled. "(2) Paragraph (1) shall not apply to any transfer if the assessment of any deficiency which would result from the application of the election in respect of such transfer is, on the date of the election under para- graph (1), prevented by the operation of any law or rule of law. "(3) If the taxpayer makes an election under para- graph (1), and if, on the date of such election, the as- sessment of any deficiency which results from the ap- plication of the election in respect of any transfer is not prevented by the operation of any law or rule of law, the period within which assessment of such defi- ciency may be made shall not expire earlier than 2 years after the date of the enactment of this Act (Feb. 26, 1964]." Page 366