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TITLE 26-INTERNAL REVENUE CODE CROSS RzrExnnCES Amount of gain and recognition of gain or loss, see section 1001 of this title. Computation of income of each partner, gains or losses described in this section, see section 702 of this title. Disposal of coal or domestic iron ore, denial of de- duction, see section 272 of this title. Involuntary conversions as nontaxable exchange, see section 1033 of this title. Idmitation on capital losses, see section 1211 of this title. Loss from wash sales of stock or securities, see sec- tion 1091 of this title. Rules for allocation of basis of partnership, see sec- tion 755 of this title. Sale of land with unharvested crop as nondeductible item from gross income, see section 268 of this title. Sale or exchange of residence as nontaxable, see sec- tion 1034 of this title. Section 341 assets as including property described in subsection (b) of this section, see section 341 of this title. SECTION REFRED TO IN OTHEa SzCrIONS This section is referred to in sections 57, 64, 118, 170, 268, 272, 341, 451, 543, 702, 751, 755, 804, 817, 904, 1223, 1251 of this title. § 1232. Bonds and other evidences of indebtedness (a) General rule For purposes of this subtitle, in the case of bonds, debentures, notes, or certificates or other evidences of indebtedness, which are cap- ital assets in the hands of the taxpayer, and which are issued by any corporation, or by any government or political subdivision thereof- (1) Retirement Amounts received by the holder on retire- ment of such bonds or other evidences of in- debtedness shall be considered as amounts re- ceived in exchange therefor (except that in the case of bonds or other evidences of in- debtedness issued before January 1, 1955, this paragroph shall apply only to those Issued with a-,terest coupons or in registered form, or to those in such form on March 1, 1954). (2) Sale or exchange (A) Corporate bonds issued after May 27, 1969 Except as provided in subparagraph (C), on the sale or exchange of bonds or other evidences of indebtedness issued by a corpo- ration after May 27, 1969, held by the tax- payer more than 9 months, any gain real- ized shall (except as provided in the follow- ing sentence) be considered gain from the sale or exchange of a capital asset held for more than 9 months. If at the time of origi- nal issue there was an intention to call the bond or other evidence of indebtedness before maturity, any gain realized on the sale or exchange thereof which does not exceed an amount equal to the original issue discount (as defined in subsection (b)) reduced by the portion of original issue dis- count previously includible in the gross income of any holder (as provided in para- graph (3)(B)) shall be considered as ordi- nary income. (B) Corporate bonds issued on or before May 27, 1969, and government bonds Except as provided in subparagraph (C), on the sale or exchange of bonds or other evidences of indebtedness issued by a gov- emnment or political subdivision thereof after December 31, 1954, or by a corpora. tion after December 31, 1954, and on or before May 27, 1969, held by the taxpayer more than 9 months, any gain realized which does not exceed- (I) an amount equal to the original issue discount (as defined in subsection (b)), or (it) if at the time of original issue there was no intention to call the bond or other evidence of indebtedness before maturity, an amount which bears the same ratio to the original issue discount (as defined in subsection (b)) as the number of complete months that the bond or other evidence of indebtedness was held by the taxpayer bears to the number of complete months from the date of original issue to the date of maturity, shall be considered as ordinary income. Qain in excess of such amount shall be con- sidered ordinary income held more than 9 months. (C) Exceptions This paragraph shall not apply to- (I) obligations the interest on which is not includible in gross income under sec- tion 103 (relating to certain governmental obligations), or (ii) any holder who has purchased the bond or other evidence of indebtedness at a premium. (D) Double inclusion in income not required This section shall not require the inclu- sion of any amount previously includible in gross income. (3) Inclusion in income of original issue discount on corporate bonds issued after May 27, 1969 (A) General rule There shall be included in the gross income of the holder of any bond or other evidence of indebtedness issued by a corpo- ration after May 27, 1969, the ratable monthly portion of original issue discount multiplied by the number of complete months (plus any fractional part of a month determined in accordance with the last sentence of this subparagraph) such holder held such bond or other evidence of indebtedness during the taxable year. Except as provided in subparagraph (B), the ratable monthly portion of original issue discount shall equal the original issue discount (as defined in subsection (b)) divid- ed by the number of complete months from the date of original issue to the stated ma- turity date of such bond or other evidence of indebtedness. For purposes of this sec- tion, a complete month commences with the date of original issue and the corresponding day of each succeeding calendar month (or the last day of a calendar month in which there is no corresponding day); and, in any case where a bond or other evidence of in- debtedness is acquired on any other day, the ratable monthly portion of original issue discount for the complete month in which such acquisition occurs shall be allo- cated between the transferor and the trans- Page 684 § 1232