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TITLE 26-INTERNAL REVENUE CODE (c) Bond with unmatured coupons detached If a bond or other evidence of indebtedness issued at any time with Interest coupons- (1) is purchased after August 16, 1954, and before January 1, 1958, and the purchaser does not receive all the coupons which first become payable more than 12 months after the date of the purchase, or (2) is purchased after December 31, 1957, and the purchaser does not receive all the coupons which first become payable after the date of the purchase, then the gain on the sale or other disposition of such evidence of indebtedness by such purchas- er (or by a person whose basis Is determined by reference to the basis in the hands of such pur- chaser) shall be considered as ordinary income to the extent that the fair market value (deter- mined as of the time of the purchase) of the evidence of indebtedness with coupons attached exceeds the purchase price. If this subsection and subsection (a)(2)(A) apply with respect to gain realized on the sale or exchange of any evi- dence of indebtedness, then subsection (a)(2)(A) shall apply with respect to that part of the gain to which this subsection does not apply. (d) Cross reference For special treatment of face.amount certificates on retirement, see section 72. (Aug. 16. 1954, ch. 736, 68A Stat. 326; Sept. 2, 1958, Pub. L. 85-866, title I, §§ 50(a), 51, 72 Stat. 1642, 1643; June 25, 1959, Pub. L. 86-69, § 3(e), 73 Stat. 140; Sept. 2, 1964, Pub. L. 88-563, § 5, 78 Stat. 845; Dec. 30, 1969, Pub. L. 91-172, title IV, § 413(a), (b), 83 Stat. 609, 611; Oct. 4, 1976, Pub. L. 94-455, title XIV, § 1402(b)(1)(S), title XIX, §§ 1901(b)(3)(I), (14)(D), 1904(b)(10)(C), 90 Stat. 1732, 1793, 1796, 1817.) TAXABLE YEARS AFTER 1977 Subsec. (a)(2) of this section amended by Pub. L. 94-455, title XIV, § 1402(b)(2), Oct. 4, 1976, 90 Stat. 1732, effective with respect to taxable years beginning after Dec. 31, 1977, by substituting "1 year"for "9 months". AMENDMENTS 1976-Subsec. (a)(2)(A), (B). Pub. L. 94-455, §§ 1402(b)(1)(S), 1901(b)(3)(I), provided that in sub- pars. (A) and (B): "6 months" would be changed to "9 months" for taxable years beginning in 1977; and sub- stituted "ordinary income" for "gain from sale or ex- change of property which is not a capital asset". Subsec. (b)(2). Pub. L. 94-455, §§ 1901(b)(14)(D), 1904(b)(10)(C), struck out reference to section 373 of this title and inserted", as in effect before July 1, 1974" following "section 4911". Subsec. (c). Pub. L. 94-455, § 1901(b)(3)(I), substitut- ed "ordinary income" for "gain from the sale or ex- change of property which is not a capital asset". 1969-Subsec. (a). Pub. L. 91-172, §413(a), added pars. (2)(A) and (3) and redesignated pars. (2)(A), (B), and (C), as (2)(B), (C), and (D), respectively, and in par. (2)(B), as so redesignated, extended its application to corporate bonds issued on or before May 27, 1969, and to government bonds. Subsec. (b)(2). Pub. L. 91-172, § 413(b), added provi- sions for the determination of the issue price in the case of a bond or other evidence of indebtedness and an option or other security issued together as an in- vestment unit. 1964-Subsec. (b)(2). Pub. L. 88-563 inserted provi- sions requiring the issue price of privately placed issues of bonds or other evidence of indebtedness to be increased by the amount, if any, of tax paid under sec- tion 4911 (and not credited, refunded, or reimbursed) on the acquisition of such bond or evidence by the first buyer. 1959-Subsec. (a)(2)(C). Pub. L. 86-69 substituted "Double inclusion in income not required" for "Elec- tion as to inclusion" in the catchline, and eliminated provisions which related to obligations with respect to which the taxpayer has made an election provided by section 454(a) and (c) of this title. 1958-Subsec. (a)(2)(A). Pub. L. 85-866, § 50(a), sub- stituted "which does not exceed-" for "which does not exceed", added clause (1) and designated existing provisions as clause (2), inserting the conditional clause therein. Subsec. (c). Pub. L. 85-8t%6, § 51, substituted "unma- tured" for "excess number of" in the catchline and "sale or exchange of any evidence of indebtedness" for "retirement of any bond", consolidated formed clauses (1) and (2) into present clause (1) with limitation to purchases made before Jan. 1, 1958, added present clause (2). and inserted parenthetical phrase "(or by a person whose basis is determined by reference to the basis in the hands of such purchaser)" and the word "fair" before "market value". EFFECTIVE DATE OF 1976 AMENDMENT Section 1402(b)(1) of Pub. L. 94-455 provided in part that the substitution of "9 months" for "6 months" in subsec. (a)(2)(A) and (B) of this section by section 1.t02(b)(1)(S) of Pub. L. 94-455 is effective with respect to taxable years beginning in 1977. Amendment of subsecs. (a)(2). (b)(2), (C) by section 1901(b)(3)(I), (14)(D) of Pub. L. 94-455 applicable with respect to taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455. set out as an Ef- fective Date of 1976 Amendment note under section 2 of this title. Amendment of subsec. (b)(2) by section 1904(b)(10)(C) of Pub. L. 94-455 effective Feb. 1, 1977, see section 1904(d) of Pub. L. 94-455, set out as an Ef- fective Date of 1976 Amendment note under section 4041 of this title. EFrECTIVE DATE OF 1969 AMENDMENT Section 413(e) of Pub. L. 91-172 provided that: "The amendments made by this section [amending subsecs. (a) and (b) of this section and section 6049 of this title] shall apply with respect to bonds and other evi- dences of indebtedness issued after May 27, 1969 (other than evidences of indebtedness issued pursuant to a written commitment which was binding on May 27, 1969, and at all times thereafter)." EFFECTIVE DATE OF 1959 AENDMENT Amendment by Pub. L. 86-69 applicable only with respect to taxable years beginning after Dec. 31, 1957, see section 4 of Pub. L. 86-69, set out as an Effective Date note under section 801 of this title. EFFECTIVE DATE OF 1958 AMENDMENT Section 50(b) of Pub. L. 85-866 provided that: "The amendment made by subsection (a) (to subsec. (a)(2) (A) of this section] shall apply to taxable years ending after December 31, 1957, but only with respect to dis- positions after such date." Amendment of subsec. (c) by Pub. L. 85-866 applica- ble to taxable years beginning after Dec. 31, 1953, and ending after Aug. 16, 1954, see section 1(c) of Pub. L. 85-866, set out as an Effective Date of 1958 Amend- ment note under section 165 of this title. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 249, 405, 409, 818, 871, 881, 1037, 1351, 1441, 6049 of this title, § 1232 Page 686