[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2761 Introduced in House (IH)]







104th CONGRESS
  1st Session
                                H. R. 2761

 To amend the Internal Revenue Code of 1986 to provide an election for 
 an overpayment in lieu of a basis increase where indebtedness secured 
 by property has original issue discount and is held by a cash method 
                               taxpayer.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           December 12, 1995

  Mr. Greenwood (for himself and Mr. McHale) introduced the following 
      bill; which was referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to provide an election for 
 an overpayment in lieu of a basis increase where indebtedness secured 
 by property has original issue discount and is held by a cash method 
                               taxpayer.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. ELECTION OF OVERPAYMENT IN LIEU OF BASIS INCREASE WHERE 
              INDEBTEDNESS SECURED BY PROPERTY HAS ORIGINAL ISSUE 
              DISCOUNT AND IS HELD BY CASH METHOD TAXPAYER.

    (a) In General.--Section 1038 of the Internal Revenue Code of 1986 
is amended by adding at the end the following new subsection:
    ``(h) Election of Overpayment In Lieu of Basis Increase Where 
Indebtedness Secured By Property Has Original Issue Discount and Is 
Held by Cash Method Taxpayer.--
            ``(1) In general.--In the case of a reacquisition of real 
        property to which subsection (a) applies, if--
                    ``(A) with respect to the indebtedness referred to 
                in subsection (a)(1), amounts were includible in the 
                gross income of the seller under section 1272 for 
                periods prior to such reacquisition, and
                    ``(B) the seller used the cash receipts and 
                disbursements method of accounting for all such 
                periods,
        at the election of such seller, the excess inclusion tax amount 
        with respect to such indebtedness shall be treated for purposes 
        of this title as an overpayment of tax for the taxable year in 
        which such reacquisition occurs.
            ``(2) Excess inclusion tax amount.--For purposes of 
        paragraph (1), the term `excess inclusion tax amount' means, 
        with respect to any indebtedness, the sum of the tax 
        adjustments for each of the taxable years in which amounts 
        described in paragraph (1)(A) were includible in gross income.
            ``(3) Tax adjustments.--For purposes of paragraph (2), the 
        term `tax adjustment' means, with respect to any taxable year, 
        the sum of--
                    ``(A) the amount by which the net chapter 1 tax 
                liability of the taxpayer would be decreased or 
                increased for such taxable year if such liability were 
                determined without regard to section 1272 with respect 
                to the indebtedness referred to in subsection (a)(1) 
                for such taxable year and all prior taxable years, plus
                    ``(B) interest on such decrease or increase as 
                determined under paragraph (4).
        If, as of the due date (as defined in paragraph (4)(B)) for the 
        taxable year in which such reacquisition occurs, a refund or 
        credit with respect to any preceding taxable year is prevented 
        by the operation of any law or rule of law (including res 
        judicata), subparagraph (B) shall not apply to such preceding 
        taxable year.
            ``(4) Computation of interest.--
                    ``(A) In general.--The amount of interest referred 
                to in paragraph (3)(B) with respect to any taxable year 
                shall be determined for the period--
                            ``(i) beginning on the due date for such 
                        taxable year, and
                            ``(ii) ending on the due date for the 
                        taxable year in which the reacquisition 
                        referred to in paragraph (1) occurs,
                by using the rates and methods applicable under section 
                6621 for underpayments or overpayments of tax (as 
                appropriate) for such period.
                    ``(B) Due date.--For purposes of this paragraph, 
                the term `due date' means the date prescribed by law 
                (determined without regard to extensions) for filing 
                the return of the tax imposed by this chapter for the 
                taxable year.
            ``(5) Coordination with amount of gain resulting and basis 
        adjustment.--In the case of a reacquisition with respect to 
        which the election under this subsection applies--
                    ``(A) the amount of gain (if any) determined under 
                subsection (b) resulting from such reacquisition shall 
                not be less than the amount of such gain which would be 
                determined under subsection (b), and
                    ``(B) the amount of increase (if any) under 
                subsection (c) shall not exceed the amount of the 
                increase which would be determined under subsection 
                (c),
        if section 1272 had not applied with respect to the 
        indebtedness referred to in subsection (a)(1).''
    (b) Effective Date.--The amendment made by this section shall apply 
to reacquisitions occurring after December 31, 1995.
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