[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[S. 2197 Introduced in Senate (IS)]







105th CONGRESS
  2d Session
                                S. 2197

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


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                   IN THE SENATE OF THE UNITED STATES

                             June 19, 1998

 Mr. Santorum introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to provide an election of a 
  deduction 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 DEDUCTION 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 Deduction 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 income inclusion 
        with respect to such indebtedness shall be treated for purposes 
        of this title as a nonbusiness debt (as defined in section 
        166(d)(2)) which became worthless within the taxable year in 
        which such reacquisition occurs.
            ``(2) Excess income inclusion.--For purposes of paragraph 
        (1), the term `excess income inclusion' means, with respect to 
        any indebtedness, the sum of the amounts included in the gross 
        income of the seller under section 1272 for the taxable years 
        ending before such reacquisition.
            ``(3) Election.--The election under this subsection shall 
        be made not later than the due date (including extensions) for 
        filing the return of tax imposed by this chapter for the 
        taxable year in which such reacquisition occurs.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to reacquisitions occurring after December 31, 1997.
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