# 26 U.S.C. § 1288: Treatment of original issue discount on tax-exempt obligations

Source: OLRC release point 119-134 <https://uscode.house.gov/us/usc/119-134/t26/s1288>. Cite pinpoints as 26 U.S.C. § 1288(a)(1).

## § 1288(a) General rule

Original issue discount on any tax-exempt obligation shall be treated as accruing—

**§ 1288(a)(1)** for purposes of section 163, in the manner provided by section 1272(a) (determined without regard to paragraph (7) thereof), and

**§ 1288(a)(2)** for purposes of determining the adjusted basis of the holder, in the manner provided by section 1272(a) (determined with regard to paragraph (7) thereof).

## § 1288(b) Definitions and special rules

For purposes of this section—

**§ 1288(b)(1) Original issue discount.** The term “original issue discount” has the meaning given to such term by section 1273(a) without regard to paragraph (3) thereof. In applying section 483 or 1274, under regulations prescribed by the Secretary, appropriate adjustments shall be made to the applicable Federal rate to take into account the tax exemption for interest on the obligation.

**§ 1288(b)(2) Tax-exempt obligation.** The term “tax-exempt obligation” has the meaning given to such term by section 1275(a)(3).

**§ 1288(b)(3) Short-term obligations.** In applying this section to obligations with maturity of 1 year or less, rules similar to the rules of section 1283(b) shall apply.

## Regulations

- [Treas. Reg. § 1.1288-1](/26/reg/1.1288-1.md): Adjustment of applicable Federal rate for tax-exempt obligations. (interprets § 1288)

## Final rules

- [81 FR 24482](https://www.federalregister.gov/documents/2016/04/26/2016-09614/determination-of-adjusted-applicable-federal-rates-under-section-1288-and-the-adjusted-federal) (2016): Determination of Adjusted Applicable Federal Rates Under Section 1288 and the Adjusted Federal Long-Term Rate Under Section 382

## Connections

Cites: § 163 Interest; § 483 Interest on certain deferred payments; § 1272 Current inclusion in income of original issue discount; § 1273 Determination of amount of original issue discount; § 1275 Other definitions and special rules; § 1283 Definitions and special rules

Cited by: § 163 Interest

## Amendments

- 1984-07-18: [Pub. L. 98-369](/26/act/98-369.md), 98 Stat. 553
- 1988-11-10: [Pub. L. 100-647](/26/act/100-647.md), 102 Stat. 3427