103 STAT. 2332 PUBLIC LAW 101-239—DEC. 19, 1989 " (2) SIGNIFICANT ORIGINAL ISSUE DISCOUNT. —For purposes of paragraph (I)(C), a debt instrument shall be treated as having signi]^cant original issue discount if— "(A) the aggregate amount which would be includible in gross income with respect to such instrument for periods before the close of any accrual period (as defined in section 1272(a)(5)) ending after the date 5 years after the date of issue, exceeds— "(B) the sum of— "(i) the aggregate amount of interest to be paid under the instrument before the close of such accrual period, and "(ii) the product of the issue price of such instrument (as defined in sections 1278(b) and 1274(a)) and its yield to maturity. "(3) SPECIAL RULES.— For purposes of determining whether a debt instrument is an applicable high jdeld discount obliga- tion— "(A) any payment under the instrument shall be assumed to be made on the last day permitted under the instrument, and "(B) any payment to be made in the form of another obligation (or stock) of the issuer (or a related person within f the meaning of section 453(fKl)) shall be assumed to be e made when such obligation (or stock) is required to be paid in cash or in property other than such obligation (or stock). "(4) DEBT INSTRUMENT.—For purposes of this subsection, the term 'debt instrument' mesms any instrument which is a debt instrument as defined in section 1275(a). "(5) REGULATIONS.—The Secretary shall prescribe such regu- lations as may be appropriate to carry out the purposes of this subsection and subsection (e)(5), including— "(A) regulations providing for modifications to the provi- sions of this subsection and subsection (e)(5) in the case of varying rates of interest, put or call options, indefinite maturities, contingent payments, assumptions of debt in- struments, conversion rights, or other circumstances where such modifications are appropriate to carry out the pur- poses of this subsection and subsection (e)(5), and "(B) regulations to prevent avoidance of the purposes of this subjection and subsection (e)(5) through the use of issuers other than C corporations, agreements to borrow amounts due under the debt instrument, or other arrange- ments." 26 USC 163 note. (c) EFFECTIVE DATE.— (1) IN GENERAL.— Except as provided in paragraph (2), the amendments made by tlus section shall apply to instruments issued after July 10, 1989. (2) EXCEPTIONS. — (A) The amendments made by this section shall not apply to any instrument if— (i) such instrument is issued in connection with an acquisition— (I) which is made on or before July 10, 1989, (H) for which there was a written binding con- tract in effect on July 10, 1989, and at all times thereafter before such acquisition, or
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