123STA T . 33 8PUBLIC LA W 111 –5—FE B.1 7, 2 0 0 9(b)EF F ECTIV E DA TE .—Theam e nd men ts made b y th i sse c ti o n sha l la p ply to indi v id u als w ho be g in wo rkf or the employer after December 31,20 0 8 . PARTIV— R ULES RELATI NG T OD E B T INSTRU M ENTS SEC.123 1. D E F E R R AL A N DRA T A B LE I NCL U SI O N OF INCO M E ARISIN G FROM BUSINESS INDEBTEDNESS DISC H ARGED B Y THE REAC Q UISITION OF A DEBT INSTRUMENT. (a) ING ENE R A L .— S ection 108 (relating to income from dis - charge of indebtedness) is amended by adding at the end the fol- lowing new subsection
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‘(i) DEFERRAL AN DR ATA B LE INCL US I O N OF INCO M E A RISIN GF ROM B USINESS INDEBTEDNESS DISC H ARGED B Y THE REAC Q UISITION OF A DEBT INSTRUMENT.— ‘‘(1) IN GENERAL.—At the election of the ta x payer, income from the discharge of indebtedness in connection with the reac q uisition after December 31, 2008, and before J anuary 1, 2011, of an applicable debt instrument shall be includible in gross income ratably over the 5 -taxable-year period beginning with— ‘‘(A) in the case of a reacquisition occurring in 200 9 , the fifth taxable year following the taxable year in which the reacquisition occurs, and ‘‘(B) in the case of a reacquisition occurring in 2010, the fourth taxable year following the taxable year in which the reacquisition occurs. ‘‘(2) DEFERRAL OF DEDUCTION FOR ORIGINAL ISSUE DISCOUNT IN DEBT FOR DEBT E X CHANGES.— ‘‘(A) IN GENERAL.—If, as part of a reacquisition to which paragraph (1) applies, any debt instrument is issued for the applicable debt instrument being reacquired (or is treated as so issued under subsection (e)( 4 ) and the regulations thereunder) and there is any original issue discount determined under subpart A of part V of sub- chapter P of this chapter with respect to the debt instrument so issued— ‘‘(i) except as provided in clause (ii), no deduction otherwise allowable under this chapter shall be allowed to the issuer of such debt instrument with respect to the portion of such original issue discount which— ‘‘(I) accrues before the 1st taxable year in the 5-taxable-year period in which income from the discharge of indebtedness attributable to the reacquisition of the debt instrument is includible under paragraph (1), and ‘‘(II) does not exceed the income from the dis- charge of indebtedness with respect to the debt instrument being reacquired, and ‘‘(ii) the aggregate amount of deductions disallowed under clause (i) shall be allowed as a deduction ratably over the 5-taxable-year period described in clause (i)(I). If the amount of the original issue discount accruing before such 1st taxable year exceeds the income from the dis- charge of indebtedness with respect to the applicable debt Timep e r i ods.26USC108 .
