
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC1037]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
          Subchapter O--Gain or Loss on Disposition of Property
 
                  PART III--COMMON NONTAXABLE EXCHANGES
 
Sec. 1037. Certain exchanges of United States obligations


(a) General rule

    When so provided by regulations promulgated by the Secretary in 
connection with the issue of obligations of the United States, no gain 
or loss shall be recognized on the surrender to the United States of 
obligations of the United States issued under chapter 31 of title 31 in 
exchange solely for other obligations issued under such chapter.

(b) Application of original issue discount rules

      (1) Exchanges involving obligations issued at a discount

        In any case in which gain has been realized but not recognized 
    because of the provisions of subsection (a) (or so much of section 
    1031(b) as relates to subsection (a) of this section), to the extent 
    such gain is later recognized by reason of a disposition or 
    redemption of an obligation received in an exchange subject to such 
    provisions, the first sentence of section 1271(c)(2) shall apply to 
    such gain as though the obligation disposed of or redeemed were the 
    obligation surrendered to the Government in the exchange rather than 
    the obligation actually disposed of or redeemed. For purposes of 
    this paragraph and subpart A of part V of subchapter P, if the 
    obligation surrendered in the exchange is a nontransferable 
    obligation described in subsection (a) or (c) of section 454--
            (A) the aggregate amount considered, with respect to the 
        obligation surrendered, as ordinary income shall not exceed the 
        difference between the issue price and the stated redemption 
        price which applies at the time of the exchange, and
            (B) the issue price of the obligation received in the 
        exchange shall be considered to be the stated redemption price 
        of the obligation surrendered in the exchange, increased by the 
        amount of other consideration (if any) paid to the United States 
        as a part of the exchange.

    (2) Exchanges of transferable obligations issued at not less 
                                  than par

        In any case in which subsection (a) (or so much of section 
    1031(b) or (c) as relates to subsection (a) of this section) has 
    applied to the exchange of a transferable obligation which was 
    issued at not less than par for another transferable obligation, the 
    issue price of the obligation received from the Government in the 
    exchange shall be considered for purposes of applying subpart A of 
    part V of subchapter P to be the same as the issue price of the 
    obligation surrendered to the Government in the exchange, increased 
    by the amount of other consideration (if any) paid to the United 
    States as a part of the exchange.

(c) Cross references

            (1) For rules relating to the recognition of gain or loss in 
        a case where subsection (a) would apply except for the fact that 
        the exchange was not made solely for other obligations of the 
        United States, see subsections (b) and (c) of section 1031.
            (2) For rules relating to the basis of obligations of the 
        United States acquired in an exchange for other obligations 
        described in subsection (a), see subsection (d) of section 1031.

(Added Pub. L. 86-346, title II, Sec. 201(a), Sept. 22, 1959, 73 Stat. 
622; amended Pub. L. 94-455, title XIX, Sec. 1901(a)(130), (b)(3)(I), 
Oct. 4, 1976, 90 Stat. 1786, 1793; Pub. L. 97-452, Sec. 2(c)(3), Jan. 
12, 1983, 96 Stat. 2478; Pub. L. 98-369, div. A, title I, 
Sec. 42(a)(11), July 18, 1984, 98 Stat. 557.)


                               Amendments

    1984--Subsec. (b). Pub. L. 98-369, Sec. 42(a)(11)(C), substituted 
``original issue discount rules'' for ``section 1232'' in heading.
    Subsec. (b)(1). Pub. L. 98-369, Sec. 42(a)(11)(A), (B), substituted 
``section 1271(c)(2)'' for ``section 1232(a)(2)(B)'', and ``subpart A of 
part V of subchapter P'' for ``section 1232''.
    Subsec. (b)(2). Pub. L. 98-369, Sec. 42(a)(11)(B), substituted 
``subpart A of part V of subchapter P'' for ``section 1232''.
    1983--Subsec. (a). Pub. L. 97-452 substituted ``chapter 31 of title 
31'' and ``chapter'' for ``the Second Liberty Bond Act'' and ``Act'', 
respectively.
    1976--Subsec. (b)(1). Pub. L. 94-455 substituted in introductory 
provisions ``section 1232(a)(2)(B)'' for ``section 1232(a)(2)(A)'' and 
in subpar. (A) ``ordinary income'' for ``gain from the sale or exchange 
of property which is not a capital asset''.


                    Effective Date of 1984 Amendment

    Amendment by Pub. L. 98-369 applicable to taxable years ending after 
July 18, 1984, see section 44 of Pub. L. 98-369, set out as an Effective 
Date note under section 1271 of this title.


                    Effective Date of 1976 Amendment

    Amendment by Pub. L. 94-455 effective for taxable years beginning 
after Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, set out as a 
note under section 2 of this title.


                             Effective Date

    Section 203 of Pub. L. 86-346 provided that: ``The amendments made 
by this title [enacting this section and amending section 1031 of this 
title and section 742a of former Title 31, Money and Finance] shall be 
effective for taxable years ending after the date of enactment of this 
Act [Sept. 22, 1959].''

                  Section Referred to in Other Sections

    This section is referred to in sections 454, 1031 of this title.
