
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document affected by Public Law 107-134 Section 105]
[CITE: 26USC108]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
               Subchapter B--Computation of Taxable Income
 
         PART III--ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
 
Sec. 108. Income from discharge of indebtedness


(a) Exclusion from gross income

                           (1) In general

        Gross income does not include any amount which (but for this 
    subsection) would be includible in gross income by reason of the 
    discharge (in whole or in part) of indebtedness of the taxpayer if--
            (A) the discharge occurs in a title 11 case,
            (B) the discharge occurs when the taxpayer is insolvent,
            (C) the indebtedness discharged is qualified farm 
        indebtedness, or
            (D) in the case of a taxpayer other than a C corporation, 
        the indebtedness discharged is qualified real property business 
        indebtedness.

                   (2) Coordination of exclusions

        (A) Title 11 exclusion takes precedence

            Subparagraphs (B), (C), and (D) of paragraph (1) shall not 
        apply to a discharge which occurs in a title 11 case.

        (B) Insolvency exclusion takes precedence over qualified farm 
                exclusion and qualified real property business exclusion

            Subparagraphs (C) and (D) of paragraph (1) shall not apply 
        to a discharge to the extent the taxpayer is insolvent.

      (3) Insolvency exclusion limited to amount of insolvency

        In the case of a discharge to which paragraph (1)(B) applies, 
    the amount excluded under paragraph (1)(B) shall not exceed the 
    amount by which the taxpayer is insolvent.

(b) Reduction of tax attributes

                           (1) In general

        The amount excluded from gross income under subparagraph (A), 
    (B), or (C) of subsection (a)(1) shall be applied to reduce the tax 
    attributes of the taxpayer as provided in paragraph (2).

           (2) Tax attributes affected; order of reduction

        Except as provided in paragraph (5), the reduction referred to 
    in paragraph (1) shall be made in the following tax attributes in 
    the following order:

        (A) NOL

            Any net operating loss for the taxable year of the 
        discharge, and any net operating loss carryover to such taxable 
        year.

        (B) General business credit

            Any carryover to or from the taxable year of a discharge of 
        an amount for purposes for determining the amount allowable as a 
        credit under section 38 (relating to general business credit).

        (C) Minimum tax credit

            The amount of the minimum tax credit available under section 
        53(b) as of the beginning of the taxable year immediately 
        following the taxable year of the discharge.

        (D) Capital loss carryovers

            Any net capital loss for the taxable year of the discharge, 
        and any capital loss carryover to such taxable year under 
        section 1212.

        (E) Basis reduction

            (i) In general

                The basis of the property of the taxpayer.
            (ii) Cross reference

                For provisions for making the reduction described in 
            clause (i), see section 1017.

        (F) Passive activity loss and credit carryovers

            Any passive activity loss or credit carryover of the 
        taxpayer under section 469(b) from the taxable year of the 
        discharge.

        (G) Foreign tax credit carryovers

            Any carryover to or from the taxable year of the discharge 
        for purposes of determining the amount of the credit allowable 
        under section 27.

                       (3) Amount of reduction

        (A) In general

            Except as provided in subparagraph (B), the reductions 
        described in paragraph (2) shall be one dollar for each dollar 
        excluded by subsection (a).

        (B) Credit carryover reduction

            The reductions described in subparagraphs (B), (C), and (G) 
        shall be 33\1/3\ cents for each dollar excluded by subsection 
        (a). The reduction described in subparagraph (F) in any passive 
        activity credit carryover shall be 33\1/3\ cents for each dollar 
        excluded by subsection (a).

                         (4) Ordering rules

        (A) Reductions made after determination of tax for year

            The reductions described in paragraph (2) shall be made 
        after the determination of the tax imposed by this chapter for 
        the taxable year of the discharge.

        (B) Reductions under subparagraph (A) or (D) of paragraph (2)

            The reductions described in subparagraph (A) or (D) of 
        paragraph (2) (as the case may be) shall be made first in the 
        loss for the taxable year of the discharge and then in the 
        carryovers to such taxable year in the order of the taxable 
        years from which each such carryover arose.

        (C) Reductions under subparagraphs (B) and (G) of paragraph (2)

            The reductions described in subparagraphs (B) and (G) of 
        paragraph (2) shall be made in the order in which carryovers are 
        taken into account under this chapter for the taxable year of 
        the discharge.

     (5) Election to apply reduction first against depreciable 
                                  property

        (A) In general

            The taxpayer may elect to apply any portion of the reduction 
        referred to in paragraph (1) to the reduction under section 1017 
        of the basis of the depreciable property of the taxpayer.

        (B) Limitation

            The amount to which an election under subparagraph (A) 
        applies shall not exceed the aggregate adjusted bases of the 
        depreciable property held by the taxpayer as of the beginning of 
        the taxable year following the taxable year in which the 
        discharge occurs.

        (C) Other tax attributes not reduced

            Paragraph (2) shall not apply to any amount to which an 
        election under this paragraph applies.

(c) Treatment of discharge of qualified real property business 
        indebtedness

                         (1) Basis reduction

        (A) In general

            The amount excluded from gross income under subparagraph (D) 
        of subsection (a)(1) shall be applied to reduce the basis of the 
        depreciable real property of the taxpayer.

        (B) Cross reference

            For provisions making the reduction described in 
        subparagraph (A), see section 1017.

                           (2) Limitations

        (A) Indebtedness in excess of value

            The amount excluded under subparagraph (D) of subsection 
        (a)(1) with respect to any qualified real property business 
        indebtedness shall not exceed the excess (if any) of--
                (i) the outstanding principal amount of such 
            indebtedness (immediately before the discharge), over
                (ii) the fair market value of the real property 
            described in paragraph (3)(A) (as of such time), reduced by 
            the outstanding principal amount of any other qualified real 
            property business indebtedness secured by such property (as 
            of such time).

        (B) Overall limitation

            The amount excluded under subparagraph (D) of subsection 
        (a)(1) shall not exceed the aggregate adjusted bases of 
        depreciable real property (determined after any reductions under 
        subsections (b) and (g)) held by the taxpayer immediately before 
        the discharge (other than depreciable real property acquired in 
        contemplation of such discharge).

          (3) Qualified real property business indebtedness

        The term ``qualified real property business indebtedness'' means 
    indebtedness which--
            (A) was incurred or assumed by the taxpayer in connection 
        with real property used in a trade or business and is secured by 
        such real property,
            (B) was incurred or assumed before January 1, 1993, or if 
        incurred or assumed on or after such date, is qualified 
        acquisition indebtedness, and
            (C) with respect to which such taxpayer makes an election to 
        have this paragraph apply.

    Such term shall not include qualified farm indebtedness. 
    Indebtedness under subparagraph (B) shall include indebtedness 
    resulting from the refinancing of indebtedness under subparagraph 
    (B) (or this sentence), but only to the extent it does not exceed 
    the amount of the indebtedness being refinanced.

               (4) Qualified acquisition indebtedness

        For purposes of paragraph (3)(B), the term ``qualified 
    acquisition indebtedness'' means, with respect to any real property 
    described in paragraph (3)(A), indebtedness incurred or assumed to 
    acquire, construct, reconstruct, or substantially improve such 
    property.

                           (5) Regulations

        The Secretary shall issue such regulations as are necessary to 
    carry out this subsection, including regulations preventing the 
    abuse of this subsection through cross-collateralization or other 
    means.

(d) Meaning of terms; special rules relating to certain provisions

                    (1) Indebtedness of taxpayer

        For purposes of this section, the term ``indebtedness of the 
    taxpayer'' means any indebtedness--
            (A) for which the taxpayer is liable, or
            (B) subject to which the taxpayer holds property.

                          (2) Title 11 case

        For purposes of this section, the term ``title 11 case'' means a 
    case under title 11 of the United States Code (relating to 
    bankruptcy), but only if the taxpayer is under the jurisdiction of 
    the court in such case and the discharge of indebtedness is granted 
    by the court or is pursuant to a plan approved by the court.

                            (3) Insolvent

        For purposes of this section, the term ``insolvent'' means the 
    excess of liabilities over the fair market value of assets. With 
    respect to any discharge, whether or not the taxpayer is insolvent, 
    and the amount by which the taxpayer is insolvent, shall be 
    determined on the basis of the taxpayer's assets and liabilities 
    immediately before the discharge.

             [(4) Repealed. Pub. L. 99-514, title VIII, 
              Sec. 822(b)(3)(A), Oct. 22, 1986, 100 Stat. 2373]

                      (5) Depreciable property

        The term ``depreciable property'' has the same meaning as when 
    used in section 1017.

        (6) Certain provisions to be applied at partner level

        In the case of a partnership, subsections (a), (b), (c), and (g) 
    shall be applied at the partner level.

                 (7) Special rules for S corporation

        (A) Certain provisions to be applied at corporate level

            In the case of an S corporation, subsections (a), (b), (c), 
        and (g) shall be applied at the corporate level.

        (B) Reduction in carryover of disallowed losses and deductions

            In the case of an S corporation, for purposes of 
        subparagraph (A) of subsection (b)(2), any loss or deduction 
        which is disallowed for the taxable year of the discharge under 
        section 1366(d)(1) shall be treated as a net operating loss for 
        such taxable year. The preceding sentence shall not apply to any 
        discharge to the extent that subsection (a)(1)(D) applies to 
        such discharge.

        (C) Coordination with basis adjustments under section 1367(b)(2)

            For purposes of subsection (e)(6), a shareholder's adjusted 
        basis in indebtedness of an S corporation shall be determined 
        without regard to any adjustments made under section 1367(b)(2).

       (8) Reductions of tax attributes in title 11 cases of 
                      individuals to be made by estate

        In any case under chapter 7 or 11 of title 11 of the United 
    States Code to which section 1398 applies, for purposes of 
    paragraphs (1) and (5) of subsection (b) the estate (and not the 
    individual) shall be treated as the taxpayer. The preceding sentence 
    shall not apply for purposes of applying section 1017 to property 
    transferred by the estate to the individual.

                 (9) Time for making election, etc.

        (A) Time

            An election under paragraph (5) of subsection (b) or under 
        paragraph (3)(C) of subsection (c) shall be made on the 
        taxpayer's return for the taxable year in which the discharge 
        occurs or at such other time as may be permitted in regulations 
        prescribed by the Secretary.

        (B) Revocation only with consent

            An election referred to in subparagraph (A), once made, may 
        be revoked only with the consent of the Secretary.

        (C) Manner

            An election referred to in subparagraph (A) shall be made in 
        such manner as the Secretary may by regulations prescribe.

                        (10) Cross reference

            For provision that no reduction is to be made in the basis 
        of exempt property of an individual debtor, see section 
        1017(c)(1).

(e) General rules for discharge of indebtedness (including discharges 
        not in title 11 cases or insolvency)

    For purposes of this title--

                  (1) No other insolvency exception

        Except as otherwise provided in this section, there shall be no 
    insolvency exception from the general rule that gross income 
    includes income from the discharge of indebtedness.

        (2) Income not realized to extent of lost deductions

        No income shall be realized from the discharge of indebtedness 
    to the extent that payment of the liability would have given rise to 
    a deduction.

        (3) Adjustments for unamortized premium and discount

        The amount taken into account with respect to any discharge 
    shall be properly adjusted for unamortized premium and unamortized 
    discount with respect to the indebtedness discharged.

     (4) Acquisition of indebtedness by person related to debtor

        (A) Treated as acquisition by debtor

            For purposes of determining income of the debtor from 
        discharge of indebtedness, to the extent provided in regulations 
        prescribed by the Secretary, the acquisition of outstanding 
        indebtedness by a person bearing a relationship to the debtor 
        specified in section 267(b) or 707(b)(1) from a person who does 
        not bear such a relationship to the debtor shall be treated as 
        the acquisition of such indebtedness by the debtor. Such 
        regulations shall provide for such adjustments in the treatment 
        of any subsequent transactions involving the indebtedness as may 
        be appropriate by reason of the application of the preceding 
        sentence.

        (B) Members of family

            For purposes of this paragraph, sections 267(b) and 
        707(b)(1) shall be applied as if section 267(c)(4) provided that 
        the family of an individual consists of the individual's spouse, 
        the individual's children, grandchildren, and parents, and any 
        spouse of the individual's children or grandchildren.

        (C) Entities under common control treated as related

            For purposes of this paragraph, two entities which are 
        treated as a single employer under subsection (b) or (c) of 
        section 414 shall be treated as bearing a relationship to each 
        other which is described in section 267(b).

    (5) Purchase-money debt reduction for solvent debtor treated 
                             as price reduction

        If--
            (A) the debt of a purchaser of property to the seller of 
        such property which arose out of the purchase of such property 
        is reduced,
            (B) such reduction does not occur--
                (i) in a title 11 case, or
                (ii) when the purchaser is insolvent, and

            (C) but for this paragraph, such reduction would be treated 
        as income to the purchaser from the discharge of indebtedness,

    then such reduction shall be treated as a purchase price adjustment.

               (6) Indebtedness contributed to capital

        Except as provided in regulations, for purposes of determining 
    income of the debtor from discharge of indebtedness, if a debtor 
    corporation acquires its indebtedness from a shareholder as a 
    contribution to capital--
            (A) section 118 shall not apply, but
            (B) such corporation shall be treated as having satisfied 
        the indebtedness with an amount of money equal to the 
        shareholder's adjusted basis in the indebtedness.

          (7) Recapture of gain on subsequent sale of stock

        (A) In general

            If a creditor acquires stock of a debtor corporation in 
        satisfaction of such corporation's indebtedness, for purposes of 
        section 1245--
                (i) such stock (and any other property the basis of 
            which is determined in whole or in part by reference to the 
            adjusted basis of such stock) shall be treated as section 
            1245 property,
                (ii) the aggregate amount allowed to the creditor--
                    (I) as deductions under subsection (a) or (b) of 
                section 166 (by reason of the worthlessness or partial 
                worthlessness of the indebtedness), or
                    (II) as an ordinary loss on the exchange,

          shall be treated as an amount allowed as a deduction for 
            depreciation, and
                (iii) an exchange of such stock qualifying under section 
            354(a), 355(a), or 356(a) shall be treated as an exchange to 
            which section 1245(b)(3) applies.

        The amount determined under clause (ii) shall be reduced by the 
        amount (if any) included in the creditor's gross income on the 
        exchange.

        (B) Special rule for cash basis taxpayers

            In the case of any creditor who computes his taxable income 
        under the cash receipts and disbursements method, proper 
        adjustment shall be made in the amount taken into account under 
        clause (ii) of subparagraph (A) for any amount which was not 
        included in the creditor's gross income but which would have 
        been included in such gross income if such indebtedness had been 
        satisfied in full.

        (C) Stock of parent corporation

            For purposes of this paragraph, stock of a corporation in 
        control (within the meaning of section 368(c)) of the debtor 
        corporation shall be treated as stock of the debtor corporation.

        (D) Treatment of successor corporation

            For purposes of this paragraph, the term ``debtor 
        corporation'' includes a successor corporation.

        (E) Partnership rule

            Under regulations prescribed by the Secretary, rules similar 
        to the rules of the foregoing subparagraphs of this paragraph 
        shall apply with respect to the indebtedness of a partnership.

          (8) Indebtedness satisfied by corporation's stock

        For purposes of determining income of a debtor from discharge of 
    indebtedness, if a debtor corporation transfers stock to a creditor 
    in satisfaction of its indebtedness, such corporation shall be 
    treated as having satisfied the indebtedness with an amount of money 
    equal to the fair market value of the stock.

    (9) Discharge of indebtedness income not taken into account 
                  in determining whether entity meets REIT 
                               qualifications

        Any amount included in gross income by reason of the discharge 
    of indebtedness shall not be taken into account for purposes of 
    paragraphs (2) and (3) of section 856(c).

     (10) Indebtedness satisfied by issuance of debt instrument

        (A) In general

            For purposes of determining income of a debtor from 
        discharge of indebtedness, if a debtor issues a debt instrument 
        in satisfaction of indebtedness, such debtor shall be treated as 
        having satisfied the indebtedness with an amount of money equal 
        to the issue price of such debt instrument.

        (B) Issue price

            For purposes of subparagraph (A), the issue price of any 
        debt instrument shall be determined under sections 1273 and 
        1274. For purposes of the preceding sentence, section 1273(b)(4) 
        shall be applied by reducing the stated redemption price of any 
        instrument by the portion of such stated redemption price which 
        is treated as interest for purposes of this chapter.

(f) Student loans

                           (1) In general

        In the case of an individual, gross income does not include any 
    amount which (but for this subsection) would be includible in gross 
    income by reason of the discharge (in whole or in part) of any 
    student loan if such discharge was pursuant to a provision of such 
    loan under which all or part of the indebtedness of the individual 
    would be discharged if the individual worked for a certain period of 
    time in certain professions for any of a broad class of employers.

                          (2) Student loan

        For purposes of this subsection, the term ``student loan'' means 
    any loan to an individual to assist the individual in attending an 
    educational organization described in section 170(b)(1)(A)(ii) made 
    by--
            (A) the United States, or an instrumentality or agency 
        thereof,
            (B) a State, territory, or possession of the United States, 
        or the District of Columbia, or any political subdivision 
        thereof,
            (C) a public benefit corporation--
                (i) which is exempt from taxation under section 
            501(c)(3),
                (ii) which has assumed control over a State, county, or 
            municipal hospital, and
                (iii) whose employees have been deemed to be public 
            employees under State law, or

            (D) any educational organization described in section 
        170(b)(1)(A)(ii) if such loan is made--
                (i) pursuant to an agreement with any entity described 
            in subparagraph (A), (B), or (C) under which the funds from 
            which the loan was made were provided to such educational 
            organization, or
                (ii) pursuant to a program of such educational 
            organization which is designed to encourage its students to 
            serve in occupations with unmet needs or in areas with unmet 
            needs and under which the services provided by the students 
            (or former students) are for or under the direction of a 
            governmental unit or an organization described in section 
            501(c)(3) and exempt from tax under section 501(a).

    The term ``student loan'' includes any loan made by an educational 
    organization described in section 170(b)(1)(A)(ii) or by an 
    organization exempt from tax under section 501(a) to refinance a 
    loan to an individual to assist the individual in attending any such 
    educational organization but only if the refinancing loan is 
    pursuant to a program of the refinancing organization which is 
    designed as described in subparagraph (D)(ii).

        (3) Exception for discharges on account of services 
                        performed for certain lenders

        Paragraph (1) shall not apply to the discharge of a loan made by 
    an organization described in paragraph (2)(D) if the discharge is on 
    account of services performed for either such organization.

(g) Special rules for discharge of qualified farm indebtedness

              (1) Discharge must be by qualified person

        (A) In general

            Subparagraph (C) of subsection (a)(1) shall apply only if 
        the discharge is by a qualified person.

        (B) Qualified person

            For purposes of subparagraph (A), the term ``qualified 
        person'' has the meaning given to such term by section 
        49(a)(1)(D)(iv); except that such term shall include any 
        Federal, State, or local government or agency or instrumentality 
        thereof.

                   (2) Qualified farm indebtedness

        For purposes of this section, indebtedness of a taxpayer shall 
    be treated as qualified farm indebtedness if--
            (A) such indebtedness was incurred directly in connection 
        with the operation by the taxpayer of the trade or business of 
        farming, and
            (B) 50 percent or more of the aggregate gross receipts of 
        the taxpayer for the 3 taxable years preceding the taxable year 
        in which the discharge of such indebtedness occurs is 
        attributable to the trade or business of farming.

    (3) Amount excluded cannot exceed sum of tax attributes and 
                       business and investment assets

        (A) In general

            The amount excluded under subparagraph (C) of subsection 
        (a)(1) shall not exceed the sum of--
                (i) the adjusted tax attributes of the taxpayer, and
                (ii) the aggregate adjusted bases of qualified property 
            held by the taxpayer as of the beginning of the taxable year 
            following the taxable year in which the discharge occurs.

        (B) Adjusted tax attributes

            For purposes of subparagraph (A), the term ``adjusted tax 
        attributes'' means the sum of the tax attributes described in 
        subparagraphs (A), (B), (C), (D), (F), and (G) of subsection 
        (b)(2) determined by taking into account $3 for each $1 of the 
        attributes described in subparagraphs (B), (C), and (G) of 
        subsection (b)(2) and the attribute described in subparagraph 
        (F) of subsection (b)(2) to the extent attributable to any 
        passive activity credit carryover.

        (C) Qualified property

            For purposes of this paragraph, the term ``qualified 
        property'' means any property which is used or is held for use 
        in a trade or business or for the production of income.

        (D) Coordination with insolvency exclusion

            For purposes of this paragraph, the adjusted basis of any 
        qualified property and the amount of the adjusted tax attributes 
        shall be determined after any reduction under subsection (b) by 
        reason of amounts excluded from gross income under subsection 
        (a)(1)(B).

(Aug. 16, 1954, ch. 736, 68A Stat. 32; June 29, 1956, ch. 463, Sec. 5, 
70 Stat. 403; Pub. L. 88-496, Sec. 1(a), June 8, 1960, 74 Stat. 164; 
Pub. L. 94-455, title XIX, Secs. 1906(b)(13)(A), 1951(b)(2)(A), Oct. 4, 
1976, 90 Stat. 1834, 1836; Pub. L. 96-589, Sec. 2(a), Dec. 24, 1980, 94 
Stat. 3389; Pub. L. 97-354, Sec. 3(e), Oct. 19, 1982, 96 Stat. 1689; 
Pub. L. 97-448, title I, Sec. 102(h)(1), title III, Sec. 304(d), Jan. 
12, 1983, 96 Stat. 2372, 2398; Pub. L. 98-369, div. A, title I, 
Sec. 59(a), (b)(1), title IV, Sec. 474(r)(5), title VII, Sec. 721(b)(2), 
title X, Sec. 1076(a), July 18, 1984, 98 Stat. 576, 839, 966, 1053; Pub. 
L. 99-514, title I, Sec. 104(b)(2), title II, Sec. 231(d)(3)(D), title 
IV, Sec. 405(a), title VI, Sec. 621(e)(1), title VIII, Secs. 805(c)(2)-
(4), 822(a), (b)(1)-(3), title XI, Sec. 1171(b)(4), title XVIII, 
Sec. 1847(b)(7), Oct. 22, 1986, 100 Stat. 2105, 2179, 2224, 2266, 2362, 
2373, 2513, 2856; Pub. L. 100-647, title I, Sec. 1004(a)(1)-(4), (6), 
Nov. 10, 1988, 102 Stat. 3385, 3387; Pub. L. 101-508, title XI, 
Secs. 11325(a)(1), (b), 11813(b)(6), Nov. 5, 1990, 104 Stat. 1388-466, 
1388-551; Pub. L. 103-66, title XIII, Secs. 13150(a)-(c)(5), 
13226(a)(1), (2)(B), (b)(1)-(3), Aug. 10, 1993, 107 Stat. 446-448, 487, 
488; Pub. L. 104-188, title I, Sec. 1703(n)(2), Aug. 20, 1996, 110 Stat. 
1877; Pub. L. 105-34, title II, Sec. 225(a), Aug. 5, 1997, 111 Stat. 
820; Pub. L. 105-206, title VI, Sec. 6004(f), July 22, 1998, 112 Stat. 
795.)


                               Amendments

    1998--Subsec. (f)(2). Pub. L. 105-206, Sec. 6004(f)(1), amended 
concluding provisions generally. Prior to amendment, concluding 
provisions read as follows: ``The term `student loan' includes any loan 
made by an educational organization so described or by an organization 
exempt from tax under section 501(a) to refinance a loan meeting the 
requirements of the preceding sentence.''
    Subsec. (f)(3). Pub. L. 105-206, Sec. 6004(f)(2), struck out ``(or 
by an organization described in paragraph (2)(E) from funds provided by 
an organization described in paragraph (2)(D))'' after ``paragraph 
(2)(D)''.
    1997--Subsec. (f)(2). Pub. L. 105-34, Sec. 225(a)(1), added subpar. 
(D) and concluding provisions and struck out former subpar. (D) which 
read as follows: ``any educational organization so described pursuant to 
an agreement with any entity described in subparagraph (A), (B), or (C) 
under which the funds from which the loan was made were provided to such 
educational organization.''
    Subsec. (f)(2)(B). Pub. L. 105-34, Sec. 225(a)(1), struck out ``or'' 
at end.
    Subsec. (f)(3). Pub. L. 105-34, Sec. 225(a)(2), added par. (3).
    1996--Subsec. (d)(9)(A). Pub. L. 104-188 substituted ``paragraph 
(3)(C)'' for ``paragraph (3)(B)''.
    1993--Subsec. (a)(1)(D). Pub. L. 103-66, Sec. 13150(a), added 
subpar. (D).
    Subsec. (a)(2)(A). Pub. L. 103-66, Sec. 13150(c)(1), substituted ``, 
(C), and (D)'' for ``and (C)''.
    Subsec. (a)(2)(B). Pub. L. 103-66, Sec. 13150(c)(2), amended heading 
and text of subpar. (B) generally. Prior to amendment, text read as 
follows: ``Subparagraph (C) of paragraph (1) shall not apply to a 
discharge to the extent the taxpayer is insolvent.''
    Subsec. (b)(2)(C) to (E). Pub. L. 103-66, Sec. 13226(b)(1), added 
subpar. (C) and redesignated former subpars. (C) and (D) as (D) and (E), 
respectively. Former subpar. (E) redesignated (F).
    Subsec. (b)(2)(F). Pub. L. 103-66, Sec. 13226(b)(2), added subpar. 
(F). Former subpar. (F) redesignated (G).
    Pub. L. 103-66, Sec. 13226(b)(1), redesignated subpar. (E) as (F).
    Subsec. (b)(2)(G). Pub. L. 103-66, Sec. 13226(b)(2), redesignated 
subpar. (F) as (G).
    Subsec. (b)(3)(B). Pub. L. 103-66, Sec. 13226(b)(3)(A), amended 
heading and text of subpar. (B) generally. Prior to amendment, text read 
as follows: ``The reductions described in subparagraphs (B) and (E) of 
paragraph (2) shall be 33\1/3\ cents for each dollar excluded by 
subsection (a).''
    Subsec. (b)(4)(B). Pub. L. 103-66, Sec. 13226(b)(3)(B), substituted 
``(D)'' for ``(C)'' in heading and text.
    Subsec. (b)(4)(C). Pub. L. 103-66, Sec. 13226(b)(3)(C), substituted 
``(G)'' for ``(E)'' in heading and text.
    Subsec. (c). Pub. L. 103-66, Sec. 13150(b), added subsec. (c).
    Subsec. (d). Pub. L. 103-66, Sec. 13150(c)(3)(B), substituted 
``certain provisions'' for ``subsections (a), (b) and (g)'' in heading.
    Subsec. (d)(6), (7)(A). Pub. L. 103-66, Sec. 13150(c)(3)(A), (C), 
substituted ``Certain provisions'' for ``Subsections (a), (b) and (g)'' 
in heading and ``subsections (a), (b), (c), and (g)'' for ``subsections 
(a), (b), and (g)'' in text.
    Subsec. (d)(7)(B). Pub. L. 103-66, Sec. 13150(c)(4), inserted at end 
``The preceding sentence shall not apply to any discharge to the extent 
that subsection (a)(1)(D) applies to such discharge.''
    Subsec. (d)(9)(A). Pub. L. 103-66, Sec. 13150(c)(5), inserted ``or 
under paragraph (3)(B) of subsection (c)'' after ``subsection (b)''.
    Subsec. (e)(6). Pub. L. 103-66, Sec. 13226(a)(2)(B), substituted 
``Except as provided in regulations, for'' for ``For''.
    Subsec. (e)(8). Pub. L. 103-66, Sec. 13226(a)(1)(B), amended heading 
and text of par. (8) generally. Prior to amendment, text read as 
follows: ``For purposes of determining income of the debtor from 
discharge of indebtedness, the stock for debt exception shall not 
apply--
        ``(A) to the issuance of nominal or token shares, or
        ``(B) with respect to an unsecured creditor, where the ratio of 
    the value of the stock received by such unsecured creditor to the 
    amount of his indebtedness cancelled or exchanged for stock in the 
    workout is less than 50 percent of a similar ratio computed for all 
    unsecured creditors participating in the workout.
Any stock which is disqualified stock (as defined in paragraph 
(10)(B)(ii)) shall not be treated as stock for purposes of this 
paragraph.''
    Subsec. (e)(10), (11). Pub. L. 103-66, Sec. 13226(a)(1)(A), 
redesignated par. (11) as (10) and struck out former par. (10) which 
related to satisfaction of indebtedness by transfer of corporation's 
stock.
    Subsec. (g)(3)(B). Pub. L. 103-66, Sec. 13226(b)(3)(D), substituted 
``subparagraphs (A), (B), (C), (D), (F), and (G)'' for ``subparagraphs 
(A), (B), (C), and (E)'' and ``subparagraphs (B), (C), and (G)'' for 
``subparagraphs (B) and (E)'' and inserted before period at end ``and 
the attribute described in subparagraph (F) of subsection (b)(2) to the 
extent attributable to any passive activity credit carryover''.
    1990--Subsec. (e)(8). Pub. L. 101-508, Sec. 11325(b)(2), inserted 
provision at end that any stock which is a disqualified stock, as so 
defined, not be treated as stock for purposes of this paragraph.
    Subsec. (e)(10)(B). Pub. L. 101-508, Sec. 11325(b)(1), substituted 
heading for one which read: ``Exception for title 11 cases and insolvent 
debtors'' and amended text generally. Prior to amendment, text read as 
follows: ``Subparagraph (A) shall not apply in the case of a debtor in a 
title 11 case or to the extent the debtor is insolvent.''
    Subsec. (e)(11). Pub. L. 101-508, Sec. 11325(a)(1), added par. (11).
    Subsec. (g)(1)(B). Pub. L. 101-508, Sec. 11813(b)(6), substituted 
``section 49(a)(1)(D)(iv)'' for ``section 46(c)(8)(D)(iv)''.
    1988--Subsec. (a)(1)(C). Pub. L. 100-647, Sec. 1004(a)(1), added 
subpar. (C).
    Subsec. (a)(2). Pub. L. 100-647, Sec. 1004(a)(2), amended par. (2) 
generally. Prior to amendment, par. (2) read as follows: ``Subparagraph 
(B) of paragraph (1) shall not apply to a discharge which occurs in a 
title 11 case.''
    Subsec. (b). Pub. L. 100-647, Sec. 1004(a)(3), struck out ``in title 
11 case or insolvency'' after ``Reduction of tax attributes'' in heading 
and substituted ``subparagraph (A), (B), or (C)'' for ``subparagraph (A) 
or (B)'' in text of par. (1).
    Subsec. (d). Pub. L. 100-647, Sec. 1004(a)(6)(B), which directed 
amendment of subsec. (d) heading by substituting ``subsections (a), (b), 
and (g)'' for ``subsections (a), and (b)'', was executed by making the 
substitution for ``subsections (a) and (b)'' as the probable intent of 
Congress.
    Subsec. (d)(6). Pub. L. 100-647, Sec. 1004(a)(6)(A), (C), 
substituted ``Subsections (a), (b), and (g)'' for ``Subsections (a) and 
(b)'' in heading and ``subsections (a), (b), and (g)'' for ``subsections 
(a) and (b)'' in text.
    Subsec. (d)(7)(A). Pub. L. 100-647, Sec. 1004(a)(6)(A), (C), 
substituted ``Subsections (a), (b), and (g)'' for ``Subsections (a) and 
(b)'' in heading and ``subsections (a), (b), and (g)'' for ``subsections 
(a) and (b)'' in text.
    Subsec. (g). Pub. L. 100-647, Sec. 1004(a)(4), substituted 
``indebtedness'' for ``indebtedness of solvent farmers'' in heading and 
amended text generally. Prior to amendment, text read as follows:
    ``(1) In general.--For purposes of this section and section 1017, 
the discharge by a qualified person of qualified farm indebtedness of a 
taxpayer who is not insolvent at the time of the discharge shall be 
treated in the same manner as if the discharge had occurred when the 
taxpayer was insolvent.
    ``(2) Qualified farm indebtedness.--For purposes of this subsection, 
indebtedness of a taxpayer shall be treated as qualified farm 
indebtedness if--
        ``(A) such indebtedness was incurred directly in connection with 
    the operation by the taxpayer of the trade or business of farming, 
    and
        ``(B) 50 percent or more of the average annual gross receipts of 
    the taxpayer for the 3 taxable years preceding the taxable year in 
    which the discharge of such indebtedness occurs is attributable to 
    the trade or business of farming.
    ``(3) Qualified person.--For purposes of this subsection, the term 
`qualified person' means a person described in section 
46(c)(8)(D)(iv).''
    1986--Subsec. (a)(1)(C). Pub. L. 99-514, Sec. 822(a), struck out 
subpar. (C) relating to exclusion from gross income if the indebtedness 
discharged is qualified business indebtedness.
    Subsec. (a)(2). Pub. L. 99-514, Sec. 822(b)(1), substituted 
``Subparagraph (B) of paragraph (1)'' for ``Subparagraphs (B) and (C) of 
paragraph (1)'' in subpar. (A), struck out subpar. (A) designation and 
heading, and struck out subpar. (B) providing that insolvency exclusion 
takes precedence over qualified business exclusion.
    Subsec. (b)(2)(B). Pub. L. 99-514, Sec. 231(d)(3)(D), substituted 
``General business credit'' for ``Research credit and general business 
credit'' in heading and amended text, as amended by this Act (Pub. L. 
99-514, Sec. 1171(b)(4) (see below)), generally. Prior to amendment, 
text read as follows: ``Any carryover to or from the taxable year of a 
discharge of an amount for purposes of determining the amount allowable 
as a credit under--
        ``(i) section 30 (relating to credit for increasing research 
    activities), or
        ``(ii) section 38 (relating to general business credit).
For purposes of this subparagraph, there shall not be taken into account 
any portion of a carryover which is attributable to the employee stock 
ownership credit determined under section 41.''
    Pub. L. 99-514, Sec. 1171(b)(4), struck out last sentence which had 
been eliminated by the general amendment of subpar. (B) by Pub. L. 99-
514, Sec. 231(d)(3)(D). See above.
    Subsec. (b)(2)(E). Pub. L. 99-514, Sec. 1847(b)(7), substituted 
``section 27'' for ``section 33''.
    Subsec. (b)(3). Pub. L. 99-514, Sec. 104(b)(2), substituted ``33\1/
3\ cents'' for ``50 cents''.
    Subsec. (c). Pub. L. 99-514, Sec. 822(b)(2), struck out subsec. (c) 
relating to tax treatment of discharge of qualified business 
indebtedness.
    Subsec. (d). Pub. L. 99-514, Sec. 822(b)(3)(B), struck out reference 
to subsec. (c) in heading.
    Subsec. (d)(4). Pub. L. 99-514, Sec. 822(b)(3)(A), struck out par. 
(4) relating to treatment of indebtedness as qualified business 
indebtedness.
    Subsec. (d)(6), (7)(A). Pub. L. 99-514, Sec. 822(b)(3)(B), struck 
out reference to subsec. (c) in heading and text.
    Subsec. (d)(7)(B). Pub. L. 99-514, Sec. 822(b)(3)(C), struck out 
``The preceding sentence shall not apply to any discharge to the extent 
that subsection (a)(1)(C) applies to such discharge.''
    Subsec. (d)(9)(A). Pub. L. 99-514, Sec. 822(b)(3)(D), struck out 
``under paragraph (4) of this subsection or'' after ``An election''.
    Subsec. (e)(7)(A)(ii)(I). Pub. L. 99-514, Sec. 805(c)(2), 
substituted ``subsection (a) or (b) of section 166'' for ``subsection 
(a), (b), or (c) of section 166''.
    Subsec. (e)(7)(B) to (D). Pub. L. 99-514, Sec. 805(c)(3), 
redesignated subpars. (C) to (E) as (B) to (D), respectively, and struck 
out former subpar. (B) which related to taxpayers on reserve method.
    Subsec. (e)(7)(E), (F). Pub. L. 99-514, Sec. 805(c)(3), (4), 
redesignated subpar. (F) as (E) and substituted ``the foregoing 
subparagraphs'' for ``subparagraphs (A), (B), (C), (D), and (E)''. 
Former subpar. (E) redesignated (D).
    Subsec. (e)(10)(C). Pub. L. 99-514, Sec. 621(e), repealed the 
amendment by Pub. L. 98-369, Sec. 59(b)(1), which had added subpar. (C) 
creating an exception for transfers in certain workouts of the 
satisfaction of indebtedness by corporation's stock. See 1984 Amendment 
note below.
    Subsec. (g). Pub. L. 99-514, Sec. 405(a), added subsec. (g).
    1984--Subsec. (b)(2)(B). Pub. L. 98-369, Sec. 474(r)(5), substituted 
provisions relating to research credits and general business credits 
covering carryovers to or from the taxable year of a discharge of an 
amount for purposes of determining the amount allowable as a credit 
under section 30 (relating to credit for increasing research 
activities), or section 38 (relating to general business credit), and 
directing that there shall not be taken into account any portion of a 
carryover which is attributable to the employee stock ownership credit 
determined under section 41 for former provisions covering carryovers to 
or from the taxable year of the discharge of an amount for purposes of 
determining the amount of a credit allowable under section 38 (relating 
to investment in certain depreciable property), section 40 (relating to 
expenses of work incentive programs), section 44B (relating to credit 
for employment of certain new employees), section 44E (relating to 
alcohol used as a fuel), or section 44F (relating to credit for 
increasing research activities), and directing that, for purposes of 
clause (i), there could not be taken into account any portion of a 
carryover which was attributable to the employee plan credit (within the 
meaning of section 48(o)(3)).
    Subsec. (d)(6). Pub. L. 98-369, Sec. 721(b)(2), struck out ``or S 
corporation shareholder level'' in heading and second sentence which 
provided that ``In the case of an S corporation, subsections (a), (b), 
and (c) shall apply at the shareholder level.''. See par. (7)(A).
    Subsec. (d)(7) to (10). Pub. L. 98-369, Sec. 721(b)(2), added par. 
(7) and redesignated former pars. (7) to (9) as (8) to (10), 
respectively.
    Subsec. (e)(10). Pub. L. 98-369, Sec. 59(a), added par. (10).
    Subsec. (e)(10)(C). Pub. L. 98-369, Sec. 59(b)(1), which added 
subpar. (C), effective as if included in the amendments made by section 
806(e) and (f) of Pub. L. 94-455, was repealed by Pub. L. 99-514, 
Sec. 621(e), (f)(2), eff. Jan. 1, 1986, with certain exceptions, see 
Effective Date of 1986 Amendment note below.
    Subsec. (f). Pub. L. 98-369, Sec. 1076(a), added subsec. (f).
    1983--Subsec. (b)(2)(B)(v). Pub. L. 97-448, Sec. 102(h)(1), added 
cl. (v).
    Subsec. (e)(7)(A)(iii). Pub. L. 97-448, Sec. 304(d), added cl. 
(iii).
    1982--Subsec. (d)(6). Pub. L. 97-354 inserted ``or S corporation 
shareholder level'' in heading and inserted ``In the case of an S 
corporation, subsections (a), (b), and (c) shall be applied at the 
shareholder level.''
    1980--Pub. L. 96-589 completely revised and expanded provisions by 
specifying the types of indebtedness and by setting out priorities among 
the exclusions, to reflect the revision of Title 11, Bankruptcy, in 
1978.
    1976--Pub. L. 94-455, Sec. 1951(b)(2)(A), struck out ``(a) Special 
rule of exclusion.--'' after ``Income from discharge of indebtedness'' 
and struck out subsec. (b) which related to discharge, cancellation, or 
modification of indebtedness of certain railroad corporations.
    Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out ``or his delegate'' 
after ``Secretary''.
    1960--Subsec. (b). Pub. L. 86-496 provided that if the discharge, 
cancellation, or modification of any indebtedness is effected pursuant 
to a court order in a receivership proceeding or in a proceeding under 
section 77 of the Bankruptcy Act, commenced before Jan. 1, 1960, then no 
amount is to be included in gross income with respect to it, and struck 
out provisions which made subsection inapplicable to discharges 
occurring in a taxable year beginning after Dec. 31, 1957.
    1956--Subsec. (b). Act June 29, 1956, substituted ``December 31, 
1957'' for ``December 31, 1955''.


                    Effective Date of 1998 Amendment

    Amendment by Pub. L. 105-206 effective, except as otherwise 
provided, as if included in the provisions of the Taxpayer Relief Act of 
1997, Pub. L. 105-34, to which such amendment relates, see section 6024 
of Pub. L. 105-206, set out as a note under section 1 of this title.


                    Effective Date of 1997 Amendment

    Section 225(b) of Pub. L. 105-34 provided that: ``The amendments 
made by this section [amending this section] shall apply to discharges 
of indebtedness after the date of the enactment of this Act [Aug. 5, 
1997].''


                    Effective Date of 1996 Amendment

    Amendment by Pub. L. 104-188 effective as if included in the 
provision of the Revenue Reconciliation Act of 1993, Pub. L. 103-66, 
Secs. 13001-13444, to which such amendment relates, see section 1703(o) 
of Pub. L. 104-188, set out as a note under section 39 of this title.


                    Effective Date of 1993 Amendment

    Section 13150(d) of Pub. L. 103-66 provided that: ``The amendments 
made by this section [amending this section and sections 703 and 1017 of 
this title] shall apply to discharges after December 31, 1992, in 
taxable years ending after such date.''
    Section 13226(a)(3) of Pub. L. 103-66 provided that:
    ``(A) In general.--Except as otherwise provided in this paragraph, 
the amendments made by this subsection [amending this section and 
section 382 of this title] shall apply to stock transferred after 
December 31, 1994, in satisfaction of any indebtedness.
    ``(B) Exception for title 11 cases.--The amendments made by this 
subsection shall not apply to stock transferred in satisfaction of any 
indebtedness if such transfer is in a title 11 or similar case (as 
defined in section 368(a)(3)(A) of the Internal Revenue Code of 1986) 
which was filed on or before December 31, 1993.''
    Section 13226(b)(4) of Pub. L. 103-66 provided that: ``The 
amendments made by this subsection [amending this section] shall apply 
to discharges of indebtedness in taxable years beginning after December 
31, 1993.''


                    Effective Date of 1990 Amendment

    Section 11325(c) of Pub. L. 101-508 provided that:
    ``(1) In general.--Except as provided in paragraph (2), the 
amendments made by this section [amending this section and section 1275 
of this title] shall apply to debt instruments issued, and stock 
transferred, after October 9, 1990, in satisfaction of any indebtedness.
    ``(2) Exceptions.--The amendments made by this section shall not 
apply to any debt instrument issued, or stock transferred, in 
satisfaction of any indebtedness if such issuance or transfer (as the 
case may be)--
        ``(A) is in a title 11 or similar case (as defined in section 
    368(a)(3)(A) of the Internal Revenue Code of 1986) which was filed 
    on or before October 9, 1990,
        ``(B) is pursuant to a written binding contract in effect on 
    October 9, 1990, and at all times thereafter before such issuance or 
    transfer,
        ``(C) is pursuant to a transaction which was described in 
    documents filed with the Securities and Exchange Commission on or 
    before October 9, 1990, or
        ``(D) is pursuant to a transaction--
            ``(i) the material terms of which were described in a 
        written public announcement on or before October 9, 1990,
            ``(ii) which was the subject of a prior filing with the 
        Securities and Exchange Commission, and
            ``(iii) which is the subject of a subsequent filing with the 
        Securities and Exchange Commission before January 1, 1991.''
    Amendment by section 11813(b)(6) of Pub. L. 101-508 applicable to 
property placed in service after Dec. 31, 1990, but not applicable to 
any transition property (as defined in section 49(e) of this title), any 
property with respect to which qualified progress expenditures were 
previously taken into account under section 46(d) of this title, and any 
property described in section 46(b)(2)(C) of this title, as such 
sections were in effect on Nov. 4, 1990, see section 11813(c) of Pub. L. 
101-508, set out as a note under section 29 of this title.


                    Effective Date of 1988 Amendment

    Amendment by Pub. L. 100-647 effective, except as otherwise 
provided, as if included in the provision of the Tax Reform Act of 1986, 
Pub. L. 99-514, to which such amendment relates, see section 1019(a) of 
Pub. L. 100-647, set out as a note under section 1 of this title.


                    Effective Date of 1986 Amendment

    Amendment by section 104(b)(2) of Pub. L. 99-514 applicable to 
taxable years beginning after Dec. 31, 1986, see section 151(a) of Pub. 
L. 99-514, set out as a note under section 1 of this title.
    Amendment by section 231(d)(3)(D) of Pub. L. 99-514 applicable to 
taxable years beginning after Dec. 31, 1985, see section 231(g) of Pub. 
L. 99-514, set out as a note under section 41 of this title.
    Section 405(c) of Pub. L. 99-514 provided that: ``The amendments 
made by this section [amending this section and section 1017 of this 
title] shall apply to discharges of indebtedness occurring after April 
9, 1986, in taxable years ending after such date.''
    Repeal by section 621(e)(1) of Pub. L. 99-514 of amendment by 
section 59(b)(1) of Pub. L. 99-369, which was effective as if included 
in the amendments made by section 806(e) and (f) of Pub. L. 94-455, 
effective Jan. 1, 1986, with certain exceptions, see section 621(f)(2) 
of Pub. L. 99-514, set out as a note under section 382 of this title.
    Amendment by section 805(c)(2), (4) of Pub. L. 99-514 applicable to 
taxable years beginning after Dec. 31, 1986, with certain changes 
required in method of accounting, see section 805(d) of Pub. L. 99-514, 
set out as a note under section 166 of this title.
    Section 822(c) of Pub. L. 99-514 provided that: ``The amendments 
made by this section [amending this section and section 1017 of this 
title] shall apply to discharges after December 31, 1986.''
    Amendment by section 1171(b)(4) of Pub. L. 99-514 applicable to 
compensation paid or accrued after Dec. 31, 1986, in taxable years 
ending after such date, except as otherwise provided, see section 
1171(c) of Pub. L. 99-514, set out as a note under section 38 of this 
title.
    Amendment by section 1847(b)(7) of Pub. L. 99-514 effective, except 
as otherwise provided, as if included in the provisions of the Tax 
Reform Act of 1984, Pub. L. 98-369, div. A, to which such amendment 
relates, see section 1881 of Pub. L. 99-514, set out as a note under 
section 48 of this title.


                    Effective Date of 1984 Amendment

    Section 59(b)(2) of Pub. L. 98-369 provided that: ``The amendment 
made by paragraph (1) [amending this section] shall take effect as if it 
had been included in the amendments made by subsections (e) and (f) of 
section 806 of the Tax Reform Act of 1976 [Pub. L. 94-455].'' See 
Effective Date of 1976 Amendment note set out under section 382 of this 
title.
    Section 59(b)[(c)] of Pub. L. 98-369 provided that:
    ``(1) In general.--Except as otherwise provided in this subsection, 
the amendment made by subsection (a) [amending this section] shall apply 
to transfers after the date of the enactment of this Act [July 18, 1984] 
in taxable years ending after such date.
    ``(2) Transitional rule.--The amendment made by subsection (a) shall 
not apply to the transfer by a corporation of its stock in exchange for 
debt of the corporation after the date of the enactment of this Act if 
such transfer is--
        ``(A) pursuant to a written contract requiring such transfer 
    which was binding on the corporation at all times on June 7, 1984, 
    and at all times after such date but only if the transfer takes 
    place before January 1, 1985, and only if the transferee held the 
    debt at all times on June 7, 1984, or
        ``(B) pursuant to the exercise of an option to exchange debt for 
    stock but only if such option was in effect at all times on June 7, 
    1984, and at all times after such date and only if at all times on 
    June 7, 1984, the option and the debt were held by the same person.
    ``(3) Certain transfers to controlling shareholder.--The amendment 
made by subsection (a) shall not apply to any transfer before January 1, 
1985, by a corporation of its stock in exchange for debt of such 
corporation if--
        ``(A) such transfer is to another corporation which at all times 
    on June 7, 1984, owned 75 percent or more of the total value of the 
    stock of the corporation making such transfer, and
        ``(B) immediately after such transfer, the transferee 
    corporation owns 80 percent or more of the total value of the stock 
    of the transferor corporation.
    ``(4) Certain transfers pursuant to debt restructure agreement.--The 
amendment made by subsection (a) shall not apply to the transfer by a 
corporation of its stock in exchange for debt of the corporation after 
the date of the enactment of this Act and before January 1, 1985, if--
        ``(A) such transfer is covered by a debt restructure agreement 
    entered into by the corporation during November 1983, and
        ``(B) such agreement was specified in a registration statement 
    filed with the Securities and Exchange Commission by the corporation 
    on March 7, 1984.''
    Amendment by section 474(r)(5) of Pub. L. 98-369 applicable to 
taxable years beginning after Dec. 31, 1983, and to carrybacks from such 
years, see section 475(a) of Pub. L. 98-369, set out as a note under 
section 21 of this title.
    Amendment by section 721(b) of Pub. L. 98-369 applicable to 
contributions to capital after Dec. 31, 1980, in taxable years ending 
after such date, see section 721(y)(2) of Pub. L. 98-369, set out as a 
note under section 1361 of this title.
    Section 1076(b) of Pub. L. 98-369 provided that: ``The amendments 
made by this section [amending this section] shall apply to discharges 
of indebtedness made on or after January 1, 1983.''


                    Effective Date of 1983 Amendment

    Amendment by title I of Pub. L. 97-448 effective, except as 
otherwise provided, as if it had been included in the provision of the 
Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such 
amendment relates, see section 109 of Pub. L. 97-448, set out as a note 
under section 1 of this title.


                    Effective Date of 1982 Amendment

    Amendment by Pub. L. 97-354 applicable to taxable years beginning 
after Dec. 31, 1982, see section 6(a) of Pub. L. 97-354, set out as an 
Effective Date note under section 1361 of this title.


                    Effective Date of 1980 Amendment

    Section 7 of Pub. L. 96-589, as amended by Pub. L. 99-514, Sec. 2, 
Oct. 22, 1986, 100 Stat. 2095, provided that:
    ``(a) For Section 2 (Relating to Tax Treatment of Discharge of 
Indebtedness).--
        ``(1) In general.--Except as provided in paragraph (2), the 
    amendments made by section 2 [amending this section and sections 
    111, 118, 382, 703 and 1017 of this title] shall apply to any 
    transaction which occurs after December 31, 1980, other than a 
    transaction which occurs in a proceeding in a bankruptcy case or 
    similar judicial proceeding (or in a proceeding under the Bankruptcy 
    Act) [Title 11, Bankruptcy] commencing on or before December 31, 
    1980.
        ``(2) Transitional rule.--In the case of any discharge of 
    indebtedness to which subparagraph (A) or (B) of section 108(a)(1) 
    of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] 
    (relating to exclusion from gross income), as amended by section 2, 
    applies and which occurs before January 1, 1982, or which occurs in 
    a proceeding in a bankruptcy case or similar judicial proceedings 
    commencing before January 1, 1982, then--
            ``(A) section 108(b)(2) of the such Code (relating to 
        reduction of tax attributes), as so amended, shall be applied 
        without regard to subparagraphs (A), (B), (C), and (E) thereof, 
        and
            ``(B) the basis of any property shall not be reduced under 
        section 1017 of such Code (relating to reduction in basis in 
        connection with discharges of indebtedness), as so amended, 
        below the fair market value of such property on the date the 
        debt is discharged.
    ``(b) For Section 3 (Relating to Rules Relating to Title 11 Cases 
for Individuals).--The amendments made by section 3 [enacting sections 
1398 and 1399 of this title and amending sections 443, 6012 and 6103 of 
this title] shall apply to any bankruptcy case commencing more than 90 
days after the date of the enactment of this Act [Dec. 24, 1980].
    ``(c) For Section 4 (Relating to Corporate Reorganization 
Provisions).--
        ``(1) In general.--The amendments made by section 4 [enacting 
    section 370 of this title and amending sections 354, 355, 357, 368 
    and 381 of this title] shall apply to any bankruptcy case or similar 
    judicial proceeding commencing after December 31, 1980.
        ``(2) Exchanges of property for accrued interest.--The 
    amendments made by subsection (e) of section 4 [amending sections 
    354 and 355 of this title] (relating to treatment of property 
    attributable to accrued interest) shall also apply to any exchange--
            ``(A) which occurs after December 31, 1980, and
            ``(B) which does not occur in a bankruptcy case or similar 
        judicial proceeding (or in a proceeding under the Bankruptcy 
        Act) commenced on or before December 31, 1980.
    ``(d) For Section 5 (Relating to Miscellaneous Corporate 
Amendments).--
        ``(1) For subsection (a) (relating to exemption from personal 
    holding company tax).--The amendments made by subsection (a) of 
    section 5 [amending section 542 of this title] shall apply to any 
    bankruptcy case or similar judicial proceeding commenced after 
    December 31, 1980.
        ``(2) For subsection (b) (relating to repeal of special 
    treatment for certain railroad redemptions).--The amendments made by 
    subsection (b) of section 5 [amending section 302 of this title] 
    shall apply to stock which is issued after December 31, 1980 (other 
    than stock issued pursuant to a plan of reorganization approved on 
    or before that date).
        ``(3) For subsection (c) (relating to application of 12-month 
    liquidation rule).--The amendment made by subsection (c) of section 
    5 [amending section 337 of this title] shall apply to any bankruptcy 
    case or similar judicial proceeding commenced after December 31, 
    1980.
        ``(4) For subsection (d) (relating to permitting bankruptcy 
    estate to be subchapter s shareholder).--The amendment made by 
    subsection (d) of section 5 [amending section 1371 of this title] 
    shall apply to any bankruptcy case commenced on or after October 1, 
    1979.
        ``(5) For subsection (e) (relating to certain transfers to 
    controlled corporations).--The amendments made by subsection (e) of 
    section 5 [amending section 351 of this title] shall apply as 
    provided in subsection (a) of this section.
        ``(6) For subsection (f) (relating to effect of debt discharge 
    on earnings and profits).--The amendment made by subsection (f) of 
    section 5 [amending section 312 of this title] shall apply as 
    provided in subsection (a) of this section.
    ``(e) For Section 6 (Relating to Changes in Tax Procedures).--The 
amendments made by section 6 [enacting sections 6658 and 7464 of this 
title, amending sections 128, 354, 422, 1023, 3302, 6012, 6036, 6155, 
6161, 6212, 6213, 6216, 6326 [now 6327], 6404, 6503, 6512, 6532, 6871, 
6872, 6873, 7430, and 7508 of this title, repealing section 1018 of this 
title, and redesignating former section 7464 of this title as 7465] 
shall take effect on October 1, 1979, but shall not apply to any 
proceeding under the Bankruptcy Act [Title 11] commenced before October 
1, 1979.
    ``(f) Election To Substitute September 30, 1979, for December 31, 
1980.--
        ``(1) In general.--The debtor (or debtors) in a bankruptcy case 
    or similar judicial proceeding may (with the approval of the court) 
    elect to apply subsections (a), (c), and (d) by substituting 
    `September 30, 1979' for `December 31, 1980' each place it appears 
    in such subsections.
        ``(2) Effect of election.--Any election made under paragraph (1) 
    with respect to any proceeding shall apply to all parties to the 
    proceeding.
        ``(3) Revocation only with consent.--Any election under this 
    subsection may be revoked only with the consent of the Secretary of 
    the Treasury or his delegate.
        ``(4) Time and manner of election.--Any election under this 
    subsection shall be made at such time, and in such manner, as the 
    Secretary of the Treasury or his delegate may by regulations 
    prescribe.
    ``(g) Definitions.--For purposes of this section--
        ``(1) Bankruptcy case.--The term `bankruptcy case' means any 
    case under title 11 of the United States Code (as recodified by 
    Public Law 95-598).
        ``(2) Similar judicial proceeding.--The term `similar judicial 
    proceeding' means a receivership, foreclosure, or similar proceeding 
    in a Federal or State court (as modified by section 368(a)(3)(D) of 
    the Internal Revenue Code of 1986).''


                    Effective Date of 1976 Amendment

    Amendment by section 1951(b)(2)(A) of Pub. L. 94-455 applicable with 
respect to taxable years beginning after Dec. 31, 1976, see section 
1951(d) of Pub. L. 94-455, set out as a note under section 72 of this 
title.


                    Effective Date of 1960 Amendment

    Section 1(b) of Pub. L. 86-496 provided that: ``The amendment made 
by subsection (a) [amending this section] shall apply to taxable years 
ending after December 31, 1959, but only with respect to discharges 
occurring after such date.''


                            Savings Provision

    For provisions that nothing in amendment by section 11813 of Pub. L. 
101-508 be construed to affect treatment of certain transactions 
occurring, property acquired, or items of income, loss, deduction, or 
credit taken into account prior to Nov. 5, 1990, for purposes of 
determining liability for tax for periods ending after Nov. 5, 1990, see 
section 11821(b) of Pub. L. 101-508, set out as a note under section 29 
of this title.
    Section 1951(b)(2)(B) of Pub. L. 94-455 provided that: ``If any 
discharge, cancellation, or modification of indebtedness of a railroad 
corporation occurs in a taxable year beginning after December 31, 1976, 
pursuant to an order of a court in a proceeding referred to in section 
108(b)(A) or (B) which commenced before January 1, 1960, then, 
notwithstanding the amendments made by subparagraph (A) [amending this 
section] the provisions of subsection (b) of section 108 shall be 
considered as not repealed with respect to such discharge, cancellation, 
or modification of indebtedness.''


           Plan Amendments Not Required Until January 1, 1989

    For provisions directing that if any amendments made by subtitle A 
or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or title XVIII 
[Secs. 1800-1899A] of Pub. L. 99-514 require an amendment to any plan, 
such plan amendment shall not be required to be made before the first 
plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. 
L. 99-514, as amended, set out as a note under section 401 of this 
title.

                  Section Referred to in Other Sections

    This section is referred to in sections 118, 147, 382, 703, 773, 
774, 1017, 1503 of this title.
