Accordingly, the obligation has 1,550 of original issue discount (,000,000-,368,450).Between February 1 and July 31, ,738 of original issue discount and ,000 of qualified stated interest accrue with respect to the obligation and are taken into account by T.An election not to report on the installment method an installment obligation received in the liquidation applies to all distributions received in the liquidation.
Under § 1.1274-2, the issue price of the obligation on February 1, 1998, is ,368,450.
For purposes of the preceding sentence, if the qualifying installment obligation is subject to § 1.446-2 (e.g., a debt instrument that has unstated interest under section 483), the adjusted issue price of the obligation is determined under § 1.446-2(c) and (d).
If the qualifying installment obligation is a variable rate debt instrument (as defined in § 1.1275-5), the shareholder uses the equivalent fixed rate debt instrument (within the meaning of § 1.1275-5(e)(3)(ii)) constructed for the qualifying installment obligation as of the date the obligation was issued to the liquidating corporation to determine the accruals of original issue discount, if any, and interest on the obligation.
On July 31, 1998, T distributes the installment obligation to A in exchange for A's stock. On January 31, 1999, A receives the first annual payment of 0,000 from B.
When the obligation is distributed to A on July 31, 1998, it is treated as if the obligation is received by A in an installment sale of shares directly to B on that date.
Under § 1.1275-1(b), the adjusted issue price of the obligation on that date is ,388,188 (original issue price of ,368,450 plus accrued original issue discount of ,738).