§ 1274A. Special rules for certain transactions where stated principal amount does not exceed $2,800,000
(b)
Qualified debt instrument defined
For purposes of this section, the term “qualified debt instrument” means any debt instrument given in consideration for the sale or exchange of property (other than new section
38 property within the meaning of section
48
(b), as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) if the stated principal amount of such instrument does not exceed $2,800,000.
(c)
Election to use cash method where stated principal amount does not exceed $2,000,000
(2)
Cash method debt instrument
For purposes of paragraph (1), the term “cash method debt instrument” means any qualified debt instrument if—
(B)
the lender does not use an accrual method of accounting and is not a dealer with respect to the property sold or exchanged,
(C)
section
1274 would have applied to such instrument but for an election under this subsection, and
(3)
Successors bound by election
(A)
In general
Except as provided in subparagraph (B), paragraph (1) shall apply to any successor to the borrower or lender with respect to a cash method debt instrument.
(B)
Exception where lender transfers debt instrument to accrual method taxpayer
If the lender (or any successor) transfers any cash method debt instrument to a taxpayer who uses an accrual method of accounting, this paragraph shall not apply with respect to such instrument for periods after such transfer.
(d)
Other special rules
(1)
Aggregation rules
For purposes of this section—
(2)
Inflation adjustments
(A)
In general
In the case of any debt instrument arising out of a sale or exchange during any calendar year after 1989, each dollar amount contained in the preceding provisions of this section shall be increased by the inflation adjustment for such calendar year. Any increase under the preceding sentence shall be rounded to the nearest multiple of $100 (or, if such increase is a multiple of $50, such increase shall be increased to the nearest multiple of $100).
(B)
Inflation adjustment
For purposes of subparagraph (A), the inflation adjustment for any calendar year is the percentage (if any) by which—
For purposes of the preceding sentence, the CPI for any calendar year is the average of the Consumer Price Index as of the close of the 12-month period ending on September 30 of such calendar year.
(e)
Regulations
The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subsection, including—