# § 1288. Treatment of original issue discount on tax-exempt obligations
**(a)** **General rule** Original issue discount on any tax-exempt obligation shall be treated as accruing—
**(1)** for purposes of section 163, in the manner provided by section 1272(a) (determined without regard to paragraph (7) thereof), and
**(2)** for purposes of determining the adjusted basis of the holder, in the manner provided by section 1272(a) (determined with regard to paragraph (7) thereof).
**(b)** **Definitions and special rules** For purposes of this section—
**(1)** **Original issue discount** The term “original issue discount” has the meaning given to such term by section 1273(a) without regard to paragraph (3) thereof. In applying section 483 or 1274, under regulations prescribed by the Secretary, appropriate adjustments shall be made to the applicable Federal rate to take into account the tax exemption for interest on the obligation.
**(2)** **Tax-exempt obligation** The term “tax-exempt obligation” has the meaning given to such term by section 1275(a)(3).
**(3)** **Short-term obligations** In applying this section to obligations with maturity of 1 year or less, rules similar to the rules of section 1283(b) shall apply.
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**Source Credit**: (Added Pub. L. 98–369, div. A, title I, § 41(a), July 18, 1984, 98 Stat. 553; amended Pub. L. 100–647, title I, § 1006(u)(3), Nov. 10, 1988, 102 Stat. 3427.)
## Editorial Notes
### Amendments
1988—Subsec. (a). substituted “paragraph (7)” for “paragraph (6)” in pars. (1) and (2).
## Statutory Notes and Related Subsidiaries
### Effective Date of 1988 Amendment
Amendment by effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, , to which such amendment relates, see , set out as a note under .
### Effective Date
Section applicable to taxable years ending after , and applicable to obligations issued after , and acquired after , see , set out as a note under .