rr-08-52.pdf

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Part I

Section 1274A.--Special Rules for Certain Transactions Where
Stated Principal Amount Does Not Exceed $2,800,000

26 CFR 1.1274A-1: Special rules for certain transactions where
stated principal amount does not exceed $2,800,000.
(Also §§ 483, 1274)

Rev. Rul. 2008-52
This revenue ruling provides the dollar amounts, increased
by the 2009 inflation adjustment, for § 1274A of the Internal
Revenue Code.
BACKGROUND
In general, §§ 483 and 1274 determine the principal amount
of a debt instrument given in consideration for the sale or
exchange of nonpublicly traded property. In addition, any
interest on a debt instrument subject to § 1274 is taken into
account under the original issue discount provisions of the Code.
Section 1274A, however, modifies the rules under §§ 483 and 1274
for certain types of debt instruments.
In the case of a "qualified debt instrument," the discount
rate used for purposes of §§ 483 and 1274 may not exceed
9 percent, compounded semiannually. Section 1274A(b) defines a
qualified debt instrument as any debt instrument given in
consideration for the sale or exchange of property (other than

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new § 38 property within the meaning of § 48(b), as in effect on
the day before the date of enactment of the Revenue
Reconciliation Act of 1990) if the stated principal amount of the
instrument does not exceed the amount specified in § 1274A(b).
For debt instruments arising out of sales or exchanges before
January 1, 1990, this amount is $2,800,000.
In the case of a "cash method debt instrument," as defined
in § 1274A(c), the borrower and lender may elect to use the cash
receipts and disbursements method of accounting. In particular,
for any cash method debt instrument, § 1274 does not apply, and
interest on the instrument is accounted for by both the borrower
and the lender under the cash method of accounting. A cash
method debt instrument is a qualified debt instrument that meets
the following additional requirements: (A) In the case of
instruments arising out of sales or exchanges before January 1,
1990, the stated principal amount does not exceed $2,000,000; (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)
§ 1274 would have applied to the debt instrument but for an
election under § 1274A(c); and (D) an election under § 1274A(c)
is jointly made with respect to the debt instrument by the
borrower and lender. Section 1.1274A-1(c)(1) of the Income Tax
Regulations provides rules concerning the time for, and manner
of, making this election.

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Section 1274A(d)(2) provides that, for any debt instrument
arising out of a sale or exchange during any calendar year after
1989, the dollar amounts stated in § 1274A(b) and
§ 1274A(c)(2)(A) are increased by the inflation adjustment for
the calendar year. Any increase due to the inflation adjustment
is rounded to the nearest multiple of $100 (or, if the increase
is a multiple of $50 and not of $100, the increase is increased
to the nearest multiple of $100). The inflation adjustment for
any calendar year is the percentage (if any) by which the CPI for
the preceding calendar year exceeds the CPI for calendar year
1988. Section 1274A(d)(2)(B) defines the CPI for any calendar
year as the average of the Consumer Price Index as of the close
of the 12-month period ending on September 30 of that calendar
year.
INFLATION-ADJUSTED AMOUNTS UNDER § 1274A
For debt instruments arising out of sales or exchanges after
December 31, 1989, the inflation-adjusted amounts under § 1274A
are shown in Table 1.

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Rev. Rul. 2008 – 52 Table 1
Inflation-Adjusted Amounts Under § 1274A

Calendar Year 1274A(b) Amount 1274A(c)(2)(A) Amount
of Sale (qualified debt (cash method debt
or Exchange instrument) instrument)
1990 $2,933,200 $2,095,100
1991 $3,079,600 $2,199,700
1992 $3,234,900 $2,310,600
1993 $3,332,400 $2,380,300
1994 $3,433,500 $2,452,500
1995 $3,523,600 $2,516,900
1996 $3,622,500 $2,587,500
1997 $3,723,800 $2,659,900
1998 $3,823,100 $2,730,800
1999 $3,885,500 $2,775,400
2000 $3,960,100 $2,828,700
2001 $4,085,900 $2,918,500
2002 $4,217,500 $3,012,500
2003 $4,280,800 $3,057,700
2004 $4,381,300 $3,129,500
2005 $4,483,000 $3,202,100
2006 $4,630,300 $3,307,400
2007 $4,800,800 $3,429,100
2008 $4,913,400 $3,509,600
2009 $5,131,700 $3,665,500
Note: These inflation adjustments were computed using the
All-Urban, Consumer Price Index, 1982-1984 base, published
by the Bureau of Labor Statistics.

EFFECT ON OTHER DOCUMENTS
Rev. Rul. 2008-3, 2008-2 I.R.B. 249,
is supplemented and
superseded.
DRAFTING INFORMATION
The author of this revenue ruling is Andrea M. Hoffenson of
the Office of the Associate Chief Counsel (Financial Institutions
and Products). For further information regarding this revenue
ruling please contact Ms. Hoffenson at (202) 622-3930 (not a
toll-free call).