26 U.S.C. § 1274A — Special rules for certain transactions where stated principal amount does not exceed $2,800,000

(a) For a qualified debt instrument^*, the discount rate used under sections 483 and 1274 may not exceed 9 percent, compounded semiannually.
(b) “Qualified debt instrument” means a debt instrument given for the sale or exchange of property^*, other than new section 38 property within the meaning of section 48(b), as that provision existed the day before enactment of the Revenue Reconciliation Act of 1990, if the instrument's stated principal amount does not exceed $2,800,000.
(c)(1) For a “cash method debt instrument,” section 1274 does not apply. Interest on it must be counted by both borrower and lender under the cash receipts and disbursements accounting method. (2) A “cash method debt instrument” is a qualified debt instrument if: (A) its stated principal amount does not exceed $2,000,000; (B) the lender does not use an accrual accounting method and is not a dealer in the property sold or exchanged; (C) section 1274 would have applied but for an election under this subsection; and (D) borrower and lender jointly make that election for the instrument. (3)(A) Unless subparagraph (B) applies, paragraph (1) also applies to any successor to the borrower or lender. (B) If the lender or a successor transfers a cash method debt instrument to a taxpayer^* using accrual accounting, this paragraph stops applying to the instrument for periods after the transfer. (4) For a cash method debt instrument, section 483 is applied as though it contained provisions similar to section 1274(b)(3), which concerns potentially abusive situations.
(d)(1) For this section, all sales or exchanges that are part of the same transaction or series of related transactions count as one sale or exchange, and all debt instruments arising from that transaction or series count as one debt instrument. (2) For an instrument arising from a sale or exchange during a calendar year after 1989, each dollar amount in this section is increased by that amount multiplied by the cost-of-living adjustment under section 1(f)(3) for the calendar year in which the taxable year^* begins, substituting calendar year 1988 for calendar year 2016 in subparagraph (A)(ii). The increase is rounded to the nearest multiple of $100. If the increase is a multiple of $50, it is rounded upward to the nearest multiple of $100.
(e) The Secretary^* must issue regulations needed to carry out this subsection, including regulations coordinating it with other title provisions, preventing tax avoidance through abuse of subsection (c), and addressing transfers of cash method debt instruments.