228 principal or principal and interest are required to be paid periodically and in such amounts over the installment period as prescribed under regulations by the Secretary or his delegate. The requirement stated in the preceding sentence shall be deemed to be satisfied if "(A) such payments are required to be made at least once every 2 years in relatively even or declining amounts over the installment period; or "(B) at least 5 percent of the principal is required to have been paid by the end of the first quarter of the installment period, at least 15 percent of the principal is required to have been paid by the end of the second quarter of the installment period, and at least 40 percent of the principal is required to have been paid by the end of the third quarter of the installment period. "(4) RULE FOR APPLYING PARAGRAPH (2) (A) (ii).—In applying clause (ii) of paragraph (2) (A), a bond or other evidence of indebtedness issued by a corporation or a government or political subdivision thereof with interest coupons attached, in registered form, or in any other form designed to render such bond or other evidence of indebtedness readily tradable on an established securities market shall not be treated as an evidence of indebtedness of a purchaser." 229 1 (c) EFFECTIVE DATE.—The amendments made by this 2 section shall apply to sales or other dispositions occurring 3 after May 27, 1969. 4 SEC. 413. BONDS AND OTHER EVIDENCES OF INDEBTED 6 (a) BONDS AND OTHER EVIDENCES OF INDEBTED7 NESS.-Section 1232 (a) (relating to general rule) is 8 amended to read as follows: 9 "(a) GENERAL RULE.-For purposes of this subtitle, 10 in the case of bonds, debentures, notes, or certificates or 11 other evidences of indebtedness, which are capital assets 12 in the hands of the taxpayer, and which are issued by any 13 corporation, or by any government or political subdivision 14 thereof "(1) RETIREMENT.-Amounts received by the holder on retirement of such bonds or other evidences of indebtedness shall be considered as amounts received in exchange therefor (except that in the case of bonds or other evidences of indebtedness issued before Janu ary 1, 1955, this paragraph shall apply only to those issued with interest coupons or in registered form, or to those in such form on March 1, 1954). "(2) SALE OR EXCHANGE.— “(A) CORPORATE BONDS ISSUED AFTER MAY 27, 1969.-Except as provided in subparagraph 230 (C), on the sale or exchange of bonds or other evidences of indebtedness issued by a corporation after May 27, 1969, held by the taxpayer more than 6 months, any gain shall (except as provided in the following sentence) be considered gain from the sale or exchange of a capital asset held for more than 6 months. If at the time of original issue there was an intention to call the bond or other evidence of indebtedness before maturity, any gain realized on sale or exchange thereof which does not exceed an amount equal to the original issue discount (as defined in subsection (b)) shall be considered as gain from the sale or exchange of property which is not a capital asset. "(B) CORPORATE BONDS ISSUED ON OR BE FORE MAY 27, 1969, AND GOVERNMENT BONDS.— Except as provided in subparagraph (C), on sale or exchange of bonds or other evidences of indebtedness issued by a government or political subdivision thereof after December 31, 1954, or by a corpora tion after December 31, 1954, and on or before May 27, 1969, held by the taxpayer more than 6 months, any gain realized which does not exceed— "(i) an amount equal to the original issue discount (as defined in subsection (b)), or 231 “(ii) if at the time of original issue there was no intention to call the bond or other evi dence of indebtedness before maturity, an amount which bears the same ratio to the original issue discount (as defined in subsection (b)) as the number of complete months that the bond or other evidence of indebtedness was held by the taxpayer bears to the number of complete months from the date of original issue to the date of maturity, shall be considered as gain from the sale or exchange of property which is not a capital asset. Gain in excess of such amount shall be considered gain from the sale or exchange of a capital asset held more than 6 months. "(C) EXCEPTIONS.-This paragraph shall not apply to "(i) obligations the interest on which is not includible in gross income under section 103 (relating to certain governmental obligations), or "(ii) any holder who has purchased the bond or other evidence of indebtedness at a premium. "(D) DOUBLE INCLUSION IN INCOME NOT 232 REQUIRED. This section shall not require the in clusion of any amount previously includible in gross income. "(3) INCLUSION IN INCOME OF ORIGINAL ISSUE DISCOUNT ON CORPORATE BONDS ISSUED AFTER MAY 27, 1969. "(A) GENERAL RULE.-There shall be included in the gross income of the holder of any bond or other evidence of indebtedness issued by a corporation after May 27, 1969, the ratable monthly portion of original issue discount multiplied by the number of complete months (plus any fractional part of a month determined in accordance with the last sentence of this subparagraph) such holder held such bond or other evidence of indebtedness during the taxable year. Except as provided in subpara graph (B), the ratable monthly portion of original issue discount shall equal the original issue discount (as defined in subsection (b)) divided by the num ber of complete months from the date of original issue to the stated maturity date of such bond or other evidence of indebtedness. For purposes of this section, a complete month commences with the date of original issue and the corresponding day of each succeeding calendar month (or the last day of a |