(1) In general Except as otherwise provided in this subsection, this section shall apply to any debt instrument given in consideration for the sale or exchange of property if
(A) the stated redemption price at maturity for such debt instrument exceeds
(i) where there is adequate stated interest, the stated principal amount, or
(ii) in any other case, the imputed principal amount of such debt instrument determined under subsection (b), and
(B) some or all of the payments due under such debt instrument are due more than 6 months after the date of such sale or exchange.
(3) Exceptions This section shall not apply to
(A) Sales for $1,000,000 or less of farms by individuals or small businesses
(i) In general Any debt instrument arising from the sale or exchange of a farm (within the meaning of section
6420 (c)(2))
(I) by an individual, estate, or testamentary trust,
(II) by a corporation which as of the date of the sale or exchange is a small business corporation (as defined in section
1244 (c)(3)), or
(III) by a partnership which as of the date of the sale or exchange meets requirements similar to those of section
1244 (c)(3).
(ii) $1,000,000 limitation Clause (i) shall apply only if it can be determined at the time of the sale or exchange that the sales price cannot exceed $1,000,000. For purposes of the preceding sentence, all sales and exchanges which are part of the same transaction (or a series of related transactions) shall be treated as 1 sale or exchange.
(B) Sales of principal residences Any debt instrument arising from the sale or exchange by an individual of his principal residence (within the meaning of section
121).
(C) Sales involving total payments of $250,000 or less
(i) In general Any debt instrument arising from the sale or exchange of property if the sum of the following amounts does not exceed $250,000:
(I) the aggregate amount of the payments due under such debt instrument and all other debt instruments received as consideration for the sale or exchange, and
(II) the aggregate amount of any other consideration to be received for the sale or exchange.
(ii) Consideration other than debt instrument taken into account at fair market value For purposes of clause (i), any consideration (other than a debt instrument) shall be taken into account at its fair market value.
(iii) Aggregation of transactions For purposes of this subparagraph, all sales and exchanges which are part of the same transaction (or a series of related transactions) shall be treated as 1 sale or exchange.
(D) Debt instruments which are publicly traded or issued for publicly traded property Any debt instrument to which section
1273 (b)(3) applies.
(E) Certain sales of patents In the case of any transfer described in section
1235 (a) (relating to sale or exchange of patents), any amount contingent on the productivity, use, or disposition of the property transferred.
(F) Sales or exchanges to which section 483 (e) applies Any debt instrument to the extent section
483 (e) (relating to certain land transfers between related persons) applies to such instrument.
(4) Exception for assumptions If any person
(A) in connection with the sale or exchange of property, assumes any debt instrument, or
(B) acquires any property subject to any debt instrument,
in determining whether this section or section 483 applies to such debt instrument, such assumption (or such acquisition) shall not be taken into account unless the terms and conditions of such debt instrument are modified (or the nature of the transaction is changed) in connection with the assumption (or acquisition).
