CLASSIFICATION OF CERTAIN INTEREST AS STOCK OR INDEBTEDNESS.

SEC. 1936. CLASSIFICATION OF CERTAIN INTEREST AS STOCK OR INDEBTEDNESS. (a) General Rule.— Section 385 (relating to treatment of certain interests in corporations as stock or indebtedness) is amended by adding at the end thereof the following new subsection: “(c) Effect of Classification by Issuer.— “(1) In general.— The characterization (as of the time of issuance) by the issuer as to whether an interest in a corporation is stock or indebtedness shall be binding on such issuer and on all holders of such interest (but shall not be binding on the Secretary). “(2) Notification of inconsistent treatment.— Except as provided in regulations, paragraph (1) shall not apply to any holder of an interest if such holder on his return discloses that he is treating such interest in a manner inconsistent with the characterization referred to in paragraph (1). “(3) Regulations.— The Secretary is authorized to require such information as the Secretary determines to be necessary to carry out the provisions of this subsection.” (b) Effective Date.— The amendment made by subsection (a) shall apply to instruments issued after the date of the enactment of this Act.