net interest income
(1) Election to take into account in later year where net interest income from bond (A) In general If— (i) there is net interest income for any taxable year with respect to any market discount bond, and (ii) the taxpayer makes an election under this subparagraph with respect to such bond, any disallowed interest expense with respect to such bond shall be treated as interest paid or accrued by the taxpayer during such taxable year to the extent such disallowed interest expense does not exceed the net interest income with respect to such bond. (B) Determination of disallowed interest expense For purposes of subparagraph (A), the amount of the disallowed interest expense— (i) shall be determined as of the close of the preceding taxable year, and (ii) shall not include any amount previously taken into account under subparagraph (A). (C) Net interest income For purposes of this paragraph, the term “net interest income” means the excess of the amount determined under paragraph (2) of subsection (c) over the amount determined under paragraph (1) of subsection (c).