Federal long-term rate
(2) Determination of daily accruals (A) In general For purposes of this subsection, the daily accrual with respect to any residual interest for any day in any calendar quarter shall be determined by allocating to each day in such quarter its ratable portion of the product of— (i) the adjusted issue price of such interest at the beginning of such quarter, and (ii) 120 percent of the long-term Federal rate (determined on the basis of compounding at the close of each calendar quarter and properly adjusted for the length of such quarter). (B) Adjusted issue price For purposes of this paragraph, the adjusted issue price of any residual interest at the beginning of any calendar quarter is the issue price of the residual interest (adjusted for contributions)— (i) increased by the amount of daily accruals for prior quarters, and (ii) decreased (but not below zero) by any distribution made with respect to such interest before the beginning of such quarter. (C) Federal long-term rate For purposes of this paragraph, the term “Federal long-term rate” means the Federal long-term rate which would have applied to the residual interest under section 1274(d) (determined without regard to paragraph (2) thereof) if it were a debt instrument.