Public Law 84–384

That section 112 (n) (8) of the Internal Revenue Code of 1939 (relating to the suspension of certain periods of limitation while the taxpayer is on extended active duty with the Armed Forces) is hereby amended by striking out “and before January 1, 1954, except that any such period” and inserting in lieu thereof the following: “and during an

68A Stat. 35.

26 USC 112.

induction period (as defined in section 112 (c) (5) of the Internal Revenue Code of 1954), except that any such period of time”.

Sec. 2.

The amendment made by the first section of this Act shall take effect as of December 31, 1953.

Sec. 3.

The Internal Revenue Code of 1954 is amended by adding a new section to chapter 1 of subtitle A immediately following section 1341 to read as follows:

“SEC. 1342. COMPUTATION OF TAX WHERE TAXPAYER RECOVERS SUBSTANTIAL AMOUNT HELD BY ANOTHER UNDER CLAIM OF RIGHT.

“(a)“(a)

General Rule.—

If—

“(1)“(1)

an item was deducted from gross income for a prior taxable year (or years) because it appeared that another person held an unrestricted right to such item as a result of a court decision in a patent infringement suit (whether or not the taxpayer is a party to such suit); and

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“(2)“(2)

gross income is increased for the taxable year because it was established after the close of such prior taxable year (or years) that such other person did not have an unrestricted right to such item or to a portion of such item because of the subsequent reversal of such court decision on the ground that such decision was induced by fraud or undue influence; and

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“(3)“(3)

the amount of such increase in gross income exceeds $3,000, then the tax imposed by this chapter for the taxable year shall be the lesser of the following:

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“(4)“(4)

the tax for the taxable year computed with the gross income so increased; or

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“(5)“(5)

an amount equal to—

“(A)“(A)

the tax for the taxable year computed without such increase in gross income, plus

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“(B)“(B)

the increase in tax (including interest) under this chapter (or the corresponding provisions of prior revenue laws) for the prior taxable year (or years) which would result solely from the elimination of such item (or portion thereof) as a deduction from gross income for such prior taxable year (or years).

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“(b)“(b)

Special Rule.—

For purposes of subsection (a) (5) (B) interest shall be computed from the due date of the return for such prior taxable year to the due date of the return for the taxable year.”

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Sec. 4.

The amendment made by section 3 of this Act shall apply

Applicability.

with respect to taxable years beginning after December 31, 1954.