§ 1388. Definitions; special rules

Footnotes

1. 1 So in original. Probably should be “mean”.

Legislative history

Reconstructed from this section’s Code source credit and amendment notes, resolved against the local Statutes at Large. Editorial notes are evidence, not the law that made the change.

1. 1962

   Revenue Act of 1962

   Pub. L. 87–834 § 17(a) · 76 Stat. 960

   Enacted · 26 U.S.C. § 1388

   Added Pub. L. 87–834, § 17(a), Oct. 16, 1962, 76 Stat. 1049

   Source evidence

   Code source credit
   Added Pub. L. 87–834, § 17(a), Oct. 16, 1962, 76 Stat. 1049

   Enacted provision · exact public law section
   (a) In General.— Chapter 1 (relating to normal taxes and surtaxes) is amended by adding at the end thereof the following new subchapter: “Subchapter T— Cooperatives and Their Patrons “Part I. Tax treatment of cooperatives. “Part II. Tax treatment by patrons of patronage dividends. “Part III. Definitions; special rules. “PART I— TAX TREATMENT OF COOPERATIVES “Sec. 1381. Organizations to which part applies. “Sec. 1382. Taxable income of cooperatives. “Sec. 1383. Computation of tax where cooperative redeems nonqualified written notices of allocation. “SEC. 1381. ORGANIZATIONS TO WHICH PART APPLIES. “(a) In General.— This part shall apply to— “(1) any organization exempt from tax under section 521 26 USC 521. (relating to exemption of farmers’ cooperatives from tax), and “(2) any corporation operating on a cooperative basis other than an organization— “(A) which is exempt from tax under this chapter, “(B) which is subject to the provisions of— “(i) part II of subchapter H (relating to mutual savings 26 USC 591–595. banks, etc.), or “(ii) subchapter L (relating to insurance companies), or “(C) which is engaged in furnishing electric energy, or providing telephone service, to persons in rural areas. “(b) Tax on Certain Farmers’ Cooperatives.— An organization described in subsection (a)(1) shall be subject to the taxes imposed 26 USC 11, 1201. by section 11 or 1201. “SEC. 1382. TAXABLE INCOME OF COOPERATIVES. “(a) Gross Income.— Except as provided in subsection (b), the gross income of any organization to which this part applies shall be determined without any adjustment (as a reduction in gross receipts, an increase in cost of goods sold, or otherwise) by reason of any allocation or distribution to a patron out of the net earnings of such organization. “(b) Patronage Dividends.— In determining the taxable income of an organization to which this part applies, there shall not be taken into account amounts paid during the payment period for the taxable year— “(1) as patronage dividends (as defined in section 1388(a)), to the extent paid m money, qualified written notices of allocation (as defined in section 1388(c)), or other property (except nonqualified written notices of allocation (as defined in section Poet, p. 1051. 1388(d))) with respect to patronage occurring during such taxable year; or “(2) in money or other property (except written notices of allocation) in redemption of a nonqualified written notice of allocation which was paid as a patronage dividend during the payment period for the taxable year during which the patronage occurred. For purposes of this title, any amount not taken into account under the preceding sentence shall be treated in the same manner as an item of gross income and as a deduction therefrom. “(c) Deduction for Nonpatronage Distributions, etc.— In determining the taxable income of an organization described in section Ante, p. 1045. 1381(a)(1), there shall be allowed as a deduction (in addition to other deductions allowable under this chapter)— “(1) amounts paid during the taxable year as dividends on its capital stock; and “(2) amounts paid during the payment period for the taxable year— “(A) in money, qualified written notices of allocation, or other property (except nonqualified written notices of allocation) on a patronage basis to patrons with respect to its earnings during such taxable year which are derived from business done for the United States or any of its agencies or from sources other than patronage, or “(B) in money or other property (except written notices of allocation) in redemption of a nonqualined written notice of allocation which was paid, during the payment period for the taxable year during which the earnings were derived, on a patronage basis to a patron with respect to earnings derived from business or sources described in subparagraph (A). “(d) Payment Period for Each Taxable Year.— For purposes of subsections (b) and (c)(2), the payment period for any taxable year is the period beginning with the first day of such taxable year and ending with the fifteenth day of the ninth month following the close of such year. For purposes of subsections (b)(1) and (c)(2)(A), a qualified check issued during the payment period shall be treated as an amount paid in money during such period if endorsed and cashed on or before the 90th day after the close of such period. “(e) Products Marketed Under Pooling Arrangements.— For purposes of subsection (b), in the case of a pooling arrangement for the marketing of products, the patronage shall (to the extent provided in regulations prescribed by the Secretary or his delegate) be treated as patronage occurring during the taxable year in which the pool closes. “(f) Treatment of Earnings Received After Patronage Occurred.— If any portion of the earnings from business done with or for patrons is includible in the organization’s gross income for a taxable year after the taxable year during which the patronage occurred, then for purposes of applying subsection (b) to such portion the patronage shall, to the extent provided in regulations prescribed by the Secretary or his delegate, be considered to have occurred during the taxable year of the organization during which such earnings are includible in gross income. “SEC. 1383. COMPUTATION OF TAX WHERE COOPERATIVE REDEEMS NONQUALIFIED WRITTEN NOTICES OF ALLOCATION. “(a) General Rule.— If, under section 1382(b)(2) or (c)(2)(B), Ante, p. 1046. a deduction is allowable to an organization for the taxable year for amounts paid in redemption of nonqualified written notices of allocation, then the tax imposed by this chapter on such organization for the taxable year shall be the lesser of the following: “(1) the tax for the taxable year computed with such deduction; or “(2) an amount equal to— “(A) the tax for the taxable year computed without such deduction, minus “(B) the decrease in tax under this chapter for any prior taxable year (or years) which would result solely from treating such nonqualified written notices of allocation as qualified written notices of allocation. “(b) Special Rules.— “(1) If the decrease in tax ascertained under subsection (a)(2)(B) exceeds the tax for the taxable year (computed without the deduction described in subsection (a)) such excess shall be considered to be a payment of tax on the last day prescribed by law for the payment of tax for the taxable year, and shall be refunded or credited in the same manner as if it were an overpayment for such taxable year. “(2) For purposes of determining the decrease in tax under subsection (a)(2)(B), the stated dollar amount of any nonqualified written notice of allocation which is to be treated under such subsection as a qualified written notice of allocation shall be the amount paid in redemption of such written notice of allocation which is allowable as a deduction under section 1382(b)(2) or (c)(2)(B) for the taxable year. “(3) If the tax imposed by this chapter for the taxable year is the amount determined under subsection (a)(2), then the deduction described in subsection (a) shall not be taken into account for any purpose of this subtitle other than for purposes of this section. “PART II— TAX TREATMENT BY PATRONS OF PATRONAGE DIVIDENDS “Sec. 1385. Amounts includible in patron’s gross income. “SEC. 1385. AMOUNTS INCLUDIBLE IN PATRON’S GROSS INCOME. “(a) General Rule.— Except as otherwise provided in subsection (b), each person shall include tn gross income— “(1) the amount of any patronage dividend which is paid in money, a qualified written notice of allocation, or other property (except a nonqualified written notice of allocation), and which is received by him during the taxable year from an organization Ante, p. 1045. Ante, p. 1046. described in section 1381(a), and “(2) any amount, described in section 1382(c)(2)(A) (relating to certain nonpatronage distributions by tax-exempt farmers’ cooperatives), which is paid in money, a qualified written notice of allocation, or other property (except a nonqualified written notice of allocation), and which is received by him during the taxable year from an organization described in section 1381(a)(1). “(b) Exclusion From Gross Income.— Under regulations prescribed by the Secretary or his delegate, the amount of any patronage dividend, and any amount received on the redemption, sale, or other disposition of a nonqualified written notice of allocation which was paid as a patronage dividend, shall not be included in gross income to the extent that such amount— “(1) is properly taken into account as an adjustment to basis of property, or “(2) is attributable to personal, living, or family items. “(c) Treatment of Certain Nonqualified Written Notices of Allocation.— “(1) Application of subsection.— This subsection shall apply to any nonqualified written notice of allocation which— “(A) was paid as a patronage dividend, or “(B) was paid by an organization described in section 1381(a)(1) on a patronage basis with respect to earnings derived from business or sources described in section 1382(c)(2)(A). “(2) Basis; amount of gain.— In the case of any nonqualified written notice of allocation to which this subsection applies, for purposes of this chapter— “(A) the basis of such written notice of allocation in the hands of the patron to whom such written notice of allocation was paid shall be zero, “(B) the basis of such written notice of allocation which was acquired from a decedent shall be its basis in the hands of the decedent, and “(C) gain on the redemption, sale, or other disposition of such written notice of allocation by any person shall, to the extent that the stated dollar amount of such written notice of allocation exceeds its basis, be considered as gain from the sale or exchange of property which is not a capital asset. “PART III— DEFINITIONS; SPECIAL RULES “Sec. 1388. Definitions; special rules. “SEC. 1388. DEFINITIONS; SPECIAL RULES. “(a) Patronage Dividend.— For purposes of this subchapter, the term “patronage dividend’ means an amount paid to a patron by an organization to which part I of this subchapter applies— “(1) on the basis of quantity or value of business done with or for such patron, “(2) under an obligation of such organization to pay such amount, which obligation existed before the organization received the amount so paid, and “(3) which is determined by reference to the net earnings of the organization from business done with or for its patrons. Such term does not include any amount paid to a patron to the extent that (A) such amount is out of earnings other than from business done with or for patrons, or (B) such amount is out of earnings from business done with or for other patrons to whom no amounts are paid, or to whom smaller amounts are paid, with respect to substantially identical transactions. “(b) Written Notice of Allocation.— For purposes of this subchapter, the term ‘written notice of allocation’ means any capital stock, revolving fund certificate, retain certificate, certificate or indebtedness, letter of advice, or other written notice, which discloses to the recipient the stated dollar amount allocated to him by the organization and the portion thereof, if any, which constitutes a patronage dividend. “(c) Qualified Written Notice of Allocation.— “(1) Defined.— For purposes of this subchapter, the term ‘qualified written notice of allocation’ means— “(A) a written notice of allocation which may be redeemed in cash at its stated dollar amount at any time within a period beginning on the date such written notice of allocation is paid and ending not earlier than 90 days from such date, but only if the distributee receives written notice of the right of redemption at the time he receives such written notice of allocation; and “(B) a written notice of allocation which the distributee has consented, in the manner provided in paragraph (2), to take into account at its stated dollar amount as provided in section 1385(a). Ante, p. 1048. Such term does not include any written notice of allocation which is paid as part of a patronage dividend or as part of a payment described in section 1382(c)(2)(A), unless 20 percent or more Ante, p. 1046. of the amount of such patronage dividend, or such payment, is paid in money or by qualified check. “(2) Manner of obtaining consent.— A distributee shall consent to take a written notice of allocation into account as provided in paragraph (1)(B) only by— “(A) making such consent in writing, “(B) obtaining or retaining membership in the organization after— “(i) such organization has adopted (after the date of the enactment of the Revenue Act of 1962) a bylaw providing that membership in the organization constitutes such consent, and “(ii) he has received a written notification and copy of such bylaw, or “(C) if neither subparagraph (A) nor (B) applies, endorsing and cashing a qualified check, paid as a part of the patronage dividend or payment of which such written notice of allocation is also a part, on or before the 90th day after the close of the payment period for the taxable year of the organization for which such patronage dividend or payment is paid. “(3) Period for which consent is effective.— “(A) General rule.— Except as provided in subparagraph (B)— “(i) a consent described in paragraph (2)(A) shall be a consent with respect to all patronage of the distributee with the organization occurring (determined Ante, p. 1047. with the application of section 1382(e)) during the taxable year of the organization during which such consent is made and all subsequent taxable years of the organization; and “(ii) a consent described in paragraph (2)(B) shall be a consent with respect to all patronage of the distributee with the organization occurring (determined without the application of section 1382(e)) after he received the notification and copy described in paragraph (2)(B)(ii). “(B) Revocation,etc.— “(i) Any consent described in paragraph (2)(A) may be revoked (in writing) by the distributee at any time. Any such revocation shall be effective with respect to patronage occurring on or after the first day of the first taxable year of the organization beginning after the revocation is filed with such organization; except that in the case of a pooling arrangement described in section 1382(e), a revocation made by a distributee shall not be effective as to any pool with respect to which the distributee has been a patron before such revocation. “(ii) Any consent described in paragraph (2)(B) shall not be effective with respect to any patronage occurring (determined without the application of section 1382(e)) after the distributee ceases to be a member of the organization or after the bylaws of the organization cease to contain the provision described in paragraph (2)(B)(i). “(4) Qualified check.— For purposes of this subchapter, the term ‘qualified check’ means only a check (or other instrument which is redeemable in money) which is paid as a part of a patronage dividend, or as a part of a payment described in section Ante, p. 1046. 1382(c)(2)(A), to a distrioutee who has not given consent as provided in paragraph (2)(A) or (B) with respect to such patronage dividend or payment, and on which there is clearly imprinted a statement that the endorsement and cashing of the check (or other instrument) constitutes the consent of the payee to include in his gross income, as provided in the Federal income tax laws, the stated dollar amount of the written notice of allocation which is a part of the patronage dividend or payment of which such qualified check is also a part. Such term does not include any check (or other instrument) which is paid as part of a patronage dividend or payment which does not include a written notice of allocation (other than a written notice of allocation described in paragraph (1)(A)). “(d) Nonqualified Written Notice of Allocation.— For purposes of this subchapter, the term ‘nonqualified written notice of allocation’ means a written notice of allocation which is not described in subsection (c) or a qualified check which is not cashed on or before the 90th day after the close of the payment period for the taxable year for which the distribution of which it is a part is paid. “(e) Determination of Amount Paid or Received.— For purposes of this subchapter, in determining amounts paid or received— “(1) property (other than a written notice of allocation) shall be taken into account at its fair market value, and “(2) a qualified written notice of allocation shall be taken into account at its stated dollar amount.” (b) Technical Amendments.— (1) Section 521 (a) (relating to exemption of farmers’cooperatives 26 USC 521. from tax) is amended by striking out “section 522” each place it appears therein and inserting in lieu thereof “part I of subchapter T (sec. 1381 and following)”. Ante, p. 1045. Repeal. 26 USC 522. 26 USC 6072. (2) Section 522 (relating to tax on farmers’ cooperatives) is hereby repealed. (3) Section 6072(d) (relating to time for filing income tax returns of exempt cooperative associations) is amended to read as follows: “(d) Returns of Cooperative Associations.— In the case of an income tax return of— “(1) an exempt cooperative association described in section 1381(a)(1), or Ante, p. 1045. “(2) an organization described in section 1381(a)(2) which is under an obligation to pay patronage dividends (as defined in section 1388(a)) in an amount equal to at least 50 percent of its Ante, p. 1049. net earnings from business done with or for its patrons, or which paid patronage dividends in such an amount out of the net earnings from business done with or for patrons during the most recent taxable year for which it had such net earnings, a return made on the basis of a calendar year shall be filed on or before the 15th day of September following the close of the calendar year, and a return made on the basis of a fiscal year shall be filed on or before the 15th day of the 9th month following the close of the fiscal year.” (4) The table of subchapters for chapter 1 is amended by adding at the end thereof the following: “Subchapter T. Cooperativesand their patrons.” (5) The table of sections for part III of subchapter F of chapter 1 is amended by striking out the last line thereof. (c) Effective Dates.— (1) For the cooperatives.— Except as provided in paragraph (3), the amendments made by subsections (a) and (b) shall apply to taxable years of organizations described in section 1381(a) of the Internal Revenue Code of 1954 (as added by subsection (a)) beginning after December 31, 1962. (2) For the patrons.— Except as provided in paragraph (3), section 1385 of the Internal Revenue Code of 1954 (as added by Ante, p. 1048. subsection (a)) shall apply with respect to any amount received from any organization described in section 1381(a) of such Code, to the extent that such amount is paid by such organization in a taxable year of such organization beginning after December 31, 1962. (3) Application of existing law.— In the case of any money, written notice of allocation, or other property paid by any organization described in section 1381(a)— (A) before the first day of the first taxable year of such organization beginning after December 31, 1962, or (B) on or after such first day with respect to patronage occurring before such first day, the tax treatment of such money, written notice of allocation, or other property (including the tax treatment of gain or loss on the redemption, sale, or other disposition of such written notice of allocation) by any person shall be made under the Internal Revenue Code of 1954 without regard to subchapter T Ante, p. 1045. of chapter 1 of such Code. SEC. 18. INCLUSION OF FOREIGN REAL PROPERTY IN GROSS ESTATE. (a) Amendments To Include Foreign Real Property.— (1) Section 2031(a) (relating to definition of gross estate) is amended by striking out “, except real property situated outside of the United States”. (2) The following provisions of chapter 11 (imposing an estate tax) are amended by striking out “(except real property situated outside of the United States) ”: (A) section 2033 (relating to property in which the decedent had an interest), (B) section 2034 (relating to dower or curtesy interests), (C) section 2035(a) (relating to transactions in contemplation of death), (D) section 2036(a) (relating to transfers with retained life estate), (E) section 2037(a) (relating to transfers taking effect at death), (F) section 2038(a) (relating to revocable transfers), (G) section 2040 (relating to joint interests), and (H) section 2041(a) (relating to powers of appointment). (b) Effective Date.— (1) Except as provided in paragraph (2), the amendments made by subsection (a) shall apply to the estates of decedents dying after the date of the enactment of this Act. (2) In the case of a decedent dying after the date of the enactment of this Act and before July 1, 1964, the value of real property situated outside of the United States shall not be included in the gross estate (as defined in section 2031(a)) of the decedent— (A) under section 2033, 2034, 2035(a), 2036(a), 2037(a), 26 USC 2033–2038. or 2038(a) to the extent the real property, or the decedent’s interest in it, was acquired by the decedent before February 1, 1962; (B) under section 2040 to the extent such property or interest was acquired by the decedent before February 1, 1962, or was held by the decedent and the survivor in a joint tenancy or tenancy by the entirety before February 1, 1962; or (C) under section 2041(a) to the extent that before February 1, 1962, such property or interest was subject to a general ’power of appointment (as defined in section 2041) possessed by the decedent. In the case of real property, or an interest therein, situated outside of the United States (including a general power of appointment in respect of such property or interest, and including property held by the decedent and the survivor in a joint tenancy or tenancy by the entirety) which was acquired by the decedent after 26 USC 2511. January 31, 1962, by gift within the meaning of section 2511, or from a prior decedent by devise or inheritance, or by reason of death, form of ownership, or other conditions (including the exer-cise or nonexercise of a power of appointment), for purposes of this paragraph such property or interest therein shall be deemed to have been acquired by the decedent before February 1, 1962, if before that date the donor or prior decedent had acquired the property or his interest therein or had possessed a power of appointment in respect of the property or interest. SEC. 19. REPORTING OF INTEREST, DIVIDEND, AND PATRONAGE DIVIDEND PAYMENTS OF $10 OR MORE DURING A YEAR. “(a) Returns Regarding Payment of Dividends.— Section 6042 26 USC 6042. (relating to returns regarding corporate dividends, earnings, and profits) is amended to read as follows: “SEC. 6042. RETURNS REGARDING PAYMENTS OF DIVIDENDS AND CORPORATE EARNINGS AND PROFITS. “(a) Requirement of Reporting.— “(1) In general.— Every person— “(A) who makes payments of dividends aggregating $10 or more to any other person during any calendar year, or “(B) who receives payments of dividends as a nominee and who makes payments aggregating $10 or more during any calendar year to any other person with respect to the dividends so received, shall make a return according to the forms or regulations prescribed by the Secretary or his delegate, setting forth the aggregate amount of such payments and the name and address of the person to whom paid. “(2) Returns required by the secretary.— Every person who makes payments of dividends aggregating less than $10 to any other person during any calendar year shall, when required by the Secretary or his delegate, make a return setting forth the aggregate amount of such payments, and the name and address of the person to whom paid. “(b) Dividend Defined.— “(1) General rule.— For purposes of this section, the term ‘dividend’ means— “(A) any distribution by a corporation which is a dividend (as defined in section 316); and 26 USC 316. “(B) any payment made by a stockbroker to any person as a substitute for a dividend (as so defined). “(2) Exceptions.— For purposes of this section, the term ‘dividend’ does not include— “(A) to the extent provided in regulations prescribed by the Secretary or his delegate, any distribution or payment— “(i) by a foreign corporation, or “(ii) to a foreign corporation, a nonresident alien, or a partnership not engaged in trade or business in the United States and composed in whole or in part of nonresident aliens; and “(B) any amount described in section 1373 (relating to 26 USC 1373. undistributed taxable income of electing small business corporations). “(3) Special rule.— If the person making any payment described in subsection (a)(1)(A) or (B) is unable to determine the portion of such payment which is a dividend or is paid with respect to a dividend, he shall, for purposes of subsection (a)(1), treat the entire amount of such payment as a dividend or as an amount paid with respect to a dividend. “(c) Statements To Be Furnished to Persons With Respect to Whom Information Is Furnished.— Every person making a return under subsection (a)(1) shall furnish to each person whose name is set forth in such return a written statement showing— “(1) the name and address of the person making such return, and “(2) the aggregate amount of payments to the person as shown on such return. The written statement required under the preceding sentence shall be furnished to the person on or before January 31 of the year following the calendar year for which the return. under subsection (a)(1) was made. No statement shall be required to be furnished to any person under this subsection if the aggregate amount of payments to such person as shown on the return made under subsection (a)(1) is less than $10. “(d) Statements To Be Furnished by Corporations to Secretary.— Every corporation shall, when required by the Secretary or his delegate— “(1) furnish to the Secretary or his delegate a statement stating the name and address of each shareholder, and the number of shares owned by each shareholder; “(2) furnish to the Secretary or his delegate a statement of such facts as will enable him to determine the portion of the earnings and profits of the corporation (including gains, profits, and income not taxed) accumulated during such periods as the Secretary or his delegate may specify, which have been distributed or ordered to be distributed, respectively, to its shareholders during such taxable years as the Secretary or his delegate may specify; and “(3) furnish to the Secretary or his delegate a statement of its accumulated earnings and profits and the names and addresses of the individuals or shareholders who would be entitled to such accumulated earnings and profits if divided or distributed, and of the amounts that would be payable to each.” (b) Returns Regarding Payment of Patronage Dividends.— 26 USC 6044. Section 6044 (relating to returns regarding patronage dividends) is amended to read as follows: “SEC. 6044. RETURNS REGARDING PAYMENTS OF PATRONAGE DIVIDENDS. “(a) Requirement of Retorting.— “(1) In general.— Except as otherwise provided in this section, every cooperative to which part I of subchapter T of chapter Ante, p. 1045. 1 applies, which makes payments of amounts described in subsection (b) aggregating $10 or more to any person during any calendar year, shall make a return according to the forms or regulations prescribed by the Secretary or his delegate, setting forth the aggregate amount of such payments and the name and address of the person to whom paid. “(2) Returns required by the secretary.— Every such cooperative which makes payments of amounts described in subsection (b) aggregating less than $10 to any person during any calendar year shall, when required by the Secretary or his delegate, make a return setting forth the aggregate amount of such payments and the name and address of the person to whom paid. “(b) Amounts Subject to Retorting.— “(1) General rule.— Except as otherwise provided in this section, the amounts subject to reporting under subsection (a) are— “(A) the amount of any patronage dividend (as defined in section 1388(a)) which is paid in money, qualified written Ante, p. 1049. notices of allocation (as defined in section 1388(c)), or other property (except nonqualified written notices of allocation as defined in section 1388(d)), “(B) any amount described in section 1382(c)(2)(A) Ante, p. 1046. (relating to certain nonpatronage distributions) which is paid in money, qualified written notices of allocation, or other property (except nonqualified written notices of allocation) by an organization exempt from tax under section 521 (relating to exemption of farmers’ cooperatives from 26 USC 521. tax), and “(C) any amount described in section 1382(b)(2) (relating to redemption of nonqualified written notices of allocation) and, in the case of an organization described in section 1381(a)(1), any amount described in section 1382(c)(2)(B) Ante, p. 1045. (relating to redemption of nonqualified written notices of allocation paid with respect to earnings derived from sources other than patronage). “(2) Exceptions.— The provisions of subsection (a) shall not apply, to the extent provided in regulations prescribed by the Secretary or his delegate, to any payment— “(A) by a foreign corporation, or “(B) to a foreign corporation, a nonresident alien, or a partnership not engaged in trade or business in the United States and composed in whole or in part of nonresident aliens. “(c) Exemption for Certain Consumer Cooperatives.— A cooperative which the Secretary or his delegate determines is primarily engaged in selling at retail goods or services of a type that are generally for personal, living, or family use shall, upon application to the Secretary or his delegate, be granted exemption from the reporting requirements imposed by subsection (a). Application for exemption under this subsection shall be made in accordance with regulations prescribed by the Secretary or his delegate. “(d) Determination of Amount Paid.— For purposes of this section, in determining the amount of any payment— “(1) property (other than a qualified written notice of allocation) shall be taken into account at its fair market value, and “(2) a qualified written notice of allocation shall be taken into account at its stated dollar amount. “(e) Statements To Be Furnished to Persons With Respect to Whom Information Is Furnished.— Every cooperative making a return under subsection (a)(1) shall furnish to each person whose name is set forth in such return a written statement showing— “(1) the name and address of the cooperative making such return, and “(2) the aggregate amount of payments to the person as shown on such return. The written statement required under the preceding sentence shall be furnished to the person on or before January 31 of the year following the calendar year for which the return under subsection (a)(1) was made. No statement shall be required to be furnished to any person under this subsection if the aggregate amount of payments to such person as shown on the return made under subsection (a)(1) is less than $10.” (c) Returns Regarding Payment of Interest.— Subpart B of part III of subchapter A of chapter 61 (relating to information returns) is amended by adding after section 6048 (as added by section 7(f) of this Act) the following new section: Ante, p. 988. “SEC. 6049. RETURNS REGARDING PAYMENTS OF INTEREST. “(a) Requirement of Reporting.— “(1) In general.— Every person— “(A) who makes payments of interest (as defined in subsection (b)) aggregating $10 or more to any other person during any calendar year, or “(B) who receives payments of interest as a nominee and who makes payments aggregating $10 or more during any calendar year to any other person with respect to the interest so received, shall make a return according to the forms or regulations prescribed by the Secretary or his delegate, setting forth the aggregate amount of such payments and the name and address of the person to whom paid. “(2) Returns required by the secretary.— Every person who makes payments of interest (as defined in subsection (b)) aggregating less than $10 to any other person during any calendar year shall, when required by the Secretary or his delegate, make a return setting forth the aggregate amount of such payments and the name and address of the person to whom paid. “(3) Other returns required by secretary.— Every corporation making payments, regardless of amounts, of interest other than interest as defined in subsection (b) shall, when required by regulations prescribed by the Secretary or his delegate, make a return according to the forms or regulations prescribed by the Secretary or his delegate, setting forth the amount paid and the name and address of the recipient of each such payment. “(b) Interest Defined.— “(1) General rule.— For purposes of subsections (a)(1) and (2), the term ‘interest’ means— “(A) interest on evidences of indebtedness (including bonds, debentures, notes, and certificates) issued by a corporation in registered form, and, to the extent provided in regulations prescribed by the Secretary or his delegate, interest on other evidences of indebtedness issued by a corporation of a type offered by corporations to the public; “(B) interest on deposits with persons carrying on the banking business; “(C) amounts (whether or not designated as interest) paid by a mutual savings bank, savings and loan association, building and loan association, cooperative bank, homestead association, credit union, or similar organization, in respect of deposits, investment certificates, or withdrawable or repurchasable shares; “(D) interest on amounts held by an insurance company under an agreement to pay interest thereon; and “(E) interest on deposits with stockbrokers and dealers in securities. “(2) Exceptions.— For purposes of subsections (a)(1) and (2), the term ‘interest’ does not include— “(A) interest on obligations described in section 103(a)(1) or (3) (relating to interest on certain governmental obligations); “(B) to the extent provided in regulations prescribed by the Secretary or his delegate, any amount paid by or to a foreign corporation, a nonresident alien, or a partnership not engaged in trade or business in the United States and composed in whole or in part of nonresident aliens; and “(C) any amount on which the person making payment is required to deduct and withhold a tax under section 1451 26 USC 1451. (relating to tax-free convenant bonds), or would be so required but for section 1451(d) (relating to benefit of personal exemptions). “(c) Statements To Be Furnished to Persons With Respect to Whom Information Is Furnished.— Every person making a return under subsection (a)(1) shall furnish to each person whose name is set forth in such return a written statement snowing— “(1) the name and address of the person making such return, and “(2) the aggregate amount of payments to the person as shown on such return. The written statement required under the preceding sentence shall be furnished to the person on or before January 31 of the year following the calendar year for which the return under subsection (a)(1) was made. No statement shall be required to be furnished to any person under this subsection if the aggregate amount of payments to such person as shown on the return made under subsection (a)(1) is less than $10.” (d) Penalties for Failure to File Information Returns.— Section 6652 (relating to failure to file certain information returns) 26 USC 6652. is amended to read as follows: “SEC. 6652. FAILURE TO FILE CERTAIN INFORMATION RETURNS. “(a) Returns Relating to Payments of Dividends, Interest, and Patronage Dividends.— In the case of each failure to file a statement of the aggregate amount of payments to another person required by section 6042(a)(1) (relating to payments of dividends aggregating Ante, p. 1053. Ante, p. 1054. Ante, p. 1056. $10 or more), section 6044(a)(1) (relating to payments of patronage dividends aggregating $10 or more), or section 6049(a)(1) (relating to payments of interest aggregating $10 or more), on the date prescribed therefor (determined with regard to any extension of time for filing), unless it is shown that such failure is due to reasonable cause and not to willful neglect, there shall be paid (upon notice and demand by the Secretary or his delegate and in the same manner as tax), by the person failing to so file the statement, $10 for each such statement not so filed, but the total amount imposed on the delinquent person for all such failures during any calendar year shall not exceed $25,000. “(b) Other Returns.— In the case of each failure to file a statement of a payment to another person required under authority of section 6041 (relating to certain information at source), section 6042 (a)(2) (relating to payments of dividends aggregating less than $10), section 6044(a)(2) (relating to payments of patronage dividends aggregating less than $10), section 6049(a)(2) (relating to payments of interest aggregating less than $10), section 6049(a)(3) (relating to other payments of interest by corporations), or section 6051(d) (relating to information returns with respect to income tax 26 USC 6051. withheld), on the date prescribed therefor (determined with regard to any extension of time for filing), unless it is shown that such failure is due to reasonable cause and not to willful neglect, there shall be paid (upon notice and demand by the Secretary or his delegate and in the same manner as tax) by the person failing to so file the statement, $1 for each such statement not so filed, but the total amount imposed on the delinquent person for all such failures during the calendar year shall not exceed $1,000. “(c) Alcohol and Tobacco Taxes.— “For penalties for failure to file certain information returns with respect to alcohol and tobacco taxes, see, generally, subtitle E.” (e) Penalties for Failure To Furnish Statements to Persons With Respect to Whom Returns Are Filed.— Subchapter B of chapter 68 (relating to assessable penalties) is amended by adding Ante, p. 988. after section 6677 (as added by section 7(g) of this Act) the following new section: “SEC. 6678. FAILURE TO FURNISH CERTAIN STATEMENTS. “In the case of each failure to furnish a statement under section Ante, pp. 1054–1056. 6042(c), 6044(e), or 6049(c) on the date prescribed therefor to a person with respect to whom a return has been made under section 6042(a)(1), 6044(a)(1), or 6049(a)(1), respectively, unless it is shown that such failure is due to reasonable cause and not to willful neglect, there shall be paid (upon notice and demand by the Secretary or his delegate and in the same manner as tax), by the person failing to so furnish the statement, $10 for each such statement not so furnished, but the total amount imposed on the delinquent person for all such failures during any calendar year shall not exceed $25,000.” (f) Technical Amendments.— Section 6041 (relating to information at source) is amended— (1) by striking out, in subsection (a) thereof, “(other than payments described in section 6042(1) or section 6045)” and inserting in lieu thereof “(other than payments to which section 6042(a)(1), 6044(a)(1), or 6049(a)(1) applies, and other than payments with respect to which a statement is required under the authority of section 6042(a)(2), 6044(a)(2), 6045, 6049 (a)(2), or 6049(a)(3))”; and (2) by striking out subsection (c) thereof. (g) Clerical Amendments.— (1) The table of sections for subpart B of part III of subchapter A of chapter 61 is amended— (A) by striking out “Sec. 6042. Returns regarding corporate dividends, earnings, and profits.” and inserting in lieu thereof “Sec. 6042. Returns regarding payments of dividends and corporate earnings and profits.”; (B) by striking out “Sec. 6044. Returns regarding patronage dividends.” and inserting in lieu thereof “Sec. 6044. Returns regarding payments of patronage dividends.”; and (C) by adding at the end of such table the following: “Sec. 6049. Returns regarding payments of interest.”. (2) The table of sections for subchapter B of chapter 68 is amended by adding at the end thereof the following: “Sec. 6678. Failure to furnish certain statements.” (h) Effective Dates.— (1) Dividends and interest.— The amendments made by this section shall apply to payments of dividends and interest made on or after January 1, 1963. (2) Patronage dividends.— The amendments made by this section shall apply to payments of amounts described in section 6044(b) of the Internal Revenue Code of 1954 made on or after January 1, 1963, with respect to patronage occurring on or after the first day of the first taxable year of the cooperative beginning on or after January 1, 1963. SEC. 20. INFORMATION WITH RESPECT TO CERTAIN FOREIGN ENTITIES. “(a) Information To Be Furnished by Individuals, Domestic Corporations, etc., With Respect to Certain Foreign Corporations.— Section 6038 is amended to read as follows: 74 Stat. 1014. 26 USC 6038. “SEC. 6038. INFORMATION WITH RESPECT TO CERTAIN FOREIGN CORPORATIONS. “(a) Requirement.— “(1) In general.— Every United States person shall furnish, with respect to any foreign corporation which such person controls (within the meaning of subsection (d)(1)), such information as the Secretary or his delegate may prescribe by regulations relating to— “(A) the name, the principal place of business, and the nature of business of such foreign corporation, and the country under whose laws incorporated; “(B) the accumulated profits (as defined in section 902(c)) Ante, p. 1000. of such foreign corporation, including the items of income (whether or not included in gross income under chapter 1), deductions (whether or not allowed in computing taxable income under chapter 1) and any other items taken into account in computing such accumulated profits; “(C) a balance sheet for such foreign corporation listing assets, liabilities, and capital; “(D) transactions between such foreign corporation and— “(i) such person, “(ii) any other corporation which such person controls, and “(lii) any United States person owning, at the time the transaction takes place, 10 percent or more of the value of any class of stock outstanding of such foreign corporation; and “(E) a description of the various classes of stock outstanding, and a list showing the name and address of, and number of shares held by, each United States person who is a shareholder of record owning at any time during the annual accounting period 5 percent or more in value of any class of stock outstanding of such foreign corporation. The Secretary or his delegate may also require the furnishing of any other information which is similar or related in nature to that specified in the preceding sentence. “(2) Period for which information is to be furnished, etc.— The information required under paragraph (1) shall be furnished for the annual accounting period of the foreign corporation ending with or within the United States person’s taxable year. The information so required shall be furnished at such time and in such manner as the Secretary or his delegate shall by regulations prescribe. “(3) Limitation.— No information shall be required to be furnished under this subsection with respect to any foreign corporation for any annual accounting period unless such information was required to be furnished under regulations in effect on the first day of such annual accounting period. “(b) Effect of Failure To Furnish Information.— “(1) In general.— If a United States person fails to furnish, within the time prescribed under paragraph (2) of subsection (a), any information with respect to any foreign corporation required under paragraph (1) of subsection (a), then— “(A) iii applying section 901 (relating to taxes of foreign countries and possessions of the United States) to such United States person for the taxable year, the amount of taxes (other than taxes reduced under subparagraph (B)) paid or deemed paid (other than those deemed paid under 26 USC 904. section 904(d)) to any foreign country or possession of the United States for the taxable year shall be reduced by 10 percent, and “(B) in applying sections 902 (relating to foreign tax credit for corporate stockholder in foreign corporation) and Ante, p. 1020. 960 (relating to special rules for foreign tax credit) to any such United States person which is a corporation (or to any person who acquires from any other person any portion of the interest of such other person in any such foreign corporation, but only to the extent of such portion) for any taxable year, the amount of taxes paid or deemed paid by each foreign corporation with respect to which such person is required to furnish information during the annual accounting period or periods with respect to which such information is required under paragraph (2) of subsection (a) shall be reduced by 10 percent. If such failure continues 90 days or more after notice by the Secretary or his delegate to the United States person, then the amount of the reduction under this paragraph shall be 10 percent plus an additional 5 percent for each 3-month period, or fraction thereof, during which such failure to furnish information continues after the expiration of such 90-day period. “(2) Limitation.— The amount of the reduction under paragraph (1) for each failure to furnish information with respect to a foreign corporation required under subsection (a)(1) shall not exceed whichever of the following amounts is the greater: “(A) $10,000, or “(B) the income of the foreign corporation for its annual accounting period with respect to which the failure occurs. “(3) Special rules.— “(A) No taxes shall be reduced under this subsection more than once for the same failure. “(B) For purposes of this subsection, the time prescribed under paragraph (2) of subsection (a) to furnish information (and the beginning of the 90-day period after notice by the Secretary) shall be treated as being not earlier than the last day on which (as shown to the satisfaction of the Secretary or his delegate) reasonable cause existed for failure to furnish such information. “(C) In applying subsections (a) and (b) of section 902, and in applying subsection (a) of section 960, the reduction provided by this subsection shall not apply for purposes of determining the amount of accumulated profits in excess of income, war profits, and excess profits taxes. “(c) Two or More Persons Required To Furnish Information With Respect to Same Foreign Corporation.— Where, but for this subsection, two or more United States persons would be required to furnish information under subsection (a) with respect to the same foreign corporation for the same period, the Secretary or his delegate may by regulations provide that such information shall be required only from one person. To the extent practicable, the determination of which person shall furnish the information shall be made on the basis of actual ownership of stock. “(d) Definitions.— For purposes of this section— “(1) Control.— A person is in control of a corporation if such person owns stock possessing more than 50 percent of the total combined voting power of all classes of stock entitled to vote, or more than 50 percent of the total value of shares of all classes of stock, of a corporation. If a person is in control (within the meaning of the preceding sentence) of a corporation which in turn owns more than 50 percent of the total combined voting power of all classes of stock entitled to vote of another corporation, or owns more than 50 percent of the total value of the shares of all classes of stock of another corporation, then such person shall be treated as in control of such other corporation. For purposes of this paragraph, the rules prescribed by section 318(a) for 26 USC 318. determining ownership of stock shall apply; except that— “(A) the second sentence of subparagraphs (A) and (B), and clause (ii) of subparagraph (C), of section 318(a)(2) shall not be applied so as to consider a United States person as owning stock which is owned by a person who is not a United States person, and “(B) in applying clause (i) of subparagraph (C) of section 318(a)(2), the phrase TO percent’ shall be substituted for the phrase ‘50 percent’ used in subparagraph (C). “(2) Annual accounting period.— The annual accounting period of a foreign corporation is the annual period on the basis of which such corporation regularly computes its income in keeping its books. “(e) Cross References.— “(1) For provisions relating to penalties for violations of this section, see section 7203. “(2) For definition of the term United States person’, see section 7701 (a)(30).” (b) Information as to Organization or Reorganization of Foreign Corporations and as to Acquisitions of Their Stock.— Section 6046 (relating to returns as to creation or organization, or reorganization, of foreign corporations) is amended to read as 74 Stat. 1016. 26 USC 6046. follows: “SEC. 6046. RETURNS AS TO ORGANIZATION OR REORGANIZATION OF FOREIGN CORPORATIONS AND AS TO ACQUISITIONS OF THEIR STOCK. “(a) Requirement of Return.— A return complying with the requirements of subsection (b) shall be made by— “(1) each United States citizen or resident who is on January 1, 1963, an officer or director of a foreign corporation, 5 percent or more in value of the stock of which is owned by a United States person (as defined in section 7701(a)(30)), or who becomes such Ante, p. 988. an officer or director at any time after such date, “(2) each United States person who on January 1, 1963, owns 5 percent or more in value of the stock of a foreign corporation, or who, at any time after such date— “(A) acquires stock which, when added to any stock owned on January 1, 1963, has a value equal to 5 percent or more of the value of the stock of a foreign corporation, or “(B) acquires an additional 5 percent or more in value of the stock of a foreign corporation, and “(3) each person who at any time after January 1, 1963, becomes a United States person while owning 5 percent or more in value of the stock of a foreign corporation. “(b) Form and Contents of Returns.— The returns required by subsection (a) shall be in such form and shall set forth, in respect of the foreign corporation, such information as the Secretary or his delegate prescribes by forms or regulations as necessary for carrying out the provisions of the income tax laws, except that in the case of persons described only in subsection (a)(1) the information required shall be limited to the names and addresses of persons described in subsection (a)(2). “(c) Ownership of Stock.— For purposes of subsection (a), stock owned directly or indirectly by a person (including, in the case of an individual, stock owned by members of his family) shall be taken into account. For purposes of the preceding sentence, the family of an individual shall be considered as including only his brothers and sisters (whether by the whole or half blood), spouse, ancestors, and lineal descendants. “(d) Time for Filing.— Any return required by subsection (a) shall be filed on or before the 90th day after the day on which, under any provision of subsection (a), the United States citizen, resident, or person becomes liable to file such return. “(e) Limitation.— “(1) General rule.— Except as provided in paragraph (2), no information shall be required to be furnished under this section with respect to any foreign corporation unless such information was required to be furnished under regulations which have been in effect for at least 90 days before the date on which the United States citizen, resident, or person becomes liable to file a return required under subsection (a). “(2) Exception.— In the case of liability to file a return under subsection (a) arising on or after January 1, 1963, and before June 1, 1963— “(A) no information shall be required to be furnished under this section w’ith respect to any foreign corporation unless such information was required to be furnished under regulations in effect on or before March 1, 1963, and “(B) if the date on which such regulations become effective is later than the day on which such liability arose, any return required by subsection (a) shall (in lieu of the time prescribed by subsection (d)) be filed on or before the 90th day after such date. “(f) Cross Reference.— “For provisions relating to penalties for violations of this section, see sections 6679 and 7203.” (c) Civil Penalty for Failure To File Return.— Subchapter B of chapter 68 (relating to assessable penalties) is amended by adding Ante, p. 1058. after section 6678 (as added by section 19(e) of this Act) the following new section: “SEC. 6679. FAILURE TO FILE RETURNS AS TO ORGANIZATION OR REORGANIZATION OF FOREIGN CORPORATIONS AND AS TO ACQUISITIONS OF THEIR STOCK. “(a) Civil Penalty.— In addition to any criminal penalty provided Ante, p. 1061. by law, any person required to file a return under section 6046 who fails to file such return at the time provided in such section, or who files a return which does not show the information required pursuant to such section, shall pay a penalty of $1,000, unless it is shown that such failure is due to reasonable cause. “(b) Deficiency Procedures Not To Apply.— Subchapter B of 26 USC 6211–6216. chapter 63 (relating to deficiency procedure for income, estate, and gift taxes) shall not apply in respect of the assessment or collection of any penalty imposed by subsection (a).” (d) Technical Amendments.— (1) Section 318(b) (relating to cross references) is amended by 26 USC 318. striking out “and” at the end of paragraph (5), by striking out the period at the end of paragraph (6) and inserting in lieu thereof and”, and by adding at the end thereof the following: “(7) section 6038(d)(1) (relating to information with respect to certain foreign corporations).” (2) The table of sections for subpart B of part III of subchapter A of chapter 61 is amended by striking out “Sec. 6046. Returns as to creation or organization, or reorganization, of foreign corporations.” and inserting in lieu thereof “Sec. 6046. Returns as to organization or reorganization of foreign corporations and as to acquisitions of their stock.” (3) The table of sections for subchapter B of chapter 68 is amended by adding at the end thereof the following: “Sec. 6679. Failure to file returns as to organization or reorganization of foreign corporations and as to acquisitions of their stock.” (e) Effective Date.— (1) The amendments made by subsection (a) shall apply with respect to annual accounting periods of foreign corporations beginning after December 31, 1962. (2) The amendments made by subsection (b) shall take effect on January 1, 1963. SEC. 21. EXPENDITURES BY FARMERS FOR CLEARING LAND. “(a) Allowance of Deduction.— Part VI of subchapter B of chapter 1 (relating to itemized deductions for individuals and corporations) is amended by adding after section 181 (as added by section Ante, p. 971. 2(c) of this Act) the following new section: “SEC. 182. EXPENDITURES BY FARMERS FOR CLEARING LAND. “(a) In General.— A taxpayer engaged in the business of farming may elect to treat expenditures which are paid or incurred by him during the taxable year in the clearing of land for the purpose of making such land suitable for use in farming as expenses which are not chargeable to capital account. The expenditures so treated shall be allowed as a deduction. “(b) Limitation.— The amount deductible under subsection (a) for any taxable year shall not exceed whichever of the following amounts is the lesser: “(1) $5,000, or “(2) 25 percent of the taxable income derived from farming during the taxable year. For purposes of paragraph (2), the term ‘taxable income derived from farming’ means the gross income derived from farming reduced by the deductions allowed by this chapter (other than by this section) which are attributable to the business of farming. “(c) Definitions.— For purposes of subsection (a)— “(1) The term ‘clearing of land’ includes (but is not limited to) the eradication of trees, stumps, and brush, the treatment or moving of earth, and the diversion of streams and watercourses. “(2) The term ‘land suitable for use in farming’ means land which as a result of the activities described in paragraph (1) is suitable for use by the taxpayer or his tenant tot the production of crops, fruits, or other agricultural products or for the sustenance of livestock. “(d) Exceptions, etc.— “(1) Exceptions.— The expenditures to which subsection (a) applies shall not include— “(A) the purchase, construction, installation, or improvement of structures, appliances, or facilities which are of a character which is subject to the allowance for depreciation 26 USC 167. provided in section 167, or “(B) any amount paid or incurred which is allowable as a deduction without regard to this section. “(2) Certain property used in the clearing of land.— “(A) Allowance for depreciation.— The expenditures to which subsection (a) applies shall include a reasonable allowance for depreciation with respect to property of the taxpayer which is used in the clearing of land for the purpose of making such land suitable for use in farming and which, if used in a trade or business, would be property subject to the allowance for depreciation provided by section 167. “(B) Treatment as depreciation deduction.— For purposes of this chapter, any expenditure described in subparagraph (A) shall, to the extent allowed as a deduction under subsection (a), be treated as an amount allowed under section 167 for exhaustion, wear and tear, or obsolescence of the property which is used in the clearing of land. “(e) Election.— The election under subsection (a) for any taxable year shall be made within the time prescribed by law (including extensions thereof) for filing the return for such taxable year. Such election shall be made in such manner as the Secretary or his delegate may by regulations prescribe. Such election may not be revoked except with the consent of the Secretary or his delegate.” (b) Conforming Amendment.— Section 263(a)(1) (relating to disallowance of deductions for capital expenditures) is amended by striking out “or” at the end of subparagraph (C), by striking out the period at the end of subparagraph (D) and inserting “, or”, and by adding at the end thereof the following new subparagraph: “(E) expenditures by farmers for clearing land deductible under section 182.” (c) Clerical Amendment.— The table of sections for such part VI is amended by adding at the end thereof the following: “Sec. 182. Expenditures by farmers for clearing land.” (d) Effective Date.— The amendments made by this section shall apply with respect to taxable years beginning after December 31, 1962. SEC. 22. CHARITABLE CONTRIBUTIONS MADE FROM INCOME ATTRIBUTABLE TO SEVERAL TAXABLE YEARS. (a) Treatment for Purposes of Part I of Subchapter Q.— Section 26 USC 1307. 1307 (relating to rules applicable to part I of subchapter Q) is amended by adding at the end thereof the following new subsection: “(e) Election With Respect to Charitable Contributions.— In the case of an individual who elects (in such manner and at such time as the Secretary or his delegate prescribes by regulations) to have the provisions of this subsection apply, an amount received or accrued to which this part applies shall be reduced, for purposes of computing the tax liability of the taxpayer under this part with respect to the amount so received or accrued, by an amount equal to that portion of (1) the amount of charitable contributions made by the taxpayer during the taxable year in which the amount is so received or accrued which are allowable as a deduction for such year under section 170 26 USC 170. (determined without regard to this part), as (2) the amount received or accrued to which this part applies is of the adjusted gross income for the taxable year (determined without regard to this part). In any case in which the taxpayer elects to have the provisions of the preceding sentence apply, for purposes of computing the limitation on tax under this part— “(1) only the same proportion of the amount to which this part applies shall be taken into account for purposes of computing the limitations under section 170(b)(1)(A) and (B) for taxable years before the taxable year in which such amount is received or accrued as (A) the excess of the maximum amount which could, if the taxpayer had made additional contributions described in clause (i), (ii), or (iii) of section 170(b)(1)(A), have been described in clause (1) of the preceding sentence over the amount described in such clause (1), bears to (B) such maximum amount, and “(2) the portion of the amount of charitable contributions described in the preceding sentence shall not be taken into account in computing the tax for the taxable year in which the amount to which this part applies is received or accrued.” (b) Effective Date.— The amendment made by subsection (a) shall apply with respect to amounts received or accrued in taxable years beginning after December 31, 1961. SEC 23. EFFECTIVE DATE OF SECTION 1371(e) OF THE INTERNAL REVENUE CODE OF 1954. (a) In General.— Subject to the provisions of subsection (b), section 1371(c) of the Internal Revenue Code of 1954 (as added by 26 USC 1371. section 2(a) of the Act entitled “An Act to amend the Internal Revenue Code of 1951 to provide a personal exemption for children placed for adoption and to clarify certain provisions relating to the election of small business corporations as to taxable status”, approved September 23, 1959 (Public Law 86–376)), shall (notwithstanding the provisions of the first sentence of section 2(d) of such Act) also apply to taxable years beginning after December 31, 1957, and before January 1, 1960. (b) Election and Consent by Corporations: Consents by Shareholders.— Subsection (a) shall apply with respect to any corporation and its shareholders only if, within one year after the date of the enactment of this Act— (1) such corporation (in such manner as the Secretary of the Treasury or his delegate prescribes by regulations) elects to have the provisions of subsection (a) apply and consents to the application of subsection (c); and (2) each person who is a shareholder of such corporation on the date on which such corporation makes such election, and each person who was a shareholder of such corporation during any taxable year of such corporation beginning after December 31, 1957, and ending before the date of such election, consents (in such manner and at such time as the Secretary of the Treasury or his delegate prescribes by regulations) to such election amt to the application of subsection (c). (c) Tolling of Statutes of Limitations.— In any case in which a corporation makes an electiôn under subsection (b)— (1) if the assessment of any deficiency against the corporation making such election, or any shareholder of such corporation who consents to such election, for any taxable year is prevented, at any time on or before the expiration of one year after the date of such election, by the operation of any law or rule of law, assessment of such deficiency may, nevertheless, be made, to the extent such deficiency is attributable to the application of subsection (a), at any time on or before the expiration of such one-year period; and (2) if credit or refund of any overpayment of tax by the corporation making such election, or any shareholder of such corporation who consents to such election, for any taxable year is prevented, at any time on or before the expiration of one year after the date of such election, by the operation of any law or rule of law, credit or refund of such overpayment may, nevertheless, be allowed or made, to the extent such overpayment is attributable to the application of subsection (a), if claim therefor is filed on or before the expiration of such one-year period. SEC. 24. CERTAIN LOSSES SUSTAINED IN CONVERTING FROM STREET RAILWAY TO BUS OPERATIONS. (a) In General.— If a corporation has a net operating loss for the taxable year ending December 31, 1953, or the taxable year ending December 31, 1954, principally as the result of conversion from street railways to bus operations with respect to part or all of the company’s operations, then its unused conversion loss will be subject to the treatment provided in subsection (c). (b) Unused Conversion Loss Defined.— The amount of the unused conversion loss shall be the sum of the part of the net operating loss for each year described in subsection (a) which (without regard to this section) would be carried over to the sixth taxable year following 26 USC 172. the loss year if section 172(b) of the Internal Revenue Code of 1954 (or, where applicable, section 122(b)(2)(B) of the Internal Revenue 64 Stat. 938. Code of 1939) permitted such a carryover. (c) Treatment of Unused Conversion Loss.— If a taxpayer has an unused conversion loss, then in determining the amount of the net operating loss carryover from the taxable year ending December 31, 1959, to each of the 5 taxable years following such taxable year for purposes of section 172 of the Internal Revenue Code of 1954, such unused conversion loss shall be treated as a net operating loss for the taxable year ending December 31, 1959. This subsection shall apply only for years in which the taxpayer is engaged in the furnishing or sale of transportation (as defined in section 1503(c)(1)(A) of the 26 USC 1503. Internal Revenue Code of 1954). (d) Regulations.— The Secretary of the Treasury, or his delegate, may prescribe by regulation such rules as may be necessary to carry out the purposes of this section. SEC. 25. PENSION PLAN OF LOCAL UNION NUMBERED 435, INTERNATIONAL HOD CARRIERS’ BUILDING AND COMMON LABORERS’ UNION OF AMERICA. The pension plan of Local Union Numbered 435 of the International Hod Carriers’ Building and Common Laborers’ Union of America, which was negotiated to take effect May 1, 1980, pursuant to an agreement between such union and the Building Trades Employers Association of Rochester, New York, Incorporated, and which has been held by the Internal Revenue Sen ice to constitute a qualified 26 USC 401. 26 USC 501. trust under section 401(a) of the Internal Revenue Code of 1954, and to be exempt from taxation under section 501 (a) of such Code, shall be held and considered to have been a qualified trust under such sec-tion 401(a), and to have been exempt from taxation under such section 26 USC 401. 26 USC 501. 501(a), for the period beginning May 1, 1960, and ending April 20, 1961, but only if it is shown to the satisfaction of the Secretary of the Treasury or his delegate that the trust has not in this period been operated in a manner which would jeopardize the interests of its beneficiaries. SEC. 26. CONTINUATION OF A PARTNERSHIP YEAR FOR SURVIVING PARTNER IN A TWO-MAN PARTNERSHIP WHERE ONE DIES. (a) Close of Taxable Year of Two-Man Partnership When One Partner Dies.— Section 188 of the Internal Revenue Code of 1939 53 Stat. 71. (relating to different taxable years of partner and partnership) is amended— (1) by striking out “If” and inserting in lieu thereof “(a) General Rule.—If”; and (2) by adding at the end of such section 188 the following new subsection: “(b) Two-Man Partnership.— For the purpose of this chapter, the death of one of the partners of a partnership consisting of two members shall not, if the surviving partner so elects within one year after the date of enactment of this subsection, result in the termination of the partnership or in the closing of the taxable year of the partnership with respect to the surviving partner prior to the time the partnership year would have closed if neither partner had died or disposed of his interest.” (b) Effective Date, etc.— The amendments made by subsection (a) shall apply with respect to taxable years of a partnership beginning after December 31, 1946, to which the Internal Revenue Code of 1939 applies. If refund or credit of any overpayment resulting from the application of the amendments made by subsection (a) of this section (including interest, additions to the tax, and additional amounts), is prevented on the date of enactment of this Act, or within one year from such date, by the operation of any law or rule of law (other than section 3760 of the Internal Revenue Code of 1939 or section 7121 of the Internal Revenue Code of 1954, relating to closing agreements, and other than section 3761 of the Internal Revenue Code of 1939 or 53 Stat. 462. 26 USC 7121. 53 Stat. 462. 26 USC 7122. section 7122 of the Internal Revenue Code of 1954, relating to compromises), such refund or credit of such overpayment, may, nevertheless, be made or allowed if claim therefor is filed within one year after the date of the enactment of this Act. No interest shall be allowed or paid on any overpayment resulting from the enactment of this section. SEC. 27. EXCLUSION FROM GROSS INCOME OF CERTAIN AWARDS MADE PURSUANT TO EVACUATION CLAIMS OF JAPANESE-AMERICAN PERSONS. (a) In General.— No amount received as an award under the Act entitled “An Act to authorize the Attorney General to adjudicate certain claims resulting from evacuation of certain persons of Japanese ancestry under military orders”, approved July 2, 1948, as amended by Public Law 116, Eighty-second Congress, and Public Law 673, Eighty-fourth Congress (50 U.S.C. App., secs. 1981–1987), shall be included in gross income for purposes of chapter 1 of the Internal Revenue Code of 1939 or chapter 1 of the Internal Revenue Code of 53 Stat. 4. 26 USC 1 et seq. 1954. (b) Effective Date, etc.— Subsection (a) shall apply with respect to taxable years ending after July 2, 1948. If refund or credit of any overpayment of Federal income tax resulting from the application of subsection (a)(including interest, additions to the tax, additional amounts, and penalties) is prevented on the date of the enactment of this Act, or within one year from such date, by the operation of any law or rule of law, the refund or credit of such overpayment may nevertheless be made or allowed if claim therefor is filed within one year after the date of enactment of this Act. In the case of a claim to which the preceding sentence applies, the amount to be refunded or credited as an overpayment shall not be diminished by any credit or set-off based upon any item other than the amount of the award referred to in subsection (a). No interest shall be allowed or paid on any overpayment resulting from the application of this section. SEC. 28. DEDUCTION FOR DEPRECIATION BY TENANT-STOCKHOLDER OF COOPERATIVE HOUSING CORPORATION. (a) Alowance of Deduction.— Section 216 (relating to deductions by tenant-stockholders of a cooperative housing corporation) is amended by— (1) amending the heading thereof to read as follows: “SEC. 216. DEDUCTION OF TAXES, INTEREST, AND BUSINESS DEPRECIATION BY COOPERATIVE HOUSING CORPORATION TENANT-STOCKHOLDER.”; and (2) adding at the end of section 216 the following new subsection: “(c) Treatment as Property Subject to Depreciation.— So much of the stock of a tenant-stockholder in a cooperative housing corporation as is allocable, under regulations prescribed by the Secretary or his delegate, to a proprietary lease or right of tenancy in property 26 USC 167. subject to the allowance for depreciation under section 167(a) shall, to the extent such proprietary lease or right of tenancy is used by such tenant-stockholder in a trade or business or for the production of income, be treated as property subject to the allowance for depreciation under section 167(a). (b) Clerical Amendment.— The table of sections for part VII of subchapter B of chapter 1 is amended by striking out the item relating to section 216 and inserting in lieu thereof the following: “Sec. 216. Deduction of taxes, interest, and business depreciation by cooperative housing corporation tenant-stockholder.” (c) Effective Date.— The amendments made by subsection (a) shall be effective with respect to taxable years beginning after December 31, 1961. SEC. 29. DEDUCTION FOR INCOME TAX PURPOSES OF CONTRIBUTIONS TO CERTAIN ORGANIZATIONS FOR JUDICIAL REFORM. 26 USC 170. For purposes of section 170 of the Internal Revenue (’ode of 1954 (relating to deduction for charitable, etc., contributions and gifts), a contribution or gift made after December 31, 1961, with respect to a referendum occurring during the calendar year 1962 to or for the use of any nonprofit organization created and operated exclusively— (1) to consider proposals for the reorganization of the judicial branch of the government of any State of the United States or political subdivision of such State, and (2) to provide information, make recommendations, and seek public support or opposition as to such proposals, shall be treated as a charitable contribution if no part of the net earnings of such organization inures to the benefit of any private shareholder or individual. The provisions of the preceding sentence shall not. apply to any organization which participates in, or intervenes in, any political campaign on behalf of any candidate for public office. SEC. 30. EFFECTIVE DATE OF AMENDMENT TO SECTION 1374(b). The amendment made by section 2(b) of Public Law 86–376 (73 Stat. 699) shall take effect on September 2, 1958. SEC. 31. TREATIES. Section 7852(d) of the Internal Revenue Code of 1954 (relating to 26 USC 7852. treaty obligations) shall not apply in respect of any amendment made by this Act.

2. 1966

   Pub. L. 89–809 § 211(c)(1) · 80 Stat. 1539

   Inserted · 26 U.S.C. § 1388(e)

   Pub. L. 89–809, § 211(c)(1), inserted references to per-unit retain certificates

   Source evidence

   Code amendment note
   Subsec. (e). Pub. L. 89–809, § 211(c)(1), inserted references to per-unit retain certificates.

   Enacted provision · exact public law section
   (1) (A) Section 1388(e)(1) is amended by striking out “allocation)” and inserting in lieu thereof “allocation or a per-unit retain certificate)”. (B) Section 1388(e)(2) is amended by striking out “allocation” and inserting in lieu thereof “allocation or qualified per-unit retain certificate”.

3. 1966

   Pub. L. 89–809 § 211(c)(2) · 80 Stat. 1539

   Added · 26 U.S.C. § 1388(f)(i)

   Pub. L. 89–809, § 211(c)(2), added subsecs. (f) to (i)

   Source evidence

   Code amendment note
   Subsecs. (f) to (i). Pub. L. 89–809, § 211(c)(2), added subsecs. (f) to (i).

   Enacted provision · exact public law section
   (2) Section 1388 is amended by adding at the end thereof the following new subsections: “(f) Per-Unit Retain Allocation.— For purposes of this subchapter, the term ‘per-unit retain allocation’ means any allocation, by an organization to which part I of this subchapter applies, other than by payment in money or other property (except per-unit retain certificates) to a patron with respect to products marketed for him, the amount of which is fixed without reference to the net earnings of the organization pursuant to an agreement between the organization and the patron. “(g) Per-Unit Retain Certificate.— For purposes of this subchapter, the term ‘per-unit retain certificate’ means any written notice which discloses to the recipient the stated dollar amount of a per-unit retain allocation to him by the organization. “(h) Qualified Per-Unit Retain Certificate.— “(1) Defined.— For purposes of this subchapter, the term ‘qualified per-unit retain certificate’ means any per-unit retain certificate which the distributee has agreed, in the manner provided in paragraph (2), to take into account at its stated dollar amount as provided in section 1385 (a). 76 Stat. 1048. “(2) Manner of obtaining agreement.— A distributee shall agree to take a per-unit retain certificate into account as provided in paragraph (1) only by— “(A) making such agreement in writing, or “(B) obtaining or retaining membership in the organization after— “(i) such organization has adopted (after the date of the enactment of this subsection) a bylaw providing that membership in the organization constitutes such agreement, and “(ii) he has received a written notification and copy of such bylaw. “(3) Period for which agreement is effective.— “(A) General rule.— Except as provided in subparagraph (B)— “(i) an agreement described in paragraph (2)(A) shall be an agreement with respect to all products delivered by the distributee to the organization during the taxable year of the organization during which such agreement is made and all subsequent taxable years of the organization; and “(ii) an agreement described in paragraph (2)(B) shall be an agreement with respect to all products delivered by the distributee to the organization after he received the notification and copy described in paragraph (2)(B)(ii). “(B) Revocation, etc.— “(i) Any agreement described in paragraph (2)(A) may be revoked (in writing) by the distributee at any time. Any such revocation shall be effective with respect to products delivered by the distributee on or after the first day of the first taxable year of the organization beginning after the revocation is filed with the organization; except that in the case of a pooling arrangement described in section 1382(e) a revocation made by a distributee 76 Stat. 1046. shall not be effective as to any products which were delivered to the organization by the distributee before such revocation. “(ii) Any agreement described in paragraph (2)(B) shall not be effective with respect to any products delivered after the distributee ceases to be a member of the organization or after the bylaws of the organization cease to contain the provision described in paragraph (2)(B)(i). “(i) Nonqualified Per-Unit Retain Certificate.— For purposes of this subchapter, the term ‘nonqualified per-unit retain certificate’ means a per-unit retain certificate which is not described in subsection (h).”

4. 1969

   Tax Reform Act of 1969

   Pub. L. 91–172 title IX § 911(b) · 83 Stat. 487

   Struck · 26 U.S.C. § 1388(f)

   Pub. L. 91–172 struck out reference to allocations made by organizations other than by payment of money or other property except per-unit retain certificates

   Source evidence

   Code amendment note
   Subsec. (f). Pub. L. 91–172 struck out reference to allocations made by organizations other than by payment of money or other property except per-unit retain certificates.

   Enacted provision · exact public law section
   (b) Conforming Amendment.— Section 1388(f) (relating to per-unit retain allocations) is amended by striking out “other than by payment in money or other property (except per-unit retain certificates)”.

5. 1976

   Pub. L. 94–455 § 1901 · 90 Stat. 1520

   Substituted · 26 U.S.C. § 1388(c)(2)(B)(i)

   Pub. L. 94–455, § 1901 (a)(153)(A), substituted “October 16, 1962” for “the date of the enactment of the Revenue Act of 1962”

   Source evidence

   Code amendment note
   Subsec. (c)(2)(B)(i). Pub. L. 94–455, § 1901 (a)(153)(A), substituted “October 16, 1962” for “the date of the enactment of the Revenue Act of 1962”.

   Enacted provision · exact public law section
   SEC. 1901. AMENDMENTS OF SUBTITLE A; INCOME TAXES. (a) In General.— (1) Amendment of section 2.— Subsection (c) of section 2 (relating to certain married individuals living apart) is amended to read as follows: “(c) Certain Married Individuals Living Apart.— For purposes of this part, an individual shall be treated as not married at the close of the taxable year if such individual is so treated under the provisions of section 143 (b).” (2) Repeal of section 36.— Section 35 (relating to partially tax-exempt interest received by individuals) is repealed. (3) Amendment of section 39.— Section 39 (relating to certain uses of gasoline, special fuels, and lubricating oil) is amended by striking out subsections (b) and (c) and inserting after subsection (a) the following new subsection: “(b) Exception.— Credit shall not be allowed under subsection (a) for any amount payable under section 6421, 6424, or 6427, if a claim for such amount is timely filed and, under section 6421 (i), 6424 (f), or 6427(f), is payable under such section.” (4) Amendments of section 46.— (A) The second sentence of section 46(a)(4), as redesignated by this Act, is amended by striking out “section 408(e)” and inserting in lieu thereof “section 408(f)”. (B) Clause (iii) of section 46(c)(3)(B) (relating to public utility property) is amended by striking out “47 U.S.C., sec. 222(a)(5)” and inserting in lieu thereof “47 U.S.C. 222(a)(5)”. (5) Amendments or section 48.— (A) Section 48(a)(2)(B)(vi) (relating to section 38 property used outside the United States) is amended by striking out “; 43 U.S.C., sec. 1331)” and inserting in lieu thereof “(43 U.S.C. 1331))”. (B) Section 48(a)(2)(B)(viii) is amended by striking out “47 U.S.C., sec. 702” and inserting in lieu thereof “47 U.S.C. 702”. (6) Amendment of section 50a.— The second sentence of section 50A (a)(3) (relating to liability for tax) is amended by 26 USC 50A. striking out “section 408 (e)” and inserting in lieu thereof “section 408(f)”. (7) Repeal of section 51.— Subchapter A of chapter 1 is 26 USC 51. amended by striking out part V (relating to tax surcharge). (8) Amendments op section 62.— Section 62 (relating to definition 26 USC 62. of adjusted gross income) is amended by redesignating paragraph (11), as added by the Act of October 26, 1974 (Public Law 93–483), as paragraph (12). (9) Additional amendment of section 62.— Section 62(12), as redesignated by subparagraph (A) of this paragraph, is amended by striking out “trade or business to the extent” and inserting in lieu thereof “trade or business, to the extent”. (10) Definition of ordinary income.— Part I of subchapter B of chapter 1 (relating to definitions of gross income, adjusted 26 USC 61. gross income, and taxable income) is amended by adding at the end thereof the following new section: “SEC. 64. ORDINARY INCOME DEFINED. “For purposes of this subtitle, the term ‘ordinary income’ includes any gain from the sale or exchange of property which is neither a capital asset nor property described in section 1231(b). Any gain from the sale or exchange of property which is treated or considered, under other provisions of this subtitle, as ‘ordinary income’ shall be treated as gain from the sale or exchange of property which is neither a capital asset nor property described in section 1231(b).” (11) Definition of ordinary loss.— Part I of subchapter B of chapter 1 (relating to definitions of gross 26 USC 61. income, adjusted gross income, and taxable income) is amended by adding at the end thereof the following new section: “SEC. 65. ORDINARY LOSS DEFINED. “For purposes of this subtitle, the term ‘ordinary loss’ includes any loss from the sale or exchange of property which is not a capital asset. Any loss from the sale or exchange of property which is treated or considered, under other provisions of this subtitle, as ‘ordinary loss’ shall be treated as loss from the sale or exchange of property which is not a capital asset.” (12) Amendment of section 72.— Section 72(d)(1) (relating 26 USC 72. to employees’ annuities) is amended by striking out “(whether or not before January 1, 1954)” and by striking out “(under this paragraph and prior income tax laws)”. (13) Additional amendment of section 72.— Section 72(m)(4)(A) (relating to assignments or pledges) is amended by striking out “an individual retirement amount” and inserting in lieu thereof “an individual retirement account”. (14) Repeal of section 76.— Section 76 (relating to mortgages 26 USC 76. made or obligations issued by joint stock land banks) is repealed. (15) Amendment of section 83.— Section 83(b)(2) (relating 26 USC 83. to election to include the value of restricted property in gross income) is amended by striking out “(or, if later, 30 days after 26 USC 1 note. the date of the enactment of the Tax Reform Act of 1969)”. (16) Amendment of section 101.— Section 101 is amended by 26 USC 101. striking out subsection (f) (relating to effective date of section). (17) Amendments of section 103.— (A) Section 103(a) (relating to tax-exempt interest), as 26 USC 103. amended by this Act, is amended by inserting “and” at the end of paragraph (1), by striking out paragraphs (2) and (3), and by redesignating paragraph (4) as paragraph (2). (B) Section 103 is amended by striking out subsection (b) (relating to certain exceptions) and by redesignating subsections (c), (d), (e) (f), and (g)(as added by this Act) as subsections (b), (c), (d), (e), and (f) respectively. (C) Section 103(b)(1) (relating to industrial development bonds), as redesignated by subparagraph (B) of this paragraph, is amended by inserting “or (2)” after “(a)(1)”. (D) Section 103(c)(2)(A) (relating to definition of arbitrage bonds), as redesignated by subparagraph (B) of this paragraph, is amended by inserting “or (2)” after “(a)(1)”. (E) Section 103(e) (relating to certain cross references) as redesignated by subparagraph (B) of this paragraph, is amended to read as follows: “(e) Cross References.— “For provisions relating to the taxable status of— “(1) Puerto Rican bonds, see section 3 of the Act of March 2, 1917, as amended (48 U.S.C. 745). “(2) Virgin Islands insular and municipal bonds, see section 1 of the Act of October 27, 1919 (48 U.S.C. 1403). “(3) Certain obligations issued under title I of the Housing Act of 1949, see section 102(g) of title I of such Act (42 U.S.C. 1452(g)).” (18) Amendments of section 104.— (A) Section 104(a)(4) (relating to exclusion of compensation for injuries or sickness) is amended by striking out “;60 Stat. 1021” (B) Section 104(c)(2) as redesignated by section 505 of this Act, is amended to read as follows: “(2) For exclusion of part of disability retirement pay from the application of subsection (a)(4) of this section, see section 1403 of title 10, United States Code (relating to career compensation laws).” (19) Amendment of section 115.— Section 115 (relating to income of States, municipalities, etc.) is amended to read as follows: “SEC. 115. INCOME OF STATES, MUNICIPALITIES, ETC. “Gross income does not include— “(1) income derived from any public utility or the exercise of any essential governmental function and accruing to a State or any political subdivision thereof, or the District of Columbia; or “(2) income accruing to the government of any possession of the United States, or any political subdivision thereof.” (20) Amendment of section 116.— Subsection (a) of section 116 (relating to partial exclusion of dividends received by individuals) is amended by striking out “Effective with respect to any taxable year ending after July 31, 1954, gross income” and inserting in lieu thereof “Gross income”. (21) Amendment of section 124.— Section 124 (relating to cross references to other Acts) is amended to read as follows: “SEC. 124. CROSS REFERENCES TO OTHER ACTS. “(a) For exemption of— “(1) Adjustments of indebtedness under wage earners’ plans, see section 679 of the Bankruptcy Act (11 U.S.C. 1079). “(2) Allowances and expenditures to meet losses sustained by persons serving the United States abroad, due to appreciation of foreign currencies, see section 5943 of title 5, United States Code. “(3) Amounts credited to the Maritime Administration under section 9(b)(6) of the Merchant Ship Sales Act of 1946, see section 9(c)(1) of that Act (50 U.S.C. App. 1742). “(4) Benefits under laws administered by the Veterans’ Administration, see section 3101 of title 38, United States Code. “(5) Earning of ship contractors deposited in special reserve funds, see section 607(d) of the Merchant Marine Act, 1936 (46 U.S.C. 1177). “(6) Income derived from Federal Reserve banks, including capital stock and surplus, see section 7 of the Federal Reserve Act (12 U.S.C. 531). “(7) Railroad retirement annuities and pensions, see section 12 of the Railroad Retirement Act of 1935 (45 U.S.C. 2281). “(8) Railroad unemployment benefits, see section 2(e) of the Railroad Unemployment Insurance Act (45 U.S.C. 352). “(9) Special pensions of persons on Army and Navy medal of honor roll, see 38 U.S.C. 562(a)–(c). “(b) For extension of military income-tax-exemption benefits to commissioned officers of Public Health Service in certain circumstances, see section 212 of the Public Health Service Act (42 U.S.C. 213).” (22) Amendment of section 143.— Section 143 (relating to 26 USC 143. determination of marital status) is amended by striking out “this part” each place it appears and inserting in lieu thereof “this part and part V”. (23) Amendment of section 151.— Section 151 (e)(4)(defining 26 USC 151. student and educational institution) is amended to read as follows: “(4) Student defined.— For purposes of paragraph (1)(B)(ii), the term ‘student’ means an individual who during each of 5 calendar months during the calendar year in which the taxable year of the taxpayer begins— “(A) is a full-time student at an educational organization described in section 170(b)(1)(A)(ii); or “(B) is pursuing a full-time course of institutional on-farm training under the supervision of an accredited agent of an educational organization described in section 170(b)(1)(A)(ii) or of a State or political subdivision of a State.” (24) Amendments or section 152.— (A) Section 152(a)(defining dependent) is amended— 26 USC 152. (i) by inserting “or” at the end of paragraph (8), (ii) by striking out “, or” at the end of paragraph (9) and inserting in lieu thereof a period, and (iii) by striking out paragraph (10). (B) Section 152(b)(3) (relating to rules concerning the definition of dependent) is amended to read as follows: “(3) The term ‘dependent’ does not include any individual who “Dependent.” is not a citizen or national of the United States unless such individual is a resident of the United States or of a country contiguous to the United States. The preceding sentence shall not exclude from the definition of ‘dependent’ any child of the tax-payer legally adopted by him, if, for the taxable year of the tax-payer, the child has as his principal place of abode the home of the taxpayer and is a member of the taxpayer’s household, and if the taxpayer is a citizen or national of the United States.” (25) Amendments of section 164.— Section 164(d)(2) (relating 26 USC 164. to apportionment of taxes on real property between the seller and purchaser) is amended by striking out subparagraphs (B) and (C), and by redesignating subparagraph (D) as subparagraph (B). (26) Amendments of section 165.— Section 165 (relating 26 USC 165. to deduction of losses) is amended by striking out subsection (i) (relating to property confiscated by Cuba), and by redesignating subsection (j) as subsection (i). (27) Amendments or section 167.— (A) Section 167 (d) (relating to agreement as to useful life for depreciation) is amended by striking out “after the date of enactment of this title” and inserting in lieu thereof “after August 16, 1954”. (B) Section 167(f)(2)(defining personal property) is amended by striking out “the date of the enactment of the Revenue Act of 1962” and inserting in lieu thereof “October 16, 1962”. (C) Section 167(1)(4)(A) (relating to election as to increased-capacity property) is amended by striking out “within 180 days after the date of the enactment of this subparagraph” and inserting in lieu thereof “before June 29, 1970,”. (28) Amendments of section 170.— (A) (i) Section 170 (relating to charitable deductions) is amended by striking out subsections (f)(6) and (g) (relating to unlimited charitable deductions allowed for taxable years beginning before January 1, 1975), and by redesignating subsections (h), (i), and (j) as subsections (g), (h), and (i), respectively. (ii) Section 170(b)(1) (relating to percentage limitations on deductions for individuals) is amended by striking out subparagraph (C) (relating to unlimited deductions), and by redesignating subparagraphs (D), (E), and (F) as subparagraphs (C), (D), and (E), respectively. (iii) Section 170(b)(1)(A)(vii) is amended by striking out “subparagraph (E)” and inserting in lieu thereof “subparagraph (D)”. (iv) Section 170(b)(1)(B)(ii) is amended by striking out “subparagraph (D)” and inserting in lieu thereof “subparagraph (C)”. (v) Section 170(c) (relating to definition of charitable contribution) is amended by striking out in the last sentence “subsection (h)” and inserting in lieu thereof “subsection (g)”. (vi) Section 170(e)(1)(B)(ii) (relating to certain contributions of ordinary income and capital gain property) is amended by striking out “subsection (b)(1)(E)” and inserting in lieu thereof “subsection (b)(1)(D)”. (B) Section 170(d)(1)(A) (relating to carryover of excess charitable contributions) is amended by striking out “(30 percent, in the case of a contribution year beginning before January 1, 1970)”. (C) Section 170(h) (relating to disallowance of deductions in certain cases), as redesignated by subparagraph (A)(i) of this paragraph, is amended by striking out “64 Stat. 996;”. (D) Section 170(i) (relating to cross references), as redesignated by subparagraph (A)(i) of this paragraph, is amended to read as follows: “(i) Other Cross References.— “(1) Fer charitable contributions of estates and trusts, see section 642(c). “(2) For nondeductibilit; of contributions by common trust funds, see section 584. “(3) For charitable contributions of partners, see section 702. “(4) For charitable contributions of nonresident aliens, see section 873. “(5) For treatment of gifts for benefit of or use in connection with the Naval Academy as gifts to or for use of the United States, see section 6973 of title 10, United States Code. “(6) For treatment of gifts accepted by the Secretary of State under the Foreign Service Act of 1946 as gifts to or for the use of the United States, see section 1021(e) of that Act (22 U.S.C. 809(e)). “(7) For treatment of gifts of money accepted by the Attorney General for credit to the ‘Commissary Funds, Federal Prisons’ as gifts to or for the use of the United States, see section 2 of the Act of May 15, 1952. as amended by the Act of July 9, 1952 (31 U.S.C. 7 25s–4).” (29) Amendments of section 172.— (A) (i) Section 172(b)(1) (relating to years to which loss Ante, p. 1755. may be carried) is amended by striking out subparagraph (E). (ii) Section 172(b)(3) is amended by striking out subparagraphs 26 USC 172. (E) and (F). (B) Section 172(c) (relating to definition of net operating loss) is amended by striking out “(for any taxable year ending after December 31, 1953)”. (C) (i) Section 172 (relating to net operating loss deduction) is amended by striking out subsections (f), (g), and (i), and by redesignating subsections (h), (j), (k), and (1) as subsections (f) , (g). (h), and (i), respectively. (ii) Section 172(b)(1)(C) (relating to regulated transportation corporations) is amended by striking out “subsection (j)(1)” and “subsection (j)”, and inserting in lieu thereof “subsection (g)(1)” and “subsection (g)”, respectively. (iii) Paragraphs (1)(D) and (3)(C)(i) of section 172 Post, p. 1920. (b) (relating to net operating loss carryovers and carry-backs) are each amended by striking out “subsection (k)” and inserting in lieu thereof “subsection (h)”. (iv) Section 172(b)(2) (relating to amount of carrybacks and carryovers) is amended by striking out “subsections (i) and (j)” and inserting in lieu thereof Subsection (g)”. (D) Section 172(e) (relating to law applicable to computations) is amended by striking out the last sentence. (E) Section 172(g)(2) (relating to certain regulated transportation corporations), as redesignated by subparagraph (C) of this paragraph, is amended by striking out paragraph (4). (30) Amendments of sections 174 and 175.— Section 174(a)(2) 26 USC 174, 175. (A)(1) (relating to research and development expenditures) and section 175(d)(1)(A) (relating to soil and water conservation expenditures) are each amended by striking out “the date on which this title is enacted,” and inserting in lieu thereof “August. 16, 1954,”. (31) Repeal of section 187.— Section 187 (relating to rapid 26 USC 187. amortization for certain coal mine safety equipment) is repealed. (32) Amendment of section 219.— Section 219(b)(2)(A)(iv) 26 USC 219. (disqualifying governmental plan participants from contributing to individual retirement accounts, etc.) is amended by striking out “division” and inserting in lieu thereof “subdivision”. (33) Repeat of section 242.— Section 242 (relating to partially 26 USC 242. tax-exempt interest received by corporations) is repealed. (34) Amendments of section 243.— (A) Section 243(a)(2) (relating to the dividends received deduction) is amended by inserting after “Small Business Investment Act of 1958” the following: “(15 U.S.C. 661 and following)”. (B) Section 243(b)(2)(A) (relating to dividends received by a member of an affiliated group) is amended by striking out “(except that in the case of a taxable year of a member beginning in 1963 and ending in 1964, if the election is effective for the taxable year of the common parent corporation which includes the last day of such taxable year of such member, such election shall be effective for such taxable year of such member, if such member consents to such election with respect to such taxable year)”. (35) Amendment of section 247.— Section 247(b)(2) (relating to preferred stock) is amended to read as follows: “(2) Preferred stock.— “(A) In general.— The term ‘preferred stock’ means stock issued before October 1, 1942, which during the whole of the taxable year (or the part of the taxable year after its issue) was stock the dividends in respect of which were cumulative, limited to the same amount, and payable in preference to the payment of dividends on other stock. “(B) Certain stock issued on or after October 1, 1942.— Stock issued on or after October 1, 1942, shall be deemed for purposes of this paragraph to have been issued before October 1, 1942, if it was issued to refund or replace bonds or debentures issued before October 1, 1942, or to refund or replace other preferred stock (including stock which is preferred stock by reason of this subparagraph or subparagraph (D)), but only to the extent that the par or stated value of the new stock does not exceed the par, stated, or face value of the bonds or debentures issued before October 1, 1942, or the other preferred stock, which such new stock is issued to refund or replace. “(C) Determination under regulations.— The determination of whether stock was issued to refund or replace bonds or debentures issued before October 1, 1942, or to refund or replace other preferred stock, shall be made under regulations prescribed by the Secretary. “(D) Issuance of stock.— For purposes of subparagraph (B), issuance of stock includes issuance either by the same or another corporation in a transaction which is a reorganization (as defined in section 368(a)), a transaction to which section 371 (relating to insolvency reorganizations) applies, 26 USC 1081. or a transaction subject to part VI of subchapter 0 (relating to exchanges in SEC. obedience orders), or the respectively corresponding provisions of the Internal Revenue Code of 1939.” (36) Amendment of section 248.— Section 248(c) (relating to organizational expenditures) is amended by striking out “the date of enactment of this title” and inserting in lieu thereof “August 16, 1954”, (37) Amendment of section 265.— Section 265(2) (relating to tax-exempt interest) is amended by striking out “(other than obligations of the United States issued after September 24, 1917, and originally subscribed for by the taxpayer)”, (38) Amendment of section 269.— Section 269 (relating to 26 USC 269. acquisitions made to evade or avoid income tax) is amended by striking out subsection (c) (relating to presumption in the ease of disproportionate purchase price). (39) Amendment of section 275.— Section 275(a)(1)(C) 26 USC 275. relating to nondeductible taxes) is amended by striking out (“, and corresponding provisions of prior revenue laws”. (40) Amendments of section 281.— (A) Section 281(d)(1)(A) (relating to definition of terminal 26 USC 281. railroad corporation) is amended by inserting after “Interstate Commerce Act” the following: “(49 U.S.C. 1 and following) (B) Section 281 (relating to terminal railroad corporations and their shareholders) is amended by striking out subsection (e) (relating to taxable years ending before October 23, 1962) and by redesignating subsection (f) as subsection (e). (41) Amendment of section 301.— Section 301 (relating to distributions 26 USC 301. of property) is amended by striking out subsection (e) (relating to certain distributions by personal service corporations). (42) Amendments of section 311.— (A) Section 311(d)(1) (relating to appreciated property 26 USC 311. used to redeem stock) is amended by striking out “then again shall be recognized” and inserting in lieu thereof “then a gain shall be recognized”. (B) (i) Section 311(d)(2) (relating to exceptions and limitations) is amended by striking out subparagraph (C) (relating to certain distributions before December 1, 1974) and by redesignating subparagraphs (D), (E), (F), and (G) as subparagraphs (C), (D). (E), and (F), respectively. (ii) The amendments made by clause (i) shall apply only 26 USC 311 note. with respect to distributions after November 30, 1974. (C) Section 311(d)(2)(C), as redesignated by subparagraph (B) of this paragraph, is amended by striking out “26 Stat. 209;” and “38 Stat. 730;”. (43) Amendments of section 312.— (A) Section 312(d)(1) (relating to certain distributions 26 USC 312. of stock and securities) is amended by striking out “this Code” each place it appears and inserting in lieu thereof “this title”. (B) Section 312 (relating to earnings and profits) is amended by striking out subsection (h) (relating to personal service corporations) and by redesignating subsections (i) and (j) as subsections (h) and (i), respectively. (C) Subsection (i) of section 312 (relating to distribution of proceeds of certain loans), as redesignated by subparagraph (B) of this paragraph, is amended to read as follows: “(i) Distribution of Proceeds of Loan Insured by the United States.— If a corporation distributes property with respect to its stock and if, at the time of distribution— “(1) there, is outstanding a loan to such corporation which was made, guaranteed, or insured by the United States (or by any agency or instrumentality thereof), and “(2) the amount of such loan so outstanding exceeds the adjusted basis of the property constituting security for such loan, then the earnings and profits of the corporation shall be increased by the amount of such excess, and (immediately after the distribution) shall be decreased by the amount of such excess. For purposes of paragraph (2), the adjusted basis of the property at the time of distribution shall be determined without regard to any adjustment under section 1016(a)(2) (relating to adjustment for depreciation, etc.). For purposes of this subsection, a commitment to make, guarantee, or insure a loan shall be treated as the making, guaranteeing, or insuring of a loan.” (D) Section 312(j)(3) (relating to foreign investment companies), as redesignated by subsection (b)(32)(B)(i), is amended to read as follows: “(3) Partial liquidations and redemptions.— If a foreign investment company (as defined in section 1246) distributes amounts in partial liquidation or in a redemption to which section 302(a) or 303 applies, the part of such distribution which is properly chargeable to earnings and profits shall be an amount which is not in excess of the ratable share of the earnings and profits of the company accumulated after February 28, 1913, attributable to the stock so redeemed.” (44) Amendment of section 333.— Section 333(a)(1) (relating to election as to recognition of gain in certain liquidations) is amended by striking out “on or after June 22, 1954”. (45) Amendment of section 334.— Section 334(b)(2)(A) (relating to liquidation of subsidiary) is amended to read as follows: “(A) the distribution is pursuant to a plan of liquidation adopted not more than 2 years after the date of the transaction described in subparagraph (B) (or, in the case of a series of transactions, the date of the last such transaction); and”. (46) Amendments of section 337.— (A) Section 337(a) (relating to nonrecognition of gain or loss on certain liquidations) is amended to read as follows: “(a) General Rule.— If, within the 12month period beginning on the date on which a corporation adopts a plan of complete liquidation, all of the assets of the corporation are distributed in complete liquidation, less assets retained to meet claims, then no gain or loss shall be recognized to such corporation from the sale or exchange by it of property within such 12month period.” (B) The first sentence, of section 337(d) (relating to certain minority stockholders) is amended by striking out “on or after January 1, 1958”. (47) Repeal of section 342.— Section 342 (relating to the liquidation of certain foreign personal holding companies) is repealed. (48) Amendments of section 351.— (A) Section 351(a) (relating to transfer to corporation controlled by transferor) is amended by striking out “(including, in the case of transfers made on or before June 30, 1967, an investment company)”. (B) Section 351(d) (relating to application of June 30, 1967, date) is amended to read as follows: “(d) Exception.— This section shall not apply to a transfer of property to an investment company.” (C) The amendments made by this paragraph shall take effect with respect to transfers of property occurring after the date of the enactment of this Act. (49) Repeal of section 363.— Section 363 (a cross reference to 26 USC 363. other sections) is repealed. (50) Amendments of section 371.— Section 371 (a)(1) (relating 26 USC 371. to certain reorganization exchanges by corporations) is amended— (A) by striking out “49 Stat. 922;” and (B) by striking out “(52 Stat. 883–905; 11 U.S.C., chapter 10) or the corresponding provisions of prior law” and inserting in lieu thereof “(11 U.S.C. 501 and following)”. (51) Amendment of section 372.— Section 372(a) (relating 26 USC 372. to basis in connection with bankruptcy proceedings) is amended by striking out “54 Stat. 709;”. (52) Repeal of section 373.— Section 373 (relating to nonrecognition 26 USC 373. of loss in certain railroad reorganizations) is repealed. (53) Amendment of section 374 .— Section 374(a)(1) (relating 26 USC 374. to non recognition of gain or loss in certain railroad reorganizations) is amended by striking out “49 Stat. 922;”. (54) Amendment of section 381.— Section 381 (c) (relating to 26 USC 381. items carried over in certain corporate acquisitions) is amended by striking out paragraph (20). (55) Repeal of sections 391 through 395.— Subchapter C of 26 USC 391–395. chapter 1 (relating to corporate distributions and adjustments) is amended by striking out part VII (relating to effective dates of subchapter C). (56) Amendments of section 401.— (A) Paragraphs (12) and (13) of section 401(a) (relating 26 USC 401. to requirements for qualification) are each amended by striking out “the date of the enactment of the Employee Retirement Income Security Act of 1974” and inserting in lieu thereof “September 2, 1974”. (B) Paragraph (15) of section 401(a) is amended by striking out “the date of the enactment of the Employee Retirement Income Security Act of 1974” and inserting in lieu 29 USC 1001 note. thereof “September 2, 1974,”. (C) Paragraph (19) of section 401(a) is amended by striking out “enactment of the Employee Retirement Income Security Act of 1974” and inserting in lieu thereof “September 2, 1974”. (D) The last sentence of section 401(a) is amended to read as follows: “Paragraphs (11), (12), (13), (14), (15), (19), and (20) shall apply only in the case of a plan to which section 411 (relating to minimum vesting standards) applies without regard to subsection (e)(2) of such section.” (57) Amendments of section 402.— (A) Section 402(a)(4) (relating to distributions made to 26 USC 402. nonresident alien individuals) is amended by striking out “basic salary” each place it appears therein and inserting in lieu thereof “basic pay”, and by amending the last sentence in such paragraph to read as follows: “In the case of distributions under the civil service retirement laws, the term ‘basic pay’ shall have the meaning provided in section 8331(3) of title 5, United States Code.” (B) Section 402 (relating to taxability of beneficiary of employees’ trusts) is amended by striking out subsection (d) (relating to certain trust agreements made before October 21, 1942), (C) (i) So much of the third sentence of section 402(e)(4) 26 USC 402. (A) (relating to definition of lump sum distributions) as precedes “a distribution of an annuity contract” is amended to read as follows: “Except for purposes of subsection (a)(2) and section 403(a)(2),”. (ii) The amendment made by clause (i) shall apply with respect to distributions or payments made after December 31, 1973, in taxable years beginning after such date. (58) Amendment of section 403.— The last two sentences of section 403(a)(4) (relating to taxation of employee annuities) are amended to read as follows: “For purposes of this title, a transfer described in subparagraph (B)(1) shall be treated as a rollover contribution described in section 408(d)(3). Subparagraph (B)(ii) does not apply in the case of a transfer to an employees’ trust, or annuity plan if any part of a payment described in subparagraph (A) is attributable to an annuity plan under which the employee was an employee within the meaning of section 401(c)(1) at the time contributions were made on his behalf under the plan.” (59) Amendment of section 404.— Section 404 (relating to deduction for contributions to pension plans, etc.) is amended by striking out subsection (d) (relating to carryover of pre–1954 unused deductions). (60) Amendment of section 409.— Section 409(b)(3)(C) (relating to tax-free rollovers of individual retirement bonds) is amended by striking out “section 403(d)(3).” and inserting in lieu thereof “section 408 (d)(3).” (61) Amendments of section 410.— (A) Subparagraphs (C) and (D) of section 410(a)(5) (relating to breaks in service) are each amended by striking out “purposes of subsection (a)(1)” and inserting in lieu thereof “purposes of paragraph (1)”. (B) Paragraph (1)(C) of section 410(c) (relating to application of minimum participation standards) is amended by striking out “the date of the enactment of the Employee 29 USC 1001 note. Retirement Income Security Act of 1974” and inserting in lieu thereof “September 2, 1974,”. (C) Paragraph (2) of section 410(c) is amended by striking out “the day before the date of the enactment of this section” and inserting in lieu thereof “September 1, 1974”. (62) Amendments of section 411.— (A) Subsection (a) of section 411 (relating to minimum vesting standards) is amended by striking out “subsection (a)(8)” and inserting in lieu thereof “paragraph (8)”. (B) Subsection (a)(3)(D)(iii) of section 411 is amended— (i) by striking out “the date of the enactment of the Employee Retirement Income Security Act of 1974” and “the date of the enactment of such Act” and inserting in lieu thereof in both such places “September 2, 1974”, and (ii) by striking out “the date of the enactment of the Act” and inserting in lieu thereof “September 2, 1974,”. (C) The heading for subparagraph (C) of section 411 (a)(7) is amended to read as follows: “(C) Repayment of subparagraph (b) distributions.—” (D) Subsection (b)(1)(D)(i) and (e)(1)(C) of section 411 are each amended by striking out “the date of the enactment of the Employee Retirement Income Security Act of 1974” and inserting in lieu thereof “September 2, 1974”. 29 USC 1001 note. (E) Subsection (e)(2) of section 411 is amended by striking out “the date before the date of the enactment of the Employee Retirement Income Security Act of 1974” and 26 USC 411. inserting in lieu thereof “September 1, 1974”. (63) Amendments of section 412.— (A) Subsection (h) of section 412 (relating to minimum 26 USC 412. funding standards) is amended by striking out “the day before the date of the enactment of the Employee Retirement Income Security Act of 1974” and inserting in lieu thereof “September 1, 1974”. (B) Subsection (h)(5) of section 412 is amended by striking out “the date of the enactment of the Employee Retirement Income Security Act of 1974” and inserting in lieu thereof “September 2, 1974”. (64) Amendments of section 414.— (A) The heading for section 414(f) (relating to multi-employer 26 USC 414. plans) is amended to read as follows: ‘(f) Multiemployer Plan.—” (B) Section 414(1) (relating to mergers and consolidations of plans or transfers of plan assets) is amended by striking out “the date of the enactment of the Employee Retirement Income Security Act of 1974” and inserting in lieu thereof “September 2, 1974”. (65) Amendments of section 415.— (A) Section 415(b)(2)(A) (relating to adjustments for 26 USC 415. certain forms of benefits) is amended by striking out “and 409(b)(3)(C)” and inserting in lieu thereof “and 409(b)(3)(C))”. (B) Section 415(b)(2)(B) is amended by striking out “(as defined in section 401(a)(11)(II)(iii))” and inserting in lieu thereof “(as defined in section 401 (a)(11)(G)(iii))”. (66) Amendments of section 453.— (A) Section 453(c)(3) (relating to adjustment in tax for 26 USC 453. amounts previously taxed) is amended by striking out “corresponding provisions of the Internal Revenue Code, of 1939” and inserting in lieu thereof “corresponding provisions of the Internal Revenue Code of 1954”. (B) Section 453(d)(4)(B) (relating to liquidations to which section 337 applies) is amended by striking out “or section 617(d)(1)” and inserting in lieu thereof “, 617(d)” (67) Amendment of section 455.— Section 455(c)(3)(B) 26 USC 455. (relating to prepaid subscription income) is amended by striking out “for his first taxable year (i) which begins after December 31, 1957, and (ii) in which he receives prepaid subscription income in the trade or business” and inserting in lieu thereof “for his first taxable year in which he receives prepaid subscription income in the trade or business”. (68) Amendment of section 458.— Section 456(c)(3)(B) 26 USC 456. (relating to election without consent with respect to treatment of prepaid dues) is amended by striking out “for its first taxable year (i) which begins after December 31, 1960, and (ii)” and inserting in lieu thereof “for its first taxable year”. (69) Amendments of section 461.— (A) Section 461(c) (relating to accrual of real property taxes) is amended by striking out paragraph (2) and by redesignating paragraph (3) as paragraph (2). (B) Section 461(c)(2) (relating to elections without consent), as redesignated by subparagraph (A), is amended by striking out “his first taxable year which begins after December 31, 1953, and ends after the date of enactment of this title in which the taxpayer” and inserting in lieu thereof “his first taxable year in which he”. (70) Amendments of section 481.— (A) Section 481(b) (relating to limitation on tax where substantial adjustments are required by a change in accounting method) is amended by striking out paragraphs (4), (5), and (6) (relating to pre–1954 adjustments). (B) Section 481(b)(1) and (2) are each amended by striking out “, other than the amount of such adjustments to which paragraph (4) or (5) applies,” each place it appears. (71) Amendments of section 508.— (A) Subsections (a) and (b) of section 508 (relating to special rules relating to 501(c)(3) organizations) are each amended by striking out the hist sentence therein. (B) Section 508(e)(2) (relating to special rules for existing private foundations) is amended by striking out subparagraph (A) (relating to taxable years beginning before 1972), by redesignating subparagraphs (B) and (C) as subparagraphs (A) and (B), respectively, and by striking out “(B)” in subparagraph (B)(as so redesignated) and inserting in lieu thereof “(A)”. (C) Section 508(d)(2)(A) (relating to disallowance of deductions for certain charitable gifts or bequests) is amended by striking out “(e)(2)(B) and (C)” and inserting in lieu thereof “(e)(2)”. (72) Amendments of section 514.— (A) Section 514(c)(1) (relating to definition of acquisition indebtedness) is amended by striking out the comma at the end of subparagraph (C) and all that follows, and inserting in lieu thereof a period. (B) Section 514 (relating to unrelated debt-financed income) is amended by striking out subsection (f) (relating to definition of business lease), by striking out subsection (g) (relating to definition of business lease indebtedness), and by redesignating subsection (h) as subsection (f). (C) Section 514(b)(3)(C)(iii) (relating to definition of debt-financed property) is amended to read as follows: “(iii) shall not apply to property subject to a lease which is a business lease (as defined in this section immediately before the enactment of the Tax Reform Act of 1976).” (D) Section 514(f) (relating to personal property leased with real property), as redesignated by subparagraph (B) of this paragraph, is amended by striking out “and the term ‘premises’ include” and inserting in lieu thereof “includes”. (73) Amendments of section 534.— (A) Section 534(b) (relating to mailing notices of deficiency) is amended by striking out the last sentence, (B) Subsection (e) of section 534 (relating to effective date of section) is repealed. (74) Amendment of section 533.— Section 535(b)(1) (relating 26 USC 535. to adjustments in computing accumulated taxable income) is amended by striking out “(other than the excess profits tax imposed by subchapter E of chapter 2 of the Internal Revenue Code of 1939 for taxable years beginning after December 31, 1940)”. (75) Amendments of section 537.— (A) Section 537(b)(2) (relating to definition of excess 26 USC 537. business holdings redemption needs) is amended by striking out “, with respect to taxable years of the corporation ending after May 26, 1969,”. (B) Section 537(b)(4) (relating to inferences as to prior years) is amended by striking out “or (2)”. (76) Amendments of section 542.— (A) Section 542(a)(2) (relating to definition of personal 26 USC 542. holding company) is amended by striking out the last sentence. (B) Section 542(b)(2) (relating to ineligible affiliated group) is amended by striking out “, other than an affiliated group of railroad corporations the common parent of which would be eligible to file a consolidated return under section 141 of the Internal Revenue Code of 1939 prior to its amendment by the Revenue Act of 1942,”. (C) Section 542(c)(2) (relating to financial institutions) is amended by striking out “without regard to subparagraphs (D) and (E) thereof”, (D) Section 542(c)(8) (relating to small business investment companies) is amended by inserting after “Small Business Investment Act of 1958” the following: “(15 U.S.C. 661 and following)”. (77) Amendments of section 545.— (A) Section 545(b)(1) (relating to deduction of taxes in 26 USC 545. computing undistributed personal holding company income) is amended— (i) in the first sentence, by striking out “(other than the excess profits tax imposed by subchapter E of chapter 2 of the Internal Revenue Code of 1939 for taxable years beginning after December 31, 1940)”; and (ii) by striking out the last two sentences (relating to deduction of taxes). (B) Section 545(b) (relating to adjustments in computing undistributed personal holding company income) is amended by striking out paragraph (7) (relating to payment of indebtedness incurred before 1934). (C) Section 545(c)(2)(A) (relating to corporations to which special adjustment applies) is amended by striking out “the date of enactment of this subsection” and inserting in lieu thereof “February 26, 1964”. (78) Amendment of section 547.— Section 547 (relating to the 26 USC 547. deduction of deficiency dividends) is amended by striking out subsection (h) (relating to the effective date). ‘ (79) Amendment of section 551.— Section 551(c) (relating to 26 USC 551. foreign personal holding company income tax returns), as redesignated by subsection (b)(1)(F) of this section, is amended by striking out “taxable income, foreign personal holding com-pany,” and inserting in lieu thereof “taxable income, foreign personal holding company income,”. (80) Amendment of section 554.— The first sentence of section 556(b)(1) (relating to deduction of taxes in computing undistributed foreign personal holding company income) is amended by striking out “(other than the excess profits tax imposed by subchapter E of chapter 2 of the Internal Revenue Code of 1939 for taxable years beginning after December 1, 1940)”. (81) Amendment of section 584.— Section 564 (relating to dividend carryovers) is amended by striking out subsection (c) (relating to carryovers from pre–1954 years). (82) Repeal of section 583.— Section 583 (relating to deduction of dividends paid on certain preferred stock by banks or trust companies) is repealed. (83) Repeal of section 592.— Section 592 (relating to the deduction by mutual savings banks for repayment of certain loans) is repealed. (84) Amendments of section 593.— (A) Section 593(b)(2) (relating to additions to bad debt reserves for mutual savings banks, etc.) is amended by striking out, in the table in subparagraph (A), the following: “1969 60 percent 1970 57 percent 1971 54 percent 1972 51 percent 1973 49 percent 1974 47 percent 1975 45 percent” (B) Section 593(c) (relating to reserves for mutual savings banks) is amended by striking out paragraphs (2), (3), (4), and (5), by redesignating paragraph (6) as paragraph (3), and by inserting immediately after paragraph (1) the following: “(2) Certain pre-1963 reserves.— Notwithstanding the second sentence of paragraph (1), any amount allocated pursuant to paragraph (5)(as in effect immediately before the enactment of the Tax Reform Act of 1976) during a taxable year beginning before January 1, 1977, to the reserve for losses on qualifying real property loans out of the surplus, undivided profits, and bad debt reserves (determined as of December 31, 1962) attributable to the period before the first taxable year beginning after December 31, 1951, shall not be treated as a reserve for bad debts for any purpose other than determining the amount referred to in subsection (b)(1)(B), and for such purpose such amount shall be treated as remaining in such reserve.” (C) Section 593 is amended by striking out subsection (d) (relating to taxable years beginning in 1962 and ending in 1963), and by redesignating subsections (e) and (f) as subsections (d) and (e),respectively. (D) Section 593(b)(2)(E)(1) is amended by striking out “subsection (f)” and inserting in lien thereof “subsection (e)”- (85) Repeal of section 601.— Subchapter H of chapter 1 relating to 26 USC 601. banking institutions) is amended by striking out part III (relating to special deduction for bank affiliates). (86) Amendments of section 613a.— (A) Section 613A(b)(1)(C) (relating to exemption for 26 USC 613A. certain domestic gas wells) is amended by striking out “within the meaning of section 613(b)(1)(A)”. (B) Section 613A(c)(6)(i) (relating to limitations on percentage depletion in case of oil and gas wells) is amended by striking out “determined with” and inserting in lieu thereof “determined without”. (87) Amendments of section 614.— (A) (i) Section 614(c) (relating to aggregation of mineral 26 USC 614. interests in mines) is amended by striking out paragraph (4) (relating to special rule as to exploration deductions prior to aggregation). (ii) The amendment made by clause (i) shall apply with 26 USC 614 note. respect to elections to form aggregations of operating mineral interests made under section 614(c)(1) of the Internal Revenue Code of 1954 for taxable years beginning after December 31, 1976. (B) The third sentence of section 614(c)(2) (relating to election to treat a single interest as more than one property) is amended to read as follows: “A separate property so formed may, under regulations prescribed by the Secretary, be included as a part of an aggregation in accordance with paragraphs (1) and (3).” (C) Section 614(c)(3) (relating to manner and scope of election) is amended to read as follows: “(3) Manner and scope of election.— The elections provided by paragraphs (1) and (2) shall be made, in accordance with regulations prescribed by the Secretary, not later than the time prescribed for filing the return (including extensions thereof) for the first taxable year— “(A) in which, in the ease of an election under paragraph (1), any expenditure for development or operation in respect of the separate operating mineral interest is made by the taxpayer after the acquisition of such interest, or “(B) in which, in the case of an election under paragraph (2), expenditures for development or operation of more than one mine in respect of a property are made by the taxpayer after the acquisition of the property. An election made under paragraph (1) or (2) for a taxable year shall be binding upon the taxpayer for such year and all subsequent taxable years, except that the Secretary may consent to a different treatment of any interest with respect to which an election has been made.” (88) Repeal or section 615.— Section 615 (relating to deduction 26 USC 615. of pre–1970 exploration expenses) is repealed. (89) Amendment of section 617.— Section 617(a)(2)(B) 26 USC 617. (relating to time and scope of election to deduct certain mining exploration expenditures) is amended by striking out. “may not be revoked after the last day of the third month following the month in which the final regulations issued under the authority of this subsection are published in the Federal Register“, unless” and inserting in lieu thereof “may not be revoked unless”. (90) Repeal of section 632.— Section 632 (relating to tax in 26 USC 632. case of sale of oil and gas properties) is repealed. (91) Amendment of section 691.— Section 691(c)(1)(B) 26 USC 691. (relating to deduction for estate tax) is amended by striking out the last sentence. (92) Amendment of section 692.— The heading of section 692 (relating to income taxes of members of Armed Forces who die in a combat zone) is amended by striking out “ON” the first time it appeals in the section heading and inserting in lieu thereof “OF”. (93) Amendment of section 751.— Section 751(c) (relating to unrealized receivables) is amended by striking out “1254(a), or 1250(a),” and inserting in lieu thereof “1245(a), 1250(a),”. (94) Repeal of section 771.— Part IV of subchapter K of chapter 1 (relating to effective date of subchapter K) is repealed. (95) Amendments of section 802.— (A) Section 802(a)(1) (relating to tax imposed on life insurance companies) is amended by striking out “beginning after December 31, 1957,”. (B) Section 802(a)(2) (relating to alternative tax in case of capital gains) is amended by striking out “beginning after December 31, 1961,”. (C) Section 802(a) is amended by striking out paragraph (3) (relating to special rules for 1959 and 1960). (96) Amendments of section 804.— (A) Section 804(a) is amended by sticking out paragraph (6) (relating to certain exceptions). (B) Section 804(b)(2) (relating to short-term capital gains) is amended by striking out “In the case of a taxable year beginning after December 31, 1958, the” and inserting in lieu thereof “The”. (97) Amendments of section 805.— (A) Section 805(b)(3)(B) (relating to average earnings rate) is amended to read as follows: “(B) Special rule.— For purposes of subparagraph (A), the current earnings rate for tiny taxable year of any company which, for such year, is an insurance company (but not a life insurance company) shall be determined as if this part applied to such company for such year.” (B) Section 805(b)(4)(B) (relating to basis of assets) is amended by striking out “(determined without regard to fair market value on December 31, 1958)”. (C) Section 805(d) (relating to pension plan reserves) is amended to read as follows: “(d) Pension Plan Reserves.— For purposes of this part, the term ‘pension plan reserves’ means that portion of the life insurance reserves which is allocable to contracts— “(1) purchased under contracts entered into with trusts which (as of the time the contracts were entered into) were deemed to be (A), trusts described in section 401(a) and exempt from tax under section 501(a), or (B) trusts exempt from tax under section 185 of the Internal Revenue Code of 1939 or the corresponding provisions of prior revenue laws; “(2) purchased under contracts entered into under plans which (as of the time the, contracts were entered into) were deemed to be plans described in section 403(a), or plans meeting the requirements of paragraphs (3), (4), (5), and (6) of section 165(a) of the Internal Revenue Code of 1939; “(3) provided for employees of the life insurance company under a plan which, for the taxable year, meets the requirements of paragraphs (3), (4), (5), (6), (7), (8), (11), (12), (13), (14), (15), (16), (19), and (20) of section 401(a); “(4) purchased to provide retirement annuities for its employees by an organization which (as of the time the contracts were purchased) was an organization described in section 501(c)(3) which was exempt from tax under section 501(a) or was an organization exempt from tax under section 101(6) of the Internal Revenue Code of 1939 or the corresponding provisions of prior revenue laws, or purchased to provide retirement annuities for employees described in section 403(b)(1)(A)(ii) by an employer which is a State, a political subdivision of a state, or an agency or instrumentality of any one or more of the foregoing; or “(5) purchased under contracts entered into with trusts which (at the time the contracts were entered into) were individual retirement accounts described in section 408(a) or under contracts entered into with individual retirement annuities described in section 408(b).” (98) Amendments of section 809.— (A) Section 809(b) (relating to definition of gain and loss 26 USC 809. from operations) is amended by striking out paragraph (4). (B) (i) Section 809(d) (relating to life insurance company deductions) is amended by striking out paragraph (11) relating to mutualization distributions before 1963), and by redesignating paragraph (12) as paragraph (11). (ii) Section 809(e) is amended by striking out “subsection (d)(12)” and inserting in lieu thereof “subsection (d)(11)”, (C) Section 809 (relating to computation of gain and loss from operations) is amended by striking out subsection (g) (relating to deduction for certain mutualization distributions before 1963). (99) Amendment of section 812.— Section 812(b)(1) (relating 26 USC 812. to years to which operating losses of an insurance company may be carried), other than the last sentence thereof, as added by section 806(d)(1)(A) of this Act, is amended to read as follows: “(1) Years to which loss may be carried.— The loss from operations for any taxable year (hereinafter in this section referred to as the ‘loss year’) shall be— “(A) an operations loss carryback to each of the 3 taxable years preceding the loss year, “(B) an operations loss carryover to each of the 5 taxable years following the loss year, and “(C) subject to subsection (e), if the life insurance company is a new company for the loss year, an operations loss carryover to each of the 3 taxable years following the 5 taxable years described in subparagraph (B).” (100) Amendments of section 817.— Section 817 (relating to 26 USC 817. rules applicable to certain gains and losses) is amended by striking out subsection (c) (relating to treatment of pre–1959 capital losses) and subsection (e) (relating to certain 1958 reinsurance transactions). (101) Amendment of section 818.— Section 818 (relating to 26 USC 818. life insurance accounting provisions) is amended by striking out subsection (e) (relating to certain rules applicable to taxable years 1957, 1958, and 1959). and by redesignating subsections (f) and (g) as subsections (e) and (f), respectively. (102) Amendments of section 819.— (A) The first sentence of section 819(a)(2)(A) (relating 26 USC 819. to definition of minimum figure for foreign life insurance companies) is amended to read as follows: “The minimum figure is the amount determined by multiplying the tax-payer’s total insurance liabilities on United States business by a percentage for the taxable year to be determined and proclaimed by the Secretary.” (B) The second sentence of section 819(a)(2)(A) is amended by striking out “under clause (ii)” and inserting in lieu thereof “under the preceding sentence”. (C) Clause (i) of section 819(b)(2)(B) (relating to distributions pursuant to certain mutualizations) is amended to read as follows: “(i) the minimum figure for 1958 determined under subsection (a)(2)(A) computed by using a percentage of 9 percent in lieu of the percentage determined and proclaimed by the Secretary, or”. (103) Amendments of section 820.— (A) Section 820(c) (relating to optional treatment of certain reinsured policies) is amended by striking out paragraph (6) (relating to reimbursement for 1957 income taxes), and by redesignating paragraph (7) as paragraph (6). (B) The last sentence of section 820(c) is amended by striking out “(5). and (6) and the rules prescribed under paragraph (7)” and inserting in lieu thereof “and (5) and the rules prescribed under paragraph (6)”. (104) Amendments of section 821.— (A) Section 821(a) (relating to imposition of tax on certain mutual insurance companies) is amended by striking out “beginning after December 31, 1963,”. (B) Section 821(c)(1) (relating to alternative tax for certain small insurance companies) is amended by striking out “In the ease of taxable years beginning after December 31, 1963. there is” and inserting in lieu thereof “There is”. (C) Section 821 (relating to tax on certain mutual insurance companies) is amended by striking out subsection (e) (relating to 1962 transitional rules) and by redesignating subsection (f) as subsection (e). (105) Amendments of section 822.— (A) Section 822(c)(5) (relating to deduction of interest) is amended by striking out “(other than obligations of the United States issued after September 24, 1917, and originally subscribed for by the taxpayer)”. (B) The last sentence of section 822(d)(2) (relating to amortization of premium and accrual of discount) is amended by striking out “For taxable years beginning after December 31, 1962. no accrual” and inserting in lieu thereof “No accrual”. (106) Amendments of section 825.— Section 825(g) (relating to unused loss deduction of certain insurance companies) is amended by striking out paragraph (1) and by redesignating paragraphs (2) and (3) as paragraphs (1) and (2), respectively. (107) Amendment of section 831.— Section 831(a) (relating to tax on certain insurance companies) is amended by striking out “or the taxable income” and inserting in lieu thereof “on the taxable income.” (108) Amendments of section 832.— Paragraphs (1) and (6) of section 832(b)(definitions relating to insurance company taxable income) are each amended by striking out “Convention” and inserting in lieu thereof “Association”. (109) Amendments of section 851.— (A) Section 851(a)(1) (relating 26 USC 851. to definition of regulated investment company) is amended by striking out “54 Stat. 789;”. (B) Section 851(b)(1) (relating to regulated investment companies) is amended by stinking out “which began after December 31, 1941”, (110) Amendments of section 852.— (A) Subparagraph (C) of section 852(b)(3) (relating to 26 USC 852. method of taxation of regulated investment companies and their shareholders) is amended by striking out the third sentence. (B) (i) Section 852(b)(3)(D)(iii) is amended by striking out “by 75 percent of so much of such amounts as equals the amount subject to tax in accordance with section 1201 (a)(1)(A) and by 70 percent (72 percent in the case of a Post, p, 1786. taxable year beginning after December 31, 1969, and before January 1, 1971) of so much of such amounts as equals the amount subject to tax in accordance with section 1201(a)(1)(B) or (2)” and inserting in lieu thereof “by 70 percent of so much of such amounts as equals the amount subject to tax in accordance with section 1201(a)”. (ii) The amendment made by clause (i) shall not be considered 26 USC 852 note. to affect the amount of any increase in the basis of stock under the provisions of section 852(b)(3)(D)(iii) of the Internal Revenue Code of 1954 which is based upon amounts subject to tax under section 1201 of such Code in taxable years beginning before January 1, 1975. (C) Section 852(d) is amended by inserting after “Investment Company Act of 1940” the following: “(15 U.S.C. 80a–l and following)”. (111) Amendments of section 856.— (A) Section 856(c)(1) (relating to real estate investment 26 USC 856. trusts) is amended by striking out “which began after December 31, 1960”. (B) Section 856(c)(6)(D) (relating to definition of other terms) is amended by inserting after “Investment Company Act of 1940, as amended” the following: “(15 U.S.C. 80a–1 and following)”. (112) Amendment of section 857.— Section 857(b)(3)(C) 26 USC 857. (relating to the taxation of capital gains in the case of real estate investment trusts) is amended by striking out the last sentence. (113) Amendments of section 864.— (A) Subsection (a) of section 864 (definitions relating to 26 USC 864. determinations of sources of income) is amended to read as follows: “(a) Produced.— For purposes of this part, the term ‘produced’ “Produced.” includes created, fabricated, manufactured, extracted, processed, cured, or aged.” (B) Clauses (i) and (iii) of section 864(c)(4)(B) and subparagraph (C) of section 864(c)(5) (relating to effectively connected income) are each amended by striking out “sale” each place it appears and inserting in lieu thereof “sale or exchange”. (C) Section 864(c)(4)(B)(iii) (relating to effectively connected income) is amended by striking out “sold” and inserting in lieu thereof “sold or exchanged”. (114) Amendment of section 905.— Section 905(b) (relating to proof of foreign tax credits) is amended by striking out the last sentence (relating to the treatment of certain royalty payments). (115) Amendment of section 911.— Section 911(c) (relating to earned income from sources without the United States) is amended by striking out paragraph (7) (relating to taxable years ending in 1963, 1964, or 1965). (116) Amendment of section 921.— Section 921 (relating to definition of Western Hemisphere Trade Corporation) is amended by striking out the last sentence, (relating to taxable years before 1954). (117) Amendments of section 931.— Section 931 (relating to income from sources within possession) is amended by striking out subsection (h) (relating to certain persons taken as prisoners of war while working in a possession), and by redesignating subsection (i) as subsection (h). (118) Amendment of section 934.— Section 934(b) (relating to gross income received by a corporation from the Virgin Islands) is amended by striking out the last sentence. (119) Amendment of section 951.— Section 951 (a)(1) (relating to treatment, of subpart F income) is amended by striking out “beginning after December 31, 1962”. (120) Repeal of section 972.— Section 972 (relating to consolidation of export trade corporations) is repealed. (121) Amendment of section 1001.— Section 1001(c) (relating to recognition of gain or loss) is amended to read as follows: “(c) Recognition of Gain or Loss.— Except as otherwise provided in this subtitle, the entire amount of the gain or loss, determined under this section, on the sale or exchange of property shall be recognized.” (122) Amendments of section 1015.— (A) Subparagraph (A) of section 1015(d)(1) (relating to increased ‘basis for gift tax paid) is amended by striking out “the date of the enactment of the Technical Amendments Act of 1958” and inserting in lieu thereof “September 2, 1958”. (B) Subparagraph (B) of section 1015(d)(1) is amended by striking out “the date of the enactment of the Technical Amendments Act of 1958” and inserting in lieu thereof “September 2, 1958,”. (123) Amendment of section 1016.— Section 1016(a) (relating to adjustments to basis) is amended by striking out paragraph (19). (124) Amendment of section 1018.— Section 1018 (relating to adjustment of capital structure before September 22, 1938) is amended by striking out “54 Stat. 709;”. (125) Repeal of section 1020.— Section 1020 (relating to election in respect of depreciation allowed before 1952) is repealed. (126) Repeal of section 1022.— (A) Section 1022 (relating to the basis of certain foreign personal holding company stock) is repealed. (B) The repeal made by subparagraph (A) shall apply with respect to stock or securities acquired from a decedent dying after the date of the enactment of this Act. (127) Amendment of section 1024.— Section 1024 (containing cross references) is amended by striking out paragraph (4). (128) Amendments of section 1033.— (A) Section 1033(a) (relating to involuntary conversions) 26 USC 1033. is amended by striking out paragraph (2) and by redesignating paragraph (3) as paragraph (2). (B) Section 1033(a)(2) (relating to conversion into money), as redesignated by subparagraph (A) of this paragraph and as amended by this Act, is amended— (i) by striking out “where disposition occurred after 1950” in the paragraph heading; (ii) by striking out “(g)” each place it appears and inserting in lieu thereof “(h)”; (iii) by striking out “and the disposition of the converted property (as defined in paragraph (2)) occurred after December 31, 1950,” in the text; and (iv) by adding at the end thereof the following new subparagraph: “(E) Definitions.— For purposes of this paragraph— “(i) Control.— The term ‘control’ means the ownership of stock possessing at least 80 percent of the total combined voting power of all classes of stock entitled to vote and at least 80 percent of the total number of shares of all other classes of stock of the corporation. “(ii) Disposition of the converted property.— The term ‘disposition of the converted property’ means the destruction, theft, seizure, requisition, or condemnation of the converted property, or the sale or exchange of such property under threat or imminence of requisition or condemnation.” (C) Section 1033 (relating to involuntary conversions) is amended by striking out subsection (b) (relating to certain conversions occurring before 1954) and by redesignating subsections (c), (d), (e), (f), (g), and (h), as subsections (b), (c), (d), (e), (f), and (g), respectively. (D) The first sentence of section 1033(b) (relating to basis of a property acquired through involuntary conversions), as redesignated by subparagraph (G) of this paragraph, is amended by striking out “or (2)” and inserting in lieu thereof “or section 112(f)(2) of the Internal Revenue Code of 1939”. (E) Section 1033(f)(2) (relating to condemnation of real property), as redesignated by subparagraph (C) of this paragraph, is amended to read as follows: “(2) Limitation.— Paragraph (1) shall not apply to the purchase of stock in the acquisition of control of a corporation described in subsection (a)(2)(A).” (F) Section 1033(g)(4) (relating to condemnation of real property), as amended by section 2140(a) of this Act, is amended by striking out “(a)(3)(B)(i)” and inserting in lieu thereof“(a)(2)(B)(i)”. (129) Amendments of section 1034.— (A) Section 1034(a) (relating to gain on sale of residence) 26 USC 1034. is amended by striking out “after December 31, 1953,”. (B) Section 1034(b)(defining adjusted sales price) is amended by striking out paragraph (3) (relating to effective date of subsection (b)). (C) Section 1034(d) (relating to certain limitations) is amended by striking out “or section 112 (n) of the Internal Revenue Code of 1939”. (D) Section 1034(i) (relating to involuntary conversions) is amended to read as follows: “(ii) Special Rule for Condemnation.— In the case of the seizure, requisition, or condemnation of a residence, or the sale or exchange of a residence under threat or imminence thereof, the provisions of this section, in lieu of section 1033 (relating to involuntary conversions), shall be applicable if the taxpayer so elects. If such election is made, such seizure, requisition, or condemnation shall be treated as the sale of the residence. Such election shall he made at such time and in such manner as the Secretary shall prescribe by regulations.” (E) Section 1034(j) (relating to statute of limitations) is amended by striking out “after December 31, 1950,”. (130) Amendment of section 1037.— Section 1037(b)(1) (relating to certain exchanges of United States obligations) is amended by striking out “section 1232(a)(2)(A)” and inserting in lieu thereof “section 1232 (a)(2) (B)”. (131) Amendment of section 1051.— Section 1051 (relating to property acquired before 1929 during affiliation) is amended by striking out the last two sentences. (132) Amendments of section 1081.— (A) Subsection (e) of section 1081 (relating to distributions required by the SEC) is amended to read as follows: “(c) Distribution of Stock or Securities Only.— If there is distributed, in obedience to an order of the Securities and Exchange Commission, to a shareholder in a corporation which is a registered holding company or a majority-owned subsidiary company, stock or securities (other than stock or securities which are nonexempt property), without the surrender by such shareholder of stock or securities in such corporation, no gain to the distributee from the receipt of the stock or securities so distributed shall be recognized.” (B) Section 1081(f) (relating to conditions for application of section) is amended by striking out “Except in the case of a distribution described in subsection (c)(2), the provisions” and inserting in lien thereof “The provisions”, and by striking out “49 Stat. 820;”. (C) Section 1081(g) (relating to applicability of other provisions) is amended by striking out “If a distribution described in subsection (c)(2). or an” and inserting in lieu thereof “If an”, and by striking out the comma after “Commission”. (133) Amendments of section 1083.— (A) Section 1083(a) is amended by striking out “49 Stat. 820;”. (B) Section 1083(b) is amended by striking out “49 Stat. 804;”. (C) Section 1083(e)(4) is amended by striking out “49 Stat. 820;”. (134) Repeal of section 1111.— Part IX of subchapter O of chapter 1 (relating to distributions pursuant to orders enforcing the antitrust laws) is repealed. (135) Amendments of section 1201.— (A) Section 1201(a) (relating to the alternative tax on capital gain) is amended to read as follows: “(a) Corporations.— If for any taxable year a corporation has a net capital gain, then, in lien of the tax imposed by sections 11. 511, 821 (a) or (c) and 831(a), there is hereby imposed a tax (if such tax is less than the tax imposed by such sections) which shall consist of the sum of— “(1) a tax computed on the taxable income reduced by the amount of the net capital gain, at the rates and in the manner as if this subsection had not been enacted, plus “(2) a tax of 30 percent of the net capital gain.” (B) Section 1201(c) (relating to computation of alternative 26 USC 1201. tax) is amended to read as follows: “(c) Computation of Tax Where Capital Gain Exceeds $50,000.— The tax computed for purposes of subsection (b)(3) shall be the amount by which a tax determined under section 1 or 511 on an amount equal to the taxable income (but not less than 50 percent of the net capital gain) for the taxable year exceeds a tax determined under section 1 or 511 on an amount, equal to the sum of (A) the amount subject to tax under subsection (b)(1) plus (B) an amount equal to 50 percent of the sum referred to in subsection (b)(2)(A).” (C) (i) Section 1201 is amended by striking out subsection (d)(defining subsection (d) gain) and by redesignating subsection (e) as subsection (d). (ii) Section 1201(b)(2)(A) (relating to alternative tax on noncorporate taxpayers) is amended by striking out “the amount of the subsection (d) gain” and inserting in lieu thereof “the sum of the long-term capital gains for the taxable year, but not to exceed $50,000 ($25,000 in the case of a married individual filing a separate return)”. (iii) Section 1201(b)(3) is amended by striking out “the amount of the subsection (d) gain” and inserting in lieu thereof “the sum referred to in subparagraph (A)”. (136) Amendments of section 1222.— (A) Paragraph (9) of section 1222 (relating to definition 26 USC 1222. of terms applicable to capital gains and losses) is amended to read as follows: “(9) Capital gain net income.— The term ‘capital gain net income’ means the excess of the gains from sales or exchanges of capital assets over the losses from such sales or exchanges.” (B) Paragraph (11) of section 1222 (relating to definition of terms applicable to capital gains and losses) is amended to read as follows: “(11) Net capital gain.— The term ‘net capital gain’ means “Net capita] gain.” the excess of the net long-term capital gain for the taxable year over the net short-term capital loss for such year.” (137) Amendment of section 1233.— Section 1283((3) (relating 26 USC 1233. to certain options to sell) is amended by striking out “the date of enactment of this title” and inserting in lieu thereof “August 16, 1954”. (138) Amendment of section 1237.— Section 1237 (relating 26 USC 1237. to real property subdivided for sale) is amended by striking out subsection (d) (relating to effective date). (139) Repeal of section 1240.— Section 1240 (relating to taxability 26 USC 1240. to employee of certain termination payments) is repealed. (140) Amendment of section 1245.— Section 1245(b)(7)(B) 26 USC 1245. (relating to transfers to tax-exempt organization where property will be used in unrelated business) is amended by striking out “such organization acquiring such property,”. (141) Amendment of section 1246.— Section 1246(f) (relating 26 USC 1246. to gain on foreign investment company stock) is amended by striking out “beginning after December 31, 1962”. (142) Amendment of section 1311.— Paragraphs (2)(A), (2)(B), and (3) of section 1311(b) (relating to mitigation of effect of limitations) are each amended by striking out “Tax Court of the United States” and inserting in lieu thereof “Tax Court”. (143) Repeal of section 1315.— Section 1315 (relating to effective date of part II of subchapter Q of chapter 1) is repealed. (144) Repeal of section 1321.— Part III of subchapter Q of chapter 1 (relating to involuntary liquidation of LIFO inventories) is repealed. (145) Repeal of sections 1331 through 1337.— (A) Part IV of subchapter Q of chapter 1 (relating to war loss recoveries) is repealed. (B) The repeal by subparagraph (A) shall apply with respect to war loss recoveries in taxable years beginning after December 31, 1976. (146) Amendment of section 1341.— Section 1341(b)(2) (relating to claim of right) is amended by striking out the last sentence. (147) Repeal of section 1342.— Section 1342 (relating to computation of tax on certain amounts recovered as a result of a patent infringement suit) is repealed. (148) Repeal of section 134A.— Section 1346 (relating to recovery of unconstitutional Federal taxes) is repealed. (149) Amendments of section 1372.— (A) Section 1372(b)(1) (relating to effect of election under subchapter S) is amended by striking out “(other than the tax imposed by section 1378)” and inserting in lieu thereof “(other than as provided by section 58(d)(2) and by section 1378)”. (B) Section 1372(c) (relating to subchapter S elections by small business corporations) is amended to read as follows: “(c) Where and How Made.— An election under subsection (a) may be made by a small business corporation for any taxable year at any time during the first month of such taxable year, or at any time Regulations. during the month preceding such first month. Such election shall be made in such manner as the Secretary shall prescribe by regulations.” (C) Section 1372 is amended by striking out subsection (g) (relating to certain elections for years beginning before 1961). (150) Amendments of section 1374.— (A) Section 1374(b) (relating to net operating losses of subchapter S corporations) is amended by adding at the end thereof the following new sentence: “The deduction allowed by this subsection shall, for purposes of this chapter, be considered as a deduction attributable to a trade or business carried on by the shareholder.” (B) Subsection (d) of section 1374 (relating to treatment of net operating losses of subchapter S corporations) is repealed. (151) Amendments of section 1375.— (A) The heading of subsection (b) of section 1375 is amended by striking out “Received Credit Not Allowed” and inserting in lieu thereof “Not Treated as Such for Certain Purposes”. (B) Section 1375 (f) (relating to elections as to certain distributions) is amended by striking out paragraph (3). (152) Amendment of section 1378.— Section 1378(b) (relating 26 USC 1378. to the taxation of capital gain in the case of electing small business corporations) is amended by striking out the last sentence. (153) Amendments of section 1388.— (A) Section 1388(c)(2)(B)(i) (relating to patronage 26 USC 1388. dividends) is amended by striking out “the date of the enactment of the Revenue Act of 1962” and inserting in lieu thereof “October 16, 1962”. (B) Section 1388(h)(2)(B)(i) (relating to perunit retain certificates) is amended by striking out “the date of the enactment of Ibis subsection” and inserting in lieu thereof “November 13, 1966”. (154) Amendments of section 1401.— (A) Section 1401(a) (relating to rate of tax on self-employment 26 USC 1401. income) is amended to read as follows: “(a) Old-Age, Survivors, and Disability Insurance.— In addition to other taxes, there shall be imposed for each taxable year, on the self-employment income of every individual, a tax equal to 7.0 percent of the amount of the self-employment income for such taxable year.” (B) Section 1401(b) (relating to rate of tax on self-employment income for hospital insurance) is amended by striking out paragraphs (1) and (2) and by redesignating paragraphs (3), (4), (5), and (6), as paragraphs (1), (2), (3) and (4), respectively. (155) Amendments of section 1402.— (A) Paragraph (1) of section 1402(b) (relating to definition 26 USC 1402. of self-employment income) is amended to read as follows: “(1) that part of the net earnings from self-employment which is in excess of (i) an amount equal to the contribution and benefit base (as determined under section 230 of the Social Security Act) 42 USC 430. which is effective for the calendar year in which such taxable year begins, minus (ii) the amount of the wages paid to such individual during such taxable years; or”. (B) Section 1402 amended by striking out subsection (g) 26 USC 1402. (relating to treatment of self-employment income for years prior to 1962). and by redesignating subsections (h) and (i) as subsections (g) and (h). respectively. (C) Section 1402(g)(2) (relating to self-employment income, of members of certain religious faiths), as redesignated by subparagraph (B) of this paragraph, is amended to read as follows: “(2) Time for filing applications.— For purposes of this subsection, an application must be filed on or before the time prescribed for filing the return (including any extension thereof) for the first, taxable year for which the individual has self-employment income (determined without regard to this subsection or subsection (c)(6)), except that an application filed after such date but on or before the last day of the third calendar month following the calendar month in which the taxpayer is first notified in writing by the Secretary that a timely application for an exemption from the tax imposed by this chapter has not been filed by him shall be deemed to be filed timely.” (156) Repeal of section 1465.— Section 1465 (relating to definition 26 USC 1465. of withholding agent) is repealed. (157) Amendments of section 1481.— (A) Section 1481(a)(1)(A) (relating to mitigation of 26 USC 1481. effect of renegotiation of Government contracts) is amended by striking out “within the meaning of the Federal renegotiation act applicable to such transaction” and inserting in lieu thereof “within the meaning of the Renegotiation Act of 1951, as amended (50 U.S.C. App, 1211 and following)”. (B) Section 1481(a)(1) (relating to renegotiation) is amended by striking out subparagraph (D). (C) Subparagraphs (B) and (C) of section 1481(a)(1) are each amended by striking out “applicable Federal renegotiation act” and inserting in lieu thereof “Renegotiation Act of 1951, as amended”. (158) Amendment of section 1551.— Section 1551(a) (relating to disallowance of surtax exemption) is amended by striking out “determined under subjection (d)” and inserting in lieu thereof “determined under subsection (c)”. (159) Amendment of section 1552.— The first sentence of section 1552(a) (relating to earnings and profits of an affiliated group) is amended by striking out “beginning after December 31, 1953, and ending after the date of enactment of this title,”. (b) Conforming and Clerical Amendments.— (1) Amendments conforming to repeal of sections 35 and 242.— (A) Section 36, as amended by this Act, is amended by striking out “sections 32 and 35” and inserting in lieu thereof “section 32”. (B) Section 41(b)(2) is amended by striking out “section 35 (relating to partially tax-exempt interest)”. (C) Section 46(a)(3) is amended by striking out subparagraph (B), by inserting “and” at the end of subparagraph (A), and by redesignating subparagraph (C) as subparagraph (B). (D) Section 50A(a)(3) is amended by striking out subparagraph (B) and redesignating subparagraphs (C), (D), and (E), as subparagraphs (B), (C), and (D), respectively. (E) (i) The heading of paragraph (1) of section 171(a) is amended to read “(1) Taxable bonds.—”. (ii) The heading of paragraph (2) of section 171(a) is amended to read “(2) Tax-exempt bonds.—”, (iii) Section 171(a) is amended by striking out paragraph (3) and by redesignating paragraph (4) as paragraph (3). (iv) Section 171(b)(1)(B)(n) is amended by striking out “subsection (c)(1)(B)” and inserting in lieu thereof “subsection (a)(1)”. (v) So much of section 171(c) as precedes paragraph (2) is amended to read as follows: “(c) Election as to Taxable Bonds.— “(1) Eligibility to elect; bonds with respect to which election permitted.— In the case of bonds the interest on which is not excludable from gross income, this section shall apply only if the taxpayer has so elected.”, (F) (i) Section 551 is amended by striking out subsection (c), and by redesignating subsections (d), (e), (f), and (g), as subsections (c), (d), (e), and (f), respectively. (ii) Section 1016(a)(13) is amended by striking out “section 551(f)” and inserting in lieu thereof “section 551(e)”. (G) Section 584(c)(2) is amended to read as follows: “(2) Dividends received.— The proportionate share of each participant in the amount of dividends received by the common trust fund and to which section 116 applies shall be considered for purposes of such section as having been received by such participant.” (H) (i) Section 642(a) is amended by striking out paragraph 26 USC 642. (1), and by redesignating paragraphs (2) and (3) as paragraphs (1) and (2), respectively. (ii) Section 41(d) is amended by striking out “section 26 USC 41. 642(a)(3)” and inserting in lieu thereof “section 642(a)(2)”. (iii) Section 901(g)(3), as amended by this Act, is 26 USC 901. amended by striking out “section 642(a)(2)” and inserting in lieu thereof “section 642(a)(1)”. (I) (i) Section 702(a) is amended by striking out paragraph 26 USC 702. (7) and by redesignating paragraphs (8) and (9) as paragraphs (7) and (8), respectively. (ii) Section 702(b) is amended by striking out “paragraphs (1) through (8)” and inserting in lieu thereof “paragraphs (1) through (7)”. (iii) Section 1402(a) is amended by striking out “702(a) 26 USC 1402. (9)” each place it appears and inserting in lieu thereof “702 (a)(8)”. (J) (i) Section 804(a) is amended by striking out paragraph 26 USC 804. (3), and by redesignating paragraphs (4) and (5) as paragraphs (3) and (4),respectively. (ii) Section 243(b)(3)(C)(iii), as redesignated by paragraph 26 USC 243. (21)(A) of this subsection, is amended by striking out “sections 804(a)(4)” and inserting in lieu thereof “sections 804(a)(3)”. (iii) Section 804(a)(2) is amended by striking out “paragraph (5)” and inserting in lieu thereof “paragraph (4)”, and by striking out “paragraph (4)” and inserting in lieu thereof “paragraph (3)”. (iv) Section 809(d)(10) is amended by striking out “section 26 USC 809. 804(a)(4)”, and inserting in lieu thereof “section 804(a)(3)”. (v) Section 1561(a)(3) is amended by striking out “sections 26 USC 1561. 804(a)(4)” and inserting in lieu thereof “sections 804 (a)(3)”. (vi) Section 1564(a)(1)(C) is amended by striking out 26 USC 1564. “sections 804(a)(4)” inserting in lieu thereof “sections 804 (a)(3)”. (K) Section 804(a)(2)(A) is amended by striking out clause, (ii). by inserting “and” at the end of clause (i), and by redesignating clause (iii) as clause (ii). (L) (i) Section 809(d)(8)(A) is amended by striking out clause (ii), by inserting “and” at the end of clause (i), and by redesignating clause (iii) as clause (ii). (ii) Section 809(d)(8)(B) is amended by striking out “subparagraph (A)(iii)” and inserting in lieu thereof “subparagraph (A)(ii)”. (M) Sections 804(a)(1),804(a)(2), 809(a)(1),809(b)(1)(A) and 809(b)(2)(A) are each amended by striking out “, partially tax-exempt interest,”. (N) Section 809(e) is amended by striking out paragraph (6), and by redesignating paragraph (7) as paragraph (6). (O) Section 815(b)(2)(A)(iii) is amended by striking out 26 USC 815. “the deduction for partially tax-exempt interest provided 26 USC 242. by section 242 (as modified by section 804(a)(3)),” and by striking out the comma after “809(d)(8)(B))”. (P) Section 822(c)(2) is amended by striking out “partially tax-exempt interest and”. (Q) Section 822(c)(6)(A) is amended by striking out “or to the deduction provided in section 242 for partially tax-exempt interest”. (R) Section 822(c)(7) is amended by striking out “partially tax-exempt interest and to”. (S) Section 822(d)(2) is amended by striking out “, the deduction provided in subsection (c)(1), and the deduction allowed by section 242 (relating to partially tax-exempt interest)” and inserting in lieu thereof “and the deduction provided in subsection (c)(1)”. (T) Section 832(c)(5)(A) is amended by striking out “or to the deductions provided in section 242 for partially tax-exempt interest”. (U) Section 832(c)(12) is amended by striking out “partially tax-exempt interest and to”. (V) Sections 852(b)(1) and 857(b)(1) are each amended by striking out the last sentence. (W) Section 1244(c)(1)(E) is amended by striking out “sections 172,242,243” and inserting in lieu thereof “sections 172, 243”. (X) Section 1402 (a)(2) is amended by striking out “(other than interest described in section 35)”. (Y) Section 1503(b)(3) is amended by striking out subparagraph (C). (Z) The table of sections for subpart A of part IV of subchapter A of chapter 1 is amended by striking out the item relating to section 35. (AA) The table of sections for part VIII of subchapter B of chapter 1 is amended by striking out the item relating to section 242. (2) Amendment conforming to repeal of section 51.— The table of parts for subchapter A of chapter 1 is amended by striking out the item relating to part V. (3) Amendments conforming to auditions of sections 84 and 65.— (A) Paragraphs (1)(C), (5HA), (6)(D), and (12) of section 341(e) are each amended by striking out “gain from the sale or exchange of property which is neither a capital asset nor property described in section 1231(b)” each place it appears and inserting in lieu thereof “ordinary income”. (B) Section 483(f)(3) is amended by striking out “no part of any gain on such” and inserting in lieu thereof “all of the gain, if any, on such” and by striking out “gain from the sale or exchange of a capital asset or property described in section 1231” and inserting in lieu thereof “ordinary income”. (C) Section 707(b)(2) is amended by striking out “as gain from the sale or exchange of property other than a capital asset” and inserting in lieu thereof “as ordinary income”. (D) Paragraphs (1) and (2) of section 735(a) are each amended by striking out “gain or loss from the sale or exchange of property other than a capital asset” and inserting in lieu thereof “as ordinary income or as ordinary loss, as the case may be”. (E) Section 1236 (b) is amended by striking out “loss from 26 USC 1236. the sale or exchange of property which is not a capital asset” and inserting in lieu thereof “ordinary loss”. (F) Sections 1242 and 1243 are each amended by striking 26 USC 1242, 1243. out “a loss from the sale or exchange of property which is not a capital asset” each place it appears and inserting in lieu thereof “an ordinary loss”. (G) Section 1244 is amended by striking out “a loss from 26 USC 1244. the sale or exchange of an asset which is not a capital asset” each place it appears and inserting in lieu thereof “an ordinary loss”. (H) Section 1248(g)(3)(B), as redesignated by this Act, 26 USC 1248. is amended by striking out “gain from the sale of an asset which is not a capital asset” and inserting “ordinary income”. (I) The following provisions are each amended by striking out “gain from the sale or exchange of property which is not a capital asset” each place it appears and inserting in lieu thereof “ordinary income”: sections 341(a). 871(a)(1)(C)(i) and (ii), 881(a)(3)(A) and (B), 996(d)(1) and (2), 1037(b)(1)(A), 1232(a)(2)(A) and (B), 1232(c), 1246(a), and 1385(c)(2)(C). (J) The following provisions are each amended by striking out “gain from the sale of property which is not a capital asset” and inserting in lieu thereof “ordinary income”: sections 306(a)(1)(A),306(a)(1)(B), and 306(f). (K) The following provisions are each amended by striking out “gain from the sale or exchange of property which is neither a capital asset nor property described in section 1231” each place it appears and inserting in lieu thereof “ordinary income”: sections 80(c)(1), 163(d)(3) and (5), 613(a), 617 (d)(1). 995(b)(1)(C). 1238, 1245(a)(1), 1249(a), 1250 (f) and (g), 1251 (b)(3)(B), (c)(1), and (c)(2), and 1252(a)(1). (4) Clerical amendments conforming to additions of sections 64 and 65.— (A) The table of sections for part I of subchapter B of chapter 1 is amended by adding at the end thereof the following new items: “Sec. 64. Ordinary income defined. “Sec. 65. Ordinary loss defined.” (B) The heading for part I of subchapter B of chapter 1 is amended by striking out “AND TAXABLE INCOME” and inserting in lieu thereof “TAXABLE INCOME, ETC.” ETC.” (C) The table of parts for subchapter B of chapter 1 is amended by striking out “and taxable income.” in the item relating to part. I and inserting in lieu thereof “taxable income, etc.” (5) Amendment conforming to repeat, of section 70.— The table of sections for part II of subchapter B of chapter 1 is amended by striking out the item relating to section 76. (6) Amendments conforming to amendment of section 103.— (A) Section 6049(b)(2)(A) is amended by striking out 26 USC 6049. “section 103(a)(1) or (3)” and inserting in lieu thereof “section 103(a)”. (B) Section 852(a)(1)(B), as added by this Act, is amended by striking out “section 103(a)(1)” and inserting in lieu thereof “section 103 (a)”. (7) Amendments conforming to amendment of section 143.— (A) (i) Part V of subchapter B of chapter 1 is amended by striking out section 153 (relating to determination of marital status) and by redesignating section 154 as section 153. (ii) The table of sections for part V of subchapter B of chapter 1 is amended by striking out the items relating to sections 153 and 154 and inserting in lieu thereof the following: “Sec. 153. Cross references.”. (B) Section 152(a)(9) is amended by striking out “section 153” and inserting in lieu thereof “section 143”. (C) Section 153, as redesignated by subparagraph (A) of this paragraph, is amended by adding at the end thereof the following new paragraph: “(5) For determination of marital status, see section 143.” (8) Amendments conforming to amendment of section 151.— (A) The following provisions are each amended by striking out “educational institution (as defined in section 151 Q(4))” each place it appears and inserting in lieu thereof educational organization described in section 170(b)(1)(A)(ii)”: sections 117(a)(1)(A), 117(b)(1), 117(b)(2), 152(d), 170(g)(1)(B)(as redesignated by subsection (a)(28) 26 USC 117, 152, 170, 403. (A)(i) of this section!, and 403(b)(1)(A)(ii). (B) Section 103(c)(3)(A), as redesignated by subsection (a)(17) of this section, is amended by striking out “educational institution (within the meaning of section 151(e)(4))” and inserting in lieu thereof “educational organization described in section 170(b)(1)(A)(ii)”, (C) Section 163(b)(1) is amended by striking out “educational institution (as defined in section 151(e)(4)) and which is provided for a student of such institution” and inserting in lieu thereof “educational organization described in section 170(b)(1)(A)(ii) and which is provided for a student of such organization”. (D) (i) Subparagraphs (A), (B), and (C) of section 415 (c)(4) are each amended by striking out “educational institution” each place it appears and inserting in lieu thereof “educational organization”. (ii) Subparagraph (D)(ii) of section 415(c)(4) is amended to read as follows: “(ii) For purposes of this paragraph the term ‘educational organization’ means an educational organization described in section 170(b)(1)(A)(ii).” (iii) Section 415(c)(4) is amended by striking out “educational institutions” from the paragraph heading and inserting in lieu thereof “educational organizations”. (E) Section 508(c)(2)(A) is amended to read as follows: “(A) educational organizations described in section 170 (b)(1)(A)(u),and”. (F) Section 512(b)(15)(B), as redesignated by section 1951(b)(8)(A) of this Act, is amended by striking out “edu-cational institution (as defined in section 151(e)(4))” and inserting in lieu thereof “educational organization described in section 170(b)(1)(A)(ii)”. (G) Section 1303(d) is amended by striking out “educational 26 USC 1303. institution (as defined in section 151(e)(4))” each place it appears and inserting in lieu thereof “educational organization described in section 170(b)(1)(A)(ii)”. (H) Sections 4941(d)(2)(G)(ii) and 4945(g)(1) each 26 USC 4941, 4945. are amended by striking out “educational institution described in section 151(e)(4)” and inserting in lieu thereof “educational organization described in section 170(b)(1)(AHii)”. (9) Amendments conforming to the amendments of section 152.— Section 2(b)(3)(B) is amended by striking out clause (ii), 26 USC 2. by adding “or” at the end of clause (i), and by redesignating clause (ii) as clause (ii). (10) Amendment conforming to the amendment of section 112.— (A) Section 374(e)(2) is amended by striking out “section Ante, p. 296. 172(j)” and inserting in lieu thereof “172(g)”. (B) Section 904(f)(2)(B)(i) and 904(f)(4)(B)(i), as Ante, p. 1624. amended by this Act, are each amended by striking out “section 172(k)(1)” and inserting in lieu thereof “section 172(h)”. (11) Amendments conforming to repeal of section 187.— (A) Section 48(a)(8) (relating to section 38 property) is 26 USC 48. amended by striking out “187,”. (B) The table of sections for part VI of subchapter B of chapter 1 is amended by striking out the item relating to section 187. (C) Section 1082(a)(2)(B) (relating to basis for determining gain 26 USC 1082. or loss) is amemled by striking out “187,”. (D) Section 1245(a)(2) (relating to gain from dispositions 26 USC 1245. of certain depreciable property) is amended by striking out “187,” each place it appears. (12) Amendments conforming to the repeal of section 342.— (A) Section 551(f), as redesignated by paragraph (1)(F) 26 USC 551. of this subsection, is amended by striking out paragraph (3). (B) The table of subparts for part II of subchapter C of chapter 1 is amended by striking out the item relating to subpart C and inserting in lieu thereof: “Subpart C. Collapsible corporations,” (C) The table of sections for subpart C of part II of subchapter C of chapter 1 is amended by striking out the item relating to section 342. (D) The heading of subpart C of part II of subchapter C of chapter 1 is amended to read as follows: “Subpart C— Collapsible Corporations”. (13) Amendments conforming to the repeal of section 303.— The table of sections for subpart C of part III of subchapter C of chapter 1 is amended by striking out the item relating to section 363. (14) Amendments conforming to the repeal of section 373.— (A) Section 372(b)(1) is amended by striking out “373 26 USC 372. (b) or”. (B) Section 374(b) is amended to read as follows: “(b) Basis.— “(1) Railroad corporations.— If the property of a railroad corporation, as defined in section 77(m) of the Bankruptcy Act (11 U.S.C. 205 (m)), was acquired after December 31, 1938, in pursuance of an order of the court having jurisdiction of such corporation— “(A) in a receivership proceeding, or “(B) in a proceeding under section 77 of the Bankruptcy Act, and the acquiring corporation is a railroad corporation (as defined in section 77(m) of the Bankruptcy Act) organized or made use of to effectuate a plan of reorganization approved by the court, in such proceeding, the basis shall be the same as it would be in the hands of the railroad corporation whose property was so acquired, increased in the amount of gain recognized under subsection (a)(2) to the transferor on such transfer. “(2) Property acquired by street, suburban, or interurban electric railway corporation.— If the property of any street, suburban, or interurban electric railway corporation engaged as a common carrier in the transportation of persons or property in interstate commerce was acquired after December 31, 1934, in pursuance of an order of the court having jurisdiction of such corporation in a proceeding under section 77 of the Bankruptcy Act (11 U.S.C. 501 and following), and the acquiring corporation is a street, suburban, or interurban electric railway engaged as a common carrier in the transportation of persons or property in interstate commerce, organized or made use of to effectuate a plan of reorganization approved by the court in such proceeding, then, notwithstanding the provisions of section 270 of the Bankruptcy Act (11 U.S.C. (570), the basis shall be the same as it would be in the hands of the corporation whose property was so acquired.” (C) Section 374(c)(8) is amended by striking out “subsection (b)” and inserting in lieu thereof “subsection (b)(1)”. . .. (D) Section 1232(b)(2) is amended by striking out “section 371, 373, or 374” and inserting in lieu thereof “section 371 or 374”. (E) The table of sections for part IV of subchapter C of chapter 1 is amended by striking out the item relating to section 373. (15) Amendment conforming to repeal of sections 391 through 395.— The table of parts for subchapter C of chapter 1 is amended by striking out the item relating to part VII. (16) Amendment conforming to the amendments of section 481.— Section 381 (c) is amended by striking out paragraph (21). (17) Amendment conforming to the amendments of section 545.— Section 381(c)(15) is amended by striking out “subsections (b)(7) and (c)” and inserting in lieu thereof “subsection (c)”. (18) Amendment conforming to the repeal of section 583.— The table of sections for part I of subchapter H of chapter 1 is amended by striking out the item relating to section 583. (19) Amendment conforming to the repeal of section 592.— The table of sections for part II of subchapter H of chapter 1 is amended by striking out the item relating to section 592. (20) Amendments conforming to the repeal of section 601.— (A) Section 535(b) is amended by striking out paragraph 26 USC 535. (8). (B) (i) Section 545(b) is amended by striking out paragraph 26 USC 545. (6), and by redesignating paragraph (8) as paragraph (6). (ii) Section 545(b)(2) is amended by striking out “paragraph (8)” and inserting in lieu thereof “paragraph (6)”. (iii) Section 545(c)(5) is amended by striking out “subsection (b)(8)” and inserting in lieu thereof “subsection (b)(6)”. (C) The table of parts for subchapter H of chapter 1 is amended by striking out the item relating to part III. (21) Amendments conforming to the repeal of section 615.— (A) (i) Section 243(b)(3)(C) is amended— 26 USC 243. (I) by striking out clauses (ii) and (iii) and inserting in lieu thereof the following; “(ii) $400,000 limitation for certain exploration expenditures under section 617(h)(1),”, and (II) by redesignating clauses (iv) and (v) as clauses (iii) and (iv), respectively. (ii) Section 1564(h)(2)(C) is amended by striking out 26 USC 1564. “section 243(b)(3)(C)(v)” and inserting in lieu thereof “243(b)(3)(C)(iv)”. (B) Section 381(c)(10) is amended to read us follows: 26 USC 381. “(10) Treatment of certain mining develops cent and exploration expenses of distributor or transfer or corporation.— The acquiring corporation shall be entitled to deduct, as if it were the distributor or transferor corporation, expenses deferred under section 616 (relating to certain development expenditures) if the distributor or transferor corporation has so elected. For the purpose of applying the limitation provided in section 617(h), if, for any taxable year, the distributor or transferor corporation was allowed a deduction under section 617(a), the acquiring corporation shall be deemed to have been allowed such deduction.” (C) Section 617(h)(1) is amended by striking out “and 26 USC 617. section 615(a) and the amounts which are or have been treated as deferred expenses under section 615(b)” and inserting in lieu thereof “and subsection (a) of section 615 (as in effect before the enactment of the Tax Reform Act of 1976)”. (D) Section 617(h)(3) is amended to read as follows: “(3) Application of paragraph (2)(b).— Paragraph (2) (B) shall apply with respect to nil amounts deducted before the latest such transfer from the individual or corporation to the taxpayer. Paragraph (2)(B) shall apply only if— “(A) the taxpayer acquired any mineral property from the individual or corporation under circumstances which make paragraph (7), (8), (11), (15), (17), (20), or (22) of section 113(a) of the Internal Revenue Code of 1939 apply to such transfer; or “(B) the taxpayer acquired any mineral property from the individual or corporation under circumstances which make section 334(b), 362 (a) and (b), 372(a), 374(b)(1), 1051, or 1082 apply to such transfer.” (E) Section 617 is amended by adding at the end thereof the following new subsection: “(i) Certain Pre-1970 Exploration Expenditures.— If— “(1) the taxpayer receives mineral property in a transaction as a result of which the basis of such property in the hands of the transferee is determined by reference to the basis in the hands of the transferor, “(2) an election made by the transferor under subsection (e) of section 615(e)(as in effect before the enactment of the Tax Reform Act of 1976) applied with respect to expenditures which were made by him and which were properly chargeable to such property, and “(3) the taxpayer has made or makes an election under subsection (a), then in the application of this section with respect to the transferee, the amounts allowed as deductions under such section 615 to the transferor, which (but for the transferor’s election) would be reflected in the adjusted basis of such property in the hands of the transferee, shall be treated as expenditures allowed as deductions under subsection (a) to the transferor.” (F) Section 703 (b) is amended by striking out “under section 615 (relating to pre–1970 exploration expenditures),”. (G) Section 1016 (a) is amended by striking out paragraph (I?)-. (H) The table of sections for part. I of subchapter I of chapter 1 is amended by striking out the item relating to section 615. (22) Amendments conforming to the repeal of section 632.— (A) The table of sections for part III of subchapter I of chapter 1 is amended by striking out the item relating to section 632. (B) Section 5(b) is amended by striking out paragraph (1). (23) Amendment conforming to the repeal of section 771.— The table of parts for’ subchapter K of chapter 1 is amended by striking out the item relating to part IV. (24) Amendment conforming to the amendment of section 802.— Section 815(c)(3)(B) is amended by striking out “(determined without regard to section 802(a)(3))”. (25) Amendment conforming to the amendment of section 812.— Section 844(b)(2) is amended by striking out “section 812(b)(1)(A)(iii)” and inserting in lieu thereof “section 812 (b)(1)(C)”. (26) Amendments conforming to the amendments of section 804.— (A) Paragraphs (5) and (6) of section 861(a) (relating to items treated as income from within United States) are each amended by striking out in the heading “sale” and inserting in lieu thereof “sale or exchange”, and by striking out “sale” in the text and inserting in lieu thereof “sale or exchange”. (B) section 861(e)(1) (relating to income from certain aircraft and vessels) is amended by striking out “sale or other disposition” and inserting in lieu thereof “sale, exchange, or other disposition”. (C) Paragraphs (5) and (6) of section 862(a) (relating to items treated as income from without the United States) 26 USC 863. and paragraphs (2) and (3) of section 863(b) (relating to sources of income) are each amended by striking out “sale” and inserting in lieu thereof “sale or exchange”. (D) Paragraph (2) of section 863(b) (relating to sources 26 USC 863. of income) is amended by striking out “sold” each place it appears and inserting in lieu thereof “sold or exchanged”. (27) Amendments conforming to the repeal of section 972.— (A) Section 970(b)(1) (relating to inclusion of certain 26 USC 970. previously excluded amounts of sub part F income) is amended by striking out “application of section 972” and inserting in lieu thereof “treatment (under section 972 as in effect before the date of the enactment of the Tax Reform Act of 1976) of two or more controlled foreign corporations which are export trade corporations as a single controlled foreign corporation ”. (B) The table of sections for subpart G of part III of subchapter N of chapter 1 is amended by striking out the item relating to section 972. (28) Amendments conforming to the amendment of section 1001.— (A) Subsection (c) of section 331 is amended to read as 26 USC 331. follows: “(c) Cross Reference.— “For general rule for determination of the amount of gain or loss recognized, see section 1001.” (B) (i) Section 1002 (relating to recognition of gain or 26 USC 1002. loss) is repealed. (ii) The table of sections for part I of subchapter 0 of chapter 1 is amended by striking out the item relating to section 1002. (29) Amendments conforming to the repeal of section 1920.— (A) The third sentence of subsection (a) of section 1016 is 26 USC 1016. amended by striking out “under section 1020” and inserting in lieu thereof “under section 1020 (as in effect before the date of the enactment of the Tax Reform Act of 1976)”, Ante, p. 1520; (B) The table of sections for part II of subchapter O of chapter 1 is amended by striking out the item relating to section 1020. (30) Amendments conforming to the repeal of section 1022.— (A) Section 1016(a) is amended— 26 USC 1016. (i) by striking out paragraph (21), and (ii) by redesignating paragraphs (20) and (22) as paragraphs (19) and (20), respectively. (B) The amendment made by subparagraph (A)(i) shall 26 USC 1016 note. apply with respect to stock or securities acquired from a decedent dying after the date of the enactment of this Act. (C) Tho table of sections for part II of subchapter O of chapter 1 is amended by striking out the item relating to section 1022, ~ (31) Amendments conforming to amendments of section 1033.— (A) Section 1250(d)(4)(B) is amended by striking out 26 USC 1250. “1033(a)(3)(A)” and inserting in lieu thereof “1033(a)(2)(A)” (B) Section 1250(d)(4)(C) and (D) are each amended by striking out “1033(a)(3)” and inserting in lieu thereof “1033(a)(2)”. (C) Section 6212(c)(2)(B) is amended by striking out “1033(a)(3)(C) and (D)” and inserting in lieu thereof “1033 (aj (2)(C) and (D)”. (D) Section 6504(4) is amended by Striking out “1033(a)(3)(C) and (D)” and inserting in lieu thereof “1033(a)(2)(C) and (D)”. (E) Sections 1071(b) and 1250(d)(4)(D) are each amended by striking out “1033(c)” and inserting in lieu thereof “1033(b)”. (32) Amendments conforming to the repeal of section 1111.— (A) Section 301 is amended by striking out subsection (f), and by redesignating subsection (g) as subsection (e). (B) (i) Section 312 is amended by striking out subsection (k), and by redesignating subsections (1) and (m) as subsections (j) and (k), respectively, (ii) Section 1246(g) is amended by striking out “312(1)” and inserting in lieu thereof “312 (j)”. (iii) Sections 964(a) and 1248(c)(1) are each amended by striking out “312 (m)(3)” and inserting in lieu thereof “312 (k)” (iv) Subsection (d) of section 1377, as added by this Act, is amended by striking out “312(m)” and inserting in lieu thereof “312(k)”. (C) Section 535(b) is amended by striking out paragraphs (9) and (10). (D) Section 543(a)(1) is amended by inserting “and” at the end of subparagraph (A), and by striking out subparagraphs (B) and (C) and inserting in lieu thereof the following: “(B) interest on amounts set aside in a reserve fund under section 511 or 607 of the Merchant Marine Act, 1936 (46 U.S.C. 1161 or 1177).” (E) Section 545(b) is amended by striking out paragraphs (10) and (11). (F) Section 553(a)(1) is amended to read as follows: “(1) Dividends, etc.— Dividends, interest, royalties, and annuities.” (G) Section 556(b) is amended by striking out paragraphs (7) and (8). (H) Section 561(b) is amended to read as follows: “(b) Special Rules Applicable.— In determining the deduction for dividends paid, the rules provided in section 562 (relating to rules applicable in determining dividends eligible for dividends paid deduction) and section 563 (relating to dividends paid after the close of the taxable year) shall be applicable.” (I) The table of parts for subchapter O of chapter 1 is amended by striking out the item relating to part IX. (33) Amendments conforming to amendment of section 1222.— (A) Section 57(a)(9)(A) is amended by striking out “the amount by which the net long-term capital gain exceeds the net short-term capital loss” and inserting in lieu thereof “the net capital gain”. (B) So much of the first sentence of section 57(a)(9)(B) as precedes “by a fraction” is amended to read as follows: “In the case of a corporation having a net capital gain for the taxable year, an amount equal to the product obtained by multiplying the net capital gain”. (C) Section 527(b)(2) is amended by striking out “net 26 USC 527. section 1201 gain” and inserting in lieu thereof “net capital gain”. (D) Sections 535(b)(6) and 545(b)(5) are each amended— 26 USC 535, 545. (1) by striking out from the paragraph heading “Long-term” and inserting in lieu thereof “Net”, (2) by striking out from the text “the excess of the net long-term capital gain for the taxable year over the net short-term capital loss for such year” each place it appears and inserting in lieu thereof’ “the net capital gain for the taxable year”, and (3) by striking out from the text “such excess” each place it appears and inserting in lieu thereof “such net capital gain”. (E) Section 802(a)(2) is amended— 26 USC 802. (i) by striking out “the net long-term capital gain of any life insurance company exceeds the net short-term capital loss” and inserting in lieu thereof “any life insurance company has a net capital gain”, and (ii) by striking out “such excess” each place it appears and inserting in lieu thereof “such net capital gain”. (F) Section 804(a)(2) is amended by 26 USC 804. striking out “by which the net long-term capital gain exceeds the net short-term capital loss” and inserting in lieu thereof “of the net capital gain”. (G) Sections 809(b)(1)(B) and 809(b)(2)(B) are each 26 USC 809. amended by striking out “by which the net long-term capital gain exceeds the net short-term capital loss” and inserting in lieu thereof “of the net capital gain”. (H) Section 815(b)(2)(A)(ii) is amended by striking out 26 USC 815. “by which the net long-term capital gain exceeds the net short-term capital loss” and inserting in lieu thereof “of the net capital gain”. (I) Section 852(b)(2)(A) is amended by striking out 26 USC 852. “the excess, if any, of the net long-term capital gain over the net short-term capital loss” and inserting in lieu thereof “the amount of the net capital gain, if any”. (J) (i) Section 852(b)(3)(A) is amended to read as follows: “(A) Imposition of tax.— There is hereby imposed for each taxable year in the case of every regulated investment company a tax, determined as provided in section 1201 (a), on the excess, if any, of the net capital gain over the deduction for dividends paid (as defined in section 561) determined with reference to capital gain dividends only.” (ii) The second sentence of section 852(b)(3)(C) is amended by striking out “excess of the net long-term capital gain over the net short-term capital loss” each place it appears and inserting in lien thereof “net capital gain”. (K) The second sentence of section 857(b)(3)(C) is 26 USC 857. amended by striking out “excess of the net long-term capital gain over the net short-term capital loss” each place it appears and inserting in lieu thereof “net capital gain”. (L) Section 1201(b) is amended by striking out “net section 26 USC 1201. 1201 gain” each place it appears and inserting in lieu thereof “net capital gain”. (M) The first sentence of section 1202 is amended to read as follows: “If for any taxable year, a taxpayer other than a corporation has a net capital gain, 50 percent of the amount of the net capital gain shall be a deduction from gross income.” (N) Sections 381(e)(3)(B), 381(c)(3)(C), 852(d), 4940 (c)(1), and 4940(c)(4) are each amended by striking out “net capital gain” and inserting in lieu thereof “capital gain net income”. (O) Section 1212(a)(1) is amended by striking out “net capital gain” each place it appears and inserting in lieu thereof “capital gain net income”, and by striking out “net capital gains” and inserting in lieu thereof “capital gain net income”. (P) Section 1247(a)(1)(B) is amended by striking out “the excess (determined as if such corporation were a domestic corporation) of the net long-term capital gain over the net short-term capital loss” and inserting in lieu thereof “the amount (determined as if such corporation were a domestic corporation) of the net capital gain”. (Q) (i) Section 1375(a)(1) is amended by striking out “the excess of the corporation’s net long-term capital gain over its short-term capital loss” and inserting in lieu thereof “the corporation’s net capital gain”. (ii) The second sentence of section 1375(a)(1) is amended by striking out “such excess” and inserting in lieu thereof “such net capital gain”. (iii) Section 1375(a)(3) is amended by striking out “the excess of an electing small business corporation’s net long-term capita] gain over its net short-term capital loss” and inserting in lieu thereof “an electing small business corporation’s net capital gain”. (R) The following provisions are each amended by striking out “the excess of the net long-term capital gain over the net short-term capital loss,” and inserting in lieu thereof “the net capital gain”: Sections 1247(a)(2)(A)(i), 1247(a)(2) 26 USC 1247, 1378. (C), 1247(d)(1) and (2). 1378(a)(1), 1378(b)(1), and 1378 (c)(8). (34) Amendment conforming to the repeal of section 1240.— The table of sections of part IV of subchapter P of chapter 1 is amended by striking out the item relating to section 1240. (35) Amendment conforming to the repeal of section 1315.— The table of sections for part II of subchapter Q of chapter 1 is amended by striking out the item relating to section 1315. (36) Amendments conforming to the repeal of section 1321.— (A) Section 472 is amended by striking out subsection (f). (B) Section 6422, as amended by this Act, is amended by striking out paragraph (2), and by redesignating paragraphs (3) through (13) as paragraphs (2) through (12), respectively. (C) Section 6504 is amended by striking out paragraph (1). (D) Section 6515 is amended by striking out paragraph (1). (E) The table of parts for subchapter Q of chapter 1 is amended by striking out the item relating to part III. (37) Amendments conforming to the repeal of sections 1331 through 1337.— (A) The third sentence of section 901(a) is amended by 26 USC 901. striking out “under section 1333 (relating to war loss recoveries) or”. _ . (B) Section 936(a)(2), as added by this Act, is 26 USC 936. amended— (i) by inserting “or” at the end of subparagraph (C), and (ii) by striking out subparagraph (D). (C) Section 6212(c),(2) is amended by striking out subparagraph 26 USC 6212. (D). (D) Section 6515 is amended by striking out paragraph 26 USC 6515. (6). (E) Section 6515, as amended by this Act, is amended by striking out paragraph (2), and by redesignating paragraphs (3), (4), (5), (6), (7), and (8) as paragraphs (1), (2), (3), (4). (5),and (6) respectively. (F) The table of parts tor subchapter Q of chapter 1 is amended by striking out the item relating to part IV. (38) Amendment conforming to the repeal of section 1342.— The table of sections for part V of subchapter Q of chapter 1 is amended by striking out the item relating to section 1342. (39) Amendments conforming to the repeal of section 1340.— (A) The table of sections for part VI of subchapter Q of chapter 1 is amended by striking out the item relating to section 1346. (B) Section 6504 is amended by striking out paragraph Post, p. 1829. (7). (40) Amendment conforming to amendment of section 1372.— Section 58(d)(2) is amended by striking out “, notwithstanding 26 USC 58. the provisions of section 1371(b)(1),” (41) Amendment conforming to the repeal of section 1465.— The table of sections for subchapter C of chapter 3 is amended by striking out the item relating to section 1465. (c) Amendments to Provisions Referring to Territories.— (1) Section 37(f) is amended by striking out “a Territory,”. Ante, p. 1559. 26 USC 105, 273, 454. 26 USC 117. (2) Sections 105(e)(2), 273, and 454(b)(2) are each amended by striking out a Territory.”. (3) Section 117(b)(2)(A)(iv) is amended by striking out “a territory,”. (4) Section 162(a) is amended by striking out “territory”. 26 USC 162. 26 USC 581. (5) Section 581 is amended by striking out “, of any State, or of any Territory” and inserting m lieu thereof “or of any State”, and by striking out “, Territorial,”. (6) Section 801(b)(3) is amended by striking out “or 26 USC 801. Territorial”. (7) Section 861(a)(1) is amended by striking out “, any Territory, 26 USC 861. any political subdivision of a Territory.”. (8) Paragraphs (6) and (7) of section 1014(b) are each 26 USC 1014. amended by striking out “Territory.”. (9) Section 1221 (5) is amended by striking out “or Territory,”. 26 USC 1221. 26 USC 2 note. (d) Effective Date.— Except as otherwise expressly provided in this section, the amendments made by this section shall apply with respect to taxable years beginning after December 31, 1976. The amendments made by subsections (a)(29) and (b)(10) shall apply with respect to taxable years ending after the date of the enactment of this Act.

6. 1976

   Pub. L. 94–455 § 1901(a)(153)(B) · 90 Stat. 1520

   Substituted · 26 U.S.C. § 1388(h)(2)(B)(i)

   Pub. L. 94–455, § 1901(a)(153)(B), substituted “November 13, 1966” for “the date of the enactment of this subsection”

   Source evidence

   Code amendment note
   Subsec. (h)(2)(B)(i). Pub. L. 94–455, § 1901(a)(153)(B), substituted “November 13, 1966” for “the date of the enactment of this subsection”.

   Enacted provision · exact public law section
   (B) Section 1388(h)(2)(B)(i) (relating to perunit retain certificates) is amended by striking out “the date of the enactment of Ibis subsection” and inserting in lieu thereof “November 13, 1966”.

7. 1978

   Pub. L. 95–600 title III § 316(b)(3) · 92 Stat. 2763

   Added · 26 U.S.C. § 1388(j)

   Pub. L. 95–600 added subsec. (j)

   Source evidence

   Code amendment note
   Subsec. (j). Pub. L. 95–600 added subsec. (j).

   Enacted provision · exact public law section
   (3) 26 USC 1388. Section 1388 (relating to definitions and special rules for cooperative organizations) is amended by adding at the end thereof the following new subsection. “(j) Cross Reference.— “For provisions relating to the apportionment of the investment credit between cooperative organizations and their patrons, see section 46(h).”

8. 1986

   Consolidated Omnibus Budget Reconciliation Act of 1985

   Pub. L. 99–272 title XIII § 13210(a) · 100 Stat. 82

   1. Added · 26 U.S.C. § 1388(j); 26 U.S.C. § 1388(k)

      Pub. L. 99–272 added subsec. (j)

   2. Redesignated · 26 U.S.C. § 1388(j); 26 U.S.C. § 1388(k)

      Pub. L. 99–272 redesignated former subsec. (j) as (k)

   Source evidence

   Code amendment note
   Subsecs. (j), (k). Pub. L. 99–272 added subsec. (j) and redesignated former subsec. (j) as (k).

   Enacted provision · exact public law section
   (a) In General.— Section 1388 (relating to definitions and special 26 USC 1388. rules applicable to cooperatives) is amended by redesignating subsection (j) as subsection (k) and by inserting after subsection (i) the following new subsection: “(j) Special Rules for the Netting of Gains and Losses by Cooperatives.— For purposes of this subchapter, in the case of any organization to which part I of this subchapter applies— 26 USC 1381. “(1) Optional netting of patronage gains and losses permitted.— The net earnings of such organization may, at its option, be determined by offsetting patronage losses (including any patronage loss carried to such year) which are attributable to 1 or more allocation units (whether such units are functional, divisional, departmental, geographic, or otherwise) against patronage earnings of 1 or more other such allocation units. “(2) Certain netting permitted after section 381 transactions.— If such an organization acquires the assets of another such organization in a transaction described in section 381(a), 26 USC 381. the acquiring organization may, in computing its net earnings for taxable years ending after the date of acquisition, offset losses of 1 or more allocation units of the acquiring or acquired organization against earnings of the acquired or acquiring organization, respectively, but only to the extent— “(A) such earnings are properly allocable to periods after the date of acquisition, and “(B) such earnings could have been offset by such losses if such earnings and losses had been derived from allocation units of the same organization. “(3) Notice requirements.— “(A) In general.— In the case of any organization which exercises its option under paragraph (1) for any taxable year, such organization shall, on or before the 15th day of the 9th month following the close of such taxable year, provide to its patrons a written notice which— “(i) states that the organization has offset earnings and losses from 1 or more of its allocation units and that such offset may have affected the amount which is being distributed to its patrons, “(ii) states generally the identity of the offsetting allocation units, and “(iii) states briefly what rights, if any, its patrons may have to additional financial information of such organization under terms of its charter, articles of incorporation, or bylaws, or under any provision of law. “(B) Certain information need not be provided.— An organization may exclude from the information required to be provided under clause (ii) of subparagraph (A) any detailed or specific data regarding earnings or losses of such units which such organization determines would disclose commercially sensitive information which— “(i) could result in a competitive disadvantage to such organization, or “(ii) could create a competitive advantage to the benefit of a competitor of such organization. “(C) Failure to provide sufficient notice.— If the Secretary determines that an organization failed to provide sufficient notice under this paragraph— “(i) the Secretary shall notify such organization, and “(ii) such organization shall, upon receipt of such notification, provide to its patrons a revised notice meeting the requirements of this paragraph. Any such failure shall not affect the treatment of the organization under any provision of this subchapter or 26 USC 521. section 521. “(4) Patronage earnings or losses defined.— For purposes of this subsection, the terms ‘patronage earnings’ and ‘patronage losses’ means earnings and losses, respectively, which are derived from business done with or for patrons of the organization.”

9. 1990

   Revenue Reconciliation Act of 1990

   Pub. L. 101–508 title XI § 11813(b)(24) · 104 Stat. 1388

   Struck · 26 U.S.C. § 1388(k)

   Pub. L. 101–508 struck out subsec. (k) which cross-referenced section 46(h) for provisions relating to apportionment of investment credit between cooperative organizations and their patrons

   Source evidence

   Code amendment note
   Subsec. (k). Pub. L. 101–508 struck out subsec. (k) which cross-referenced section 46(h) for provisions relating to apportionment of investment credit between cooperative organizations and their patrons.

   Enacted provision · exact public law section
   (24) Section 1388 is amended by striking subsection (k).

10. 2004

    Pub. L. 108–357 § 312(a) · 118 Stat. 1418

    Inserted · 26 U.S.C. § 1388(a)

    Pub. L. 108–357, § 312(a), inserted at end of concluding provisions “For purposes of paragraph (3), net earnings shall not be reduced by amounts paid during the year as dividends on capital stock or other proprietary capital interests of the organization to the extent that the articles of incorporation or bylaws of such organization or other contract with patrons provide that such dividends are in addition to amounts otherwise payable to patrons which are derived from business done with or for patrons during the taxable year.”

    Source evidence

    Code amendment note
    Subsec. (a). Pub. L. 108–357, § 312(a), inserted at end of concluding provisions “For purposes of paragraph (3), net earnings shall not be reduced by amounts paid during the year as dividends on capital stock or other proprietary capital interests of the organization to the extent that the articles of incorporation or bylaws of such organization or other contract with patrons provide that such dividends are in addition to amounts otherwise payable to patrons which are derived from business done with or for patrons during the taxable year.”

    Enacted provision · exact public law section
    (a) In General.— Subsection (a) of section 1388 (relating to patronage dividend defined) is amended by adding at the end the following: “For purposes of paragraph (3), net earnings shall not be reduced by amounts paid during the year as dividends on capital stock or other proprietary capital interests of the organization to the extent that the articles of incorporation or bylaws of such organization or other contract with patrons provide that such dividends are in addition to amounts otherwise payable to patrons which are derived from business done with or for patrons during the taxable year.”.

    Effective date note
    Pub. L. 108–357, title III, § 312(b), Oct. 22, 2004, 118 Stat. 1467, provided that: “The amendment made by this section [amending this section] shall apply to distributions in taxable years beginning after the date of the enactment of this Act [Oct. 22, 2004].” Amendment by section 316(a) of Pub. L. 108–357 applicable to taxable years beginning after Oct. 22, 2004, see section 316(c) of Pub. L. 108–357, set out as a note under section 521 of this title.

11. 2004

    Pub. L. 108–357 § 316(a) · 118 Stat. 1418

    Added · 26 U.S.C. § 1388(k)

    Pub. L. 108–357, § 316(a), added subsec. (k)

    Source evidence

    Code amendment note
    Subsec. (k). Pub. L. 108–357, § 316(a), added subsec. (k).

    Enacted provision · exact public law section
    (a) In General.— Section 1388 (relating to definitions and special rules) is amended by adding at the end the following new subsection: “(k) Cooperative Marketing Includes Value-Added Processing Involving Animals.— For purposes of section 521 and this subchapter, the marketing of the products of members or other producers shall include the feeding of such products to cattle, hogs, fish, chickens, or other animals and the sale of the resulting animals or animal products.” .

    Effective date note
    Pub. L. 108–357, title III, § 312(b), Oct. 22, 2004, 118 Stat. 1467, provided that: “The amendment made by this section [amending this section] shall apply to distributions in taxable years beginning after the date of the enactment of this Act [Oct. 22, 2004].” Amendment by section 316(a) of Pub. L. 108–357 applicable to taxable years beginning after Oct. 22, 2004, see section 316(c) of Pub. L. 108–357, set out as a note under section 521 of this title.

12 of 12 references resolved to an enrolled provision