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year provided by subparagraph (A) shall be reduced by 11/2 percentage points for each 1 percentage point of such difference. If, for the taxable year, the percentage of the assets of such taxpayer which are assets described in section 7701(a) (19) (C) is less than 60 percent (50 x)ercent for a taxable year beginning before 1973 in the case of a mutual savings bank), this paragraph shall not apply. "(C)

^°^'' ^- "^•

EEDUCTION FOR AMOUNTS REFERRED TO I N PARAGRAPH

(1)(A).—The amount determined under subparagraph (A) shall be reduced by that portion of the amount referred to in paragraph (1)(A) for the taxable year (not in excess of 100 percent) which bears the same ratio to such amount as (i) 18 percent (28 percent in the case of mutual savings banks) bears to (ii) the percentage of the assets of the taxpayer for such year which are not assets described in section 7701(a) (19)(C). " (D) OVERALL LIMITATION ON PARAGRAPH.—The amount determined under this paragraph shall not exceed the amount necessary to increase the balance at the close of the taxable year of the reserve for losses on qualifying real property loans to 6 percent of such loans outstanding at such time. 1.?

621

SSP JC-

" (E) COMPUTATION OF TAXABLE INCOME.—For purposes of

this paragraph, taxable income shall be computed— "(i) by excluding from gross income any amount included therein by reason of subsection (f), T.! "(ii) without regard to any deduction allowable for any addition to the reserve for bad debts, " (iii) by excluding from gross income an amount equal to the net gain for the taxable year arising from the sale or exchange of stock of a corporation or of obligations ' • the interest on which is excludable from gross income under section 103, "(iv) by excluding from gross income an amount equal to the lesser of % of the net long-term capital gain for the taxable year or % of the net long-term capital gain -iifor the taxable year from the sale or exchange of prop's, erty other than property described in clause (iii), and h, "(v) by excluding from gross income dividends with ^,-£. respect to which a deduction is allowable by part VIII of subchapter B, reduced by an amount equal to the applicable percentage (determined mider subparagraphs (A) •t,, and (B)) of the dividends received deduction (determined without regard to section 596) for the taxable year. " (3) PERCENTAGE METHOD.—The amount determined under this paragraph to be a reasonable addition to the reserv^e for losses on qualifying real property loans shall be computed in the same manner as is provided with respect to additions to the reserves for losses on loans of banks under section 585(b)(2), reduced by the amount referred to in paragraph (1)(A) for the taxable year. " (4) EXPERIENCE METHOD.—The amount determined under this paragraph for the taxable year shall be computed in the same manner as is provided with respect to additions to the reserves for losses on loans of banks under section 585(b)(3). "(5)
 * i."

DETERMINATION OF RESERVE FOR PERCENTAGE METHOD.—

For purposes of paragraph (3), the amount deemed to be the balance of the reserve for losses on loans at the beginning of the

^°^'' P- ^^S.

^°^'' P- ^^4.

Ante, p. 616.

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 622

76 Stat. 981. 26 USC 593.

26 USC 381. 76 Stat. 982.

48 Stat. 1255.

^^ ^*^'* ^*

82"tSr5il'^' 42 USC 14501469c. 42 USC 3303.'

PUBLIC LAW 91-172-DEC. 30, 1969

[83 ST^T

taxable year shall be the total of the balances at such time of t] reserve for losses on nonqualifying loans, the reserve for losses o^ qualifying real property loans, and the supplemental reserve for losses on loans." (b) CERTAIN CORPORATE AcQuisrnoNS.—Section 593(f)(1) (relating to distributions to shareholders) is amended by adding at the end thereof the following new sentence: "This paragraph shall not apply to any transaction to which section 381 (relating to carryovers in certain corporate acquisitions) applies." (c) INVESTMENT STANDARDS.—Section 7T01(a)(19) (defining domestic building and loan association) is amended to read as follows"(19) DOMESTIC BUILDING AND LOAN ASSOCIATION.—The terni 'domestic building and loan association' means a domestic buildinoand loan association, a domestic savings and loan association and a Federal savings and loan association— " (A) which either (i) is an insured institution within the meaning of section 401(a) of the National Housing Act (12 U.S.C. sec. 1724(a)), or (ii) is subject by law to supervision and examination by State or Federal authority having supervision over such associations; " (B) the business of which consists principally of acquiring the savings of the public and investing in loans; and " (C) at least 60 percent of the amount of the total assets of which (at the close of the taxable year) consists of— " (i) cash, " (ii) obligations of the United States or of a State or political subdivision thereof, and stock or obligations of a corporation which is an instrumentality of the United States or of a State or political subdivision thereof, but not including obligations the interest on which is excludable from gross income under section 103, "(iii) certificates of deposit in, or obligations of, a corporation organized under a State law which specifically authorizes such corporation to insure the deposits or share accounts of member associations, " (iv) loans secured by a deposit or share of a member, " (v) loans (including redeemable ground rents, as defined in section 1055) secured by an interest in real property which is (or, from the proceeds of the loan, will become) residential real property or real property used primarily for church purposes, loans made for the improvement of residential real property or real property used primarily for church purposes, provided that for purposes of this clause, residential real property shall include single or multifamily dwellings, facilities m residential developments dedicated to public use or property used on a nonprofit basis for residents, and mobile homes not used on a transient basis, "(vi) loans secured by an interest in real property . '' located within an urban renewal area to be developed for, , predominantly residential use under an urban renewal plan approved by the Secretary of Housing and Urban Development under part A or part B of title I of the ' • '~ > • Housing Act of 1949, as amended, or located within aiiy _ ^ area covered by a program eligible for assistance under ' section 103 of the Demonstration Cities and Metropolitan Development Act of 1966, as amended, and loans made for the improvement of any such real property,

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license: Creative Commons - Attribution Share-Alike - https://creativecommons.org/licenses/by-sa/4.0/


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623

"(vii) loans secured by an interest in educational, health, or welfare institutions or facilities, including structures designed or used primarily for residential purposes for students, residents, and persons under care, employees, or members of the staff of such institutions or facilities, "(viii) property acquired through the li(juidation of defaulted loans described in clause (v), (vi), or (vii), " (ix) loans made for the payment of expenses of college or university education or vocational training, in accordance with such regulations as may be prescribed by the Secretary or his delegate, and " (x) property used by the association in the conduct of the business described in subparagraph (B). At the election of the taxpayer, the percentage specified in this subparagraph shall be applied on the basis of the average assets outstanding during the taxable year, in lieu of the close of the taxable year, computed under regulations prescribed by the Secretary or his delegate. For purposes of clause (v), if a multifamily structure securing a loan is used in part for nonresidential purposes, the entire loan is deemed a residential real property loan if the planned residential use exceeds 80 percent of the property's planned use (determined as of the time the loan is made). For purposes of clause (v), loans made to finance the acquisition or development of land shall be deemed to be loans secured by an interest in residential real property if, under regulations prescribed by the Secretary or his delegate, there is reasonable assurance that the property will become residential real property within a period of 3 years from the date of acquisition of such land; but this sentence shall not apply for any taxable year unless, within such 3-year period, such land becomes residential real property."

.,

(d) CONFORMING AMENDMENTS.—Section 7701(a) (32)

(defining

26 USC 7701"

cooperative bank) is amended— (1) by striking out subparagraph (B) and inserting in lieu thereof the following: " (B) meets the requirements of subparagraphs (B) and (C) of paragraph (19) of this subsection (relating to definition of domestic building and loan association).", and (2) by striking out the third sentence thereof. (e) EFFECTIVE DATE.—The amendments made by this section shall be effective for taxable years beginning after July 11, 1969. SEC. 433. TREATMENT OF BONDS, ETC., HELD BY FINANCTAL INSTITUTIONS. (a) GAIN ON SECURITIES H E U) BY FINANCIAL INSTITUTIONS.—Sub-

section (c) of section 682 (relating to bad debt and loss deduction with respect to securities held by banks) is amended by striking out such subsection and inserting the following in lieu thereof: "(c)

26'urc'582°^' "..

BOND, ETC., LOSSES AND GAINS OF FINANCIAL INSTITUTIONS.— "(1) GENERAL RULE.—For purposes of this subtitle, in the case

of a financial institution to which section 585, 586, or 593 applies, ^2^"'^' ^P- ^^^' the sale or exchange of a bond, debenture, note, or certificate or other evidence of indebtedness shall not be considered a sale or exchange of a capital asset. "(2) TRANSTTIONAL RULE FOR BANKS.—In the case of a bank, if the net long-term capital gains of the taxable year from sales or ilM*

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 624

PUBLIC LAW 91-172-DEC. 30, 1969

[33 g^

exchanges of qualifying securities exceed the net short-term cat) ital losses of the taxable year from such sales or exchanges such" excess shall be considered as gain from the sale of a capital asset held for more than 6 months to the extent it does not exceed the net gain on sales and exchanges described in paragraph (1). "(3) SPECIAL RULES.—For purposes of this subsection— " (A) The term 'qualifying security'means a bond, debeiiture, note, or certificate or other evidence of indebtedness helri by a bank on July 11, 1969. ^ " (B) The amount treated as capital gain or loss from the sale or exchange of a qualifying security shall be determined by multiplying the amount of capital gain or loss from the t'jr.IJf G sale or exchange of such security (determined without regard to this subsection) by a fraction, the numerator of which is the number of days before July 12, 1969, that such security was held by the bank, and the denominator of which is the number of days the security was held by the bank." 26 USC 1 2 4 ' ^^3

72 Stat. 693; 15 USC 684.

(^) CONFORMING AMENDMENT.—Paragraph (1) of section 1243

(relating to loss of a small business investment company) is amended to read as follows: "(1) a loss is on stock received pursuant to the conversion privilege of convertible debentures acquired pursuant to section 304 of the Small Business Investment Act of 1958, and". (c) CLERICAL AMENDMENT.—The heading for section 582 is amended to read as follows: "SEC. 582. BAD DEBTS, LOSSES, AND GAINS WITH RESPECT TO SECURITIES HELD BY FINANCIAL INSTITUTIONS." (d)

EFFECTIVE DATE.—

(1) IN GENERAL.—The amendments made by this section shall apply to taxable years beginning after July 11, 1969. (2)

ELECTION FOR SMALL BUSINESS INVESTMENT COMPANIES AND BUSINESS DEVELOPMENT CORPORATIONS.—Notwithstanding para-

- graph (1), in the case of a financial institution described in section Ante, p. 618. 586(a) of tliB Internal Revenue Code of 1954, the amendments made by this section shall not apply for its taxable years beginning after July 11, 1969, and before July 11, 1974, unless the taxpayer so elects at such time and in such manner as shall be prescribed by the Secretary of the Treasury or his delegate. Such election shall be irrevocable and shall apply to all such taxable years. SEC. 434. LIMITATION ON DEDUCTION FOR DIVIDENDS RECEIVED B Y MUTUAL SAVINGS BANKS, ETC. ^g^8A Stat. 204; (a) SPECIAL LIMITATION.—Part II of subchapter H of chapter 1 is 26 USC 591. amended by adding at the end thereof the following new section: "SEC. 596. LIMITATION ON DIVIDENDS RECEIVED DEDUCTION. Ante, pp. 620, iij^ ^-j^^ ^ g ^ QJ ^^^ orgaulzation to which section 593 applies and 622 which computes additions to the reserve for losses on loans for the taxable year under section 593(b)(2), the total amount allowed under 80 s!a!' 1558 ^' sectlous 243, 244, and 245 (determined without regard to this section) for the taxable year as a deduction with respect to dividends received shall be reduced by an amount equal to the applicable percentage for M- — . . such year (determined under subparagraphs (A) and (B) of section •^'^ 593(b)(2)) of such total amount."

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625

(b) TECHNICAL AXD CLERICAL AMENDMENTS.—

(1) Section 246 (relating to rules applying to deductions for ^^^ ^'^'- ^^' dividends received) is amended by adding at the end thereof the ''2l'usc'V/e. following new subsection: "(d)

CROSS KEFERENCE.—

"For special rule relating to mutual savings banks, etc., to which section 593 applies, see section 596." (2) The table of sections for part II of subchapter H of chapter 1 is amended by adding at the end thereof: "Sec. 596. Limitation on dividends received deduction," (c) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after July 11, 1969. SEC. 435. FOREIGN DEPOSITS IN UNITED STATES BANKS. - f (a) INCOME FROM SOURCES "WITHIN THE L^NITED STATES.—
 * «" id •

(1) Effective with respect to amounts paid or credited after December 31, 1969, subparagraphs (C) and (D) of section 861(a)(1) (relating to interest) are each amended by striking out "after December 31, 1972,". (2) Section 861(c) (relating to interest on deposits, etc.) is amended by striking out "1972" and inserting in lieu thereof "1975". (b) PROPERTY W I T H I N THE UNITED STATES.—The second sentence of section 2104(c) (relating to debt obligations) is amended by striking out "December 31, 1972" and inserting in lieu thereof "December 31, 1969".

so Stat. 1542.

80 Stat. 1572.

Subtitle E—Depreciation Allowed Regulated I n d u s t r i e s; E a r n ings and Profits Adjustment for Depreciation SEC. 441. PUBLIC UTILITY PROPERTY. (a) IN GENERAL.—Section 167 (relating to depreciation) is amended so Stat. 1513; by inserting after subsection (k) (added by section 521) the following- Post, p. 649. new subsection: "(1) REASONABLE ALLOWANCE I N (^ASE OF PROPERTY or CERTAIN UTILITIES.— " (1) P R E - 19 7 0 PUBLIC U T I L I T Y PROPERTY.—

" (A) IN GENERAL.—In the case of any pre-1970 public utility property, the term 'reasonable allowance' as used in subsection (a) means an allowance computed under— " (i) a subsection (1) method, or "(ii) the applicable 1968 method for such property. Except as provided in subparagraph (B), clause (ii) shall apply only if the taxpayer uses a normalization method of accounting. "(B)

FLOW-THROUGH METHOD or ACCOUNTIN(} IN CERTAIN

CASES.—In the case of any pre-1970 public utility property, the taxpayer may use the applicable 1968 method for such property if— " (i) the taxpayer used a flow-through method of accounting for such property for its July 1969 accounting period, or ^(ii) the first accounting period with respect to such property is after the July 1969 accounting period, and the taxpayer used a flow-through method of accounting for its July 1969 accounting period for the property on the basis of which the applicable 1968 method for the property in question is established.

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PUBLIC LAW 91-172-DEC. 30, 1969

.

76 Stat. 419.

[33 g^^^

"(2) POST-1969 PUBLIC UTILITY PROPERTY.—In the case of an post-1969 public utility property, the term 'reasonable allowanc^ as used in subsection (a) means an allowance computed under—-^ " (A) a subsection (1) method, " (B) a method otherwise allowable under this section if t\\ f!»: • ^i) taxpayer uses a normalization method of accounting, or " (C) the applicable 1968 method, if, with respect to its pre-ffliifc> *' l^'^O public utility property of the same (or similar) kind most recently placed in service, the taxpayer used a flo^. through method of accounting for its July 1969 accountine period. ^ •!' " (3) DEFINITIONS.—For purposes of this subsection— " (A) PUBLIC UTILITY PROPERTY.—The term 'public utility property' means property used predominantly in the trade or business of the furnishing or sale of— ,.,. "(i) electrical energy, water, or sewage disposal, services, "(ii) gas or steam through a local distribution system " (iii) telephone services, or other communication services if furnished or sold by the Communications Satellite Corporation for purposes authorized by the Communications Satellite Act of 1962 (47 U.S.C. 701), or "(iv) transportation of gas or steam by pipeline, if the rates for such furnishing or sale, as the case may be, have been established or approved by a State or political subdivision thereof, by any agency or instrumentality of the United States, or by a public service or public utility commission or other similar body of any State or political subdivision thereof. " (B) P R E - 1970 PUBLIC UTILITY PROPERTY.—The term 'pre1970 public utility property' means property which was public utility property in the hands of any person at any time before January 1, 1970. " (C) POST- 19 G 9 PUBLIC UTILITY PROPERTY.—The term 'post1969 public utility property' means any public utility property which is not pre-1970 public utility property. " (D) APPLICABLE 19G8 METHOD.—The term 'applicable 1968 method' means, with respect to any public utility propert}^— " (i) the method of depreciation used on a return with respect to such property for the latest taxable year for which a return was filed before August 1, 1969, "(ii) if clause (i) does not apply, the method used by the taxpayer on a return for the latest taxable year for which a return was filed before August 1, 1969, with respect to its public utility property of the same kind (or if there is no property of the same kind, property of the most similar kind) most recently placed in service, or "(iii) if neither clause (i) nor (ii) applies, a ' subsection (1) method. I n the case of any section 1250 property to which subsection (j) applies, the term 'applicable 1968 method' means the method permitted under subsection (j) which is most nearly comparable to the applicable 1968 method determined under the preceding sentence. "(E)

APPLICABLE 1968 METHOD I N CERTAIN CASES.—If P®

taxpayer evidenced the intent to use a method of depreciation (other than its applicable 1968 method or a subsection vl

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Page:Tom Swift and His Airship.djvu/178

 CHAPTER XIX

WRECKED

her nose headed north, the Red Cloud swung along through the air. Those on board were thinking of many things, but chief among them was the unjust accusation that had been made against them, by an irresponsible boy—the red-haired Andy Foger. They read the account in the paper again, seeking to learn from it new things at each perusal.

"It's just a lot of circumstantial evidence—that's what it is," said Tom. "I admit it might look suspicious to anyone who didn't know us, but Andy Foger has certainly done the most mischief by his conclusions. Burglar tools! The idea!"

"I think I shall sue the bank for damages," declared Mr. Damon. "They have injured my reputation by making this accusation against me. Anyhow, I'll certainly never do any more business with them, and I'll withdraw my ten thousand dollars deposit, as soon as we get back." 168

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PUBLIC LAW 91-172-DEC. 30, 1969

627

method) with respect to any public utility property in a timely application for change of accounting method filed before August 1, 1969, or in the computation of its tax expense for purposes of reflecting operating results in its regulated books of account for its July 1969 accounting period, such other method shall be deemed to be its applicable 1968 method with respect to such property and public utility property of the same (or similar) kind subsequently placed in service. " (F) SUBSECTION (1) METHOD.—The term 'subsection (1) method' means any method determined by the Secretary or his delegate to result in a reasonable allowance under subsection (a), other than (i) a declining balance method, (ii) the sum of the years-digits method, or (iii) any other method allowable solely by reason of the application of subsection (b)(4) or(j)(l)(C). " (G) NORMALIZATION METHOD OF ACCOUNTING.—In order to use a normalization method of accounting with respect to any public utility property— " (i) the taxpayer must use the same method of depreciation to compute both its tax expense and its deprecia' tion expense for purposes of establishing its cost of service for ratemaking purposes and for reflecting operating results in its regulated books of account, and "(li) if, to compute its allowance for depreciation under this section, it uses a method of depreciation other than the method it used for the purposes described in clause (i), the taxpayer must make adjustments to a reserve to reflect the deferral of taxes resulting from the use of such difi^erent methods of depreciation. " (H) FLOW-THROUGH METHOD OF ACCOUNTING.—The taxpayer used a 'flow-through method of accounting* with respect to any public utility property if it used the same method of ,• depreciation (other than a subsection (1) method) to compute its allowance for depreciation under this section and to compute its tax expense for purposes of reflecting operating results in its regulated books of account. "(T) J U L Y 1009 ACCOUNTING PERIOD.—The term 'July 1969 accounting period' means the taxpayer's latest accounting period ending before August 1, 1969, for which it computed its tax expense for purposes of reflecting operating results in its regulated books of account. For purposes of this paragraph, different declining balance rates shall be treated as different methods of depreciation. " (4) SPECIAL RULES AS TO FLOW-THROUGH METHOD.— " (A) ELECTION AS TO NEW PROPERTY REPRESENTING GROWTH

IN CAPACITY.—If the taxpayer makes an election under this subparagraph within 180 days after the date of the enactment of this subparagraph in the manner prescribed by the Secretary or his delegate, in the case of taxable years beginning after December 31, 1970, paragraph (2)(C) shall not apply with respect to any post-1969 public utility property, to the extent that such property constitutes property which increases the productive or operational capacity of the taxpayer with respect to the goods or services described in paragraph (3)(A) and does not represent the replacement of existing capacity. "(B)

CERTAIN PENDING APPLICATIONS FOR CHANGES IN

METHOD.—In applying paragraph (1)(B), the taxpayer shall

.^

)«u ac

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 628

76^sfat^'fo4of' 26 USC 312.

PUBLIC LAW 91-172-DEC. 30, 1969

be deemed to have used a flow-through method of accountin for its July 1969 accounting period with respect to any pr5 1970 public utility property for which it filed a timely appli, cation for change of accounting method before August 1 i%n if with respect to public utility property of the same (or similar) kind most recently placed in service, it used a flowthrough method of accounting for its July 1969 accounting period. "(5) REORGANIZATIONS, ASSETS ACQUISITIONS, ETC.—If by reason of a corporate reorganization, by reason of any other acquisition of the assets of one taxpayer by another taxpayer, by reason of the fact that any trade or business of the taxpayer is subject to ratemaking by more than one body, or by reason of other circumstances, the application of any provisions of this subsection to any public utility property does not carry out the purposes of this subsection, the Secretary or his delegate shall provide by regulations for the application of such provisions in a manner consistent with the purposes of this subsection." (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply with respect to all taxable years for which a return has not been filed before August 1, 1969. SEC. 442. EFFECT ON EARNINGS AND PROFITS. {^) I ^ GENERAL.—Section 312 (relating to earnings and profits) is amended by adding at the end thereof the following new subsection: " (m)

26 USC 167.

Post, p. 649.

26 USC 1248.

EFFECT OF DEPRECIATION ON EARNINGS AND PROFITS.—

" (1) GENERAL RULE.—For purposes of computing the earnings and profits of a corporation for any taxable year beginning after June 30, 1972, the allowance for depreciation (and amortization,if any) shall be deemed to be the amount which would be allowable for such year if the straight line method of depreciation had been used for each taxable year beginning after June 30, 1972. "(2) EXCEPTION.—If for any taxable year, beginning after June 30, 1972, a method of depreciation was used by the taxpayer which the Secretary or his delegate has determined results in a reasonable allowance under section 167(a), and which is not— " (A) a declining balance method, " (B) the sum of the years-digits method, or " (C) any other method allowable solely by reason of the application of subsection (b)(4) or (j)(1)(C) of section 167, then the adjustment to earnings and profits for depreciation for such year shall be determined under the method so used (in lieu of under the straight line method). "(3) CERTAIN FOREIGN CORPORATIONS.—The provisions of paragraph (1) shall not apply in computing the earnings and profits of a foreign corporation for any taxable year for which less than 20 percent of the gross income from all sources of such corporation is derived from sources within the United States." (b)

76 Stat. 102 7.

[33 s^^^

CONFORMING AMENDMENTS.—

^ ^ Section 964(a) (relating to earnings and profits of a foreign corporation) is amended by striking out "For purposes of this subpart," and inserting in lieu thereof "Except as provided in section 312(m)(3), for purposes of this subpart". (2) Section 1248(c)(1) (relating to general rule for determination of the earnings and profits of a foreign corporation) is amended by striking out "For purposes of this section," and inserting in lieu thereof "Except as provided in section 312(m) (3), for purposes of this section".

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629

TITLE V—ADJUSTMENTS AFFECTING INDIVIDUALS AND CORPORATIONS Subtitle A—Natural Resources SEC. 501. PERCENTAGE DEPLETION RATES. (a) CHANGE I N CERTAIN PERCENTAGE DEPLETION RATES.—Subsec-

tion (b) of section 613 (relating to percentage depletion) is amended \ l „ c -frvllrvWQ-

c'

i

/

^^^ Stat. 208; 80 Stat. 1579.

toreadastollows. ^, . 26 USC 613. »(b) PERCENTAGE DEPLETION RATES.—The mines, wells, and other natural deposits, and the percentages, referred to in subsection (a) are as follows: "(1)

, i

2 2 P E R C E N T —

-•

• -••' = -

';;-•

--•

'^'^'i

"•-''

'i;-"

"(A) oil and gas wells; " (B) sulphur and uranium; and "(C) if from deposits in the United States—anorthosite, clay, laterite, and nephelite syenite (to the extent that alumina and aluminum compounds are extracted therefrom), asbestos, bauxite, celestite, chromite, corundum, fluorspar, graphite, ilmenite, kyanite, mica, olivine, quartz crystals (radio grade), rutile, block steatite talc, and zircon, and ores of the following metals: antimony, beryllium, bismuth, cadmium, cobalt, columbium, lead, lithium, manganese, mercury, molybdenum, nickel, platinum and platinum group metals, tantalum, thorium, tin, titanium, tungsten, vanadium, and zinc. "(2) 15 PERCENT—if from deposits in the United States— " (A) gold, silver, copper, and iron ore, and " (B) oil shale (except shale described in paragraph (5)).

/^ ' '

"(3) 14 PERCENT—

"(A) metal mines (if paragraph (1)(C) or (2)(A) does not apply), rock asphalt, and vermiculite; and " (B) if paragraph (1)(C), (5), or (6)(B) does not apply, ball clay, bentonite, china clay, sagger clay, and clay used or sold for use for purposes dependent on its refractory properties. "(4) 10 PERCENT—asbestos (if paragraph (1)(C) does not 'M>pl^y)^ brucite, coal, lignite, perlite, sodium chloride, and wollastonite. "('^) '^V2 PERCENT—clay and shale used or sold for use in the manufacture of sewer pipe or brick, and clay, shale, and slate used or sold for use as sintered or burned lightweight aggregates. " (6)

5 PERCENT—

" (A) gravel, peat, pumice, sand, scoria, shale (except shale described in paragraph (2)(B) or (5)), and stone except stone described in paragraph (7)); " (B) clay used, or sold for use, in the manufacture of drainage and roofing tile, flower pots, and kindred products; and "(C) if from brine wells—bromine, calcium chloride, and magnesium chloride. "(7) 14 PERCENT—all other minerals, including, but not limited to, aplite, barite, borax, calcium carbonates, diatomaceous earth, dolomite, feldspar, fullers earth, garnet, gilsonite, S^^nite, limestone, magnesite, magnesium carbonates, marble, mollusk shells (iiichiding clam shells and oyster shells), phosphate rock, potash, (|uartzite, slate, soapstone, stone (used or sold for use by the mine owner or operator as dimension stone or ornamental stone), thenardite, tripoli, trona, and (if paragraph (1)(C) does

. y..,.,,,.,.,,

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[33 ST^T

not apply) bauxite, flake gTaphite, fluorspar, lepidolite, mien spodumene, and talc (including pyrophyllite), except that' unles' sold on bid in direct competition with a bona fide bid to sell mineral listed in paragraph (3), the percentage shall be 5 pgr, cent for any such other mineral (other than slate to which para graph (5) applies) when used, or sold for use, by the mine owner or operator as rip rap, ballast, road material, rubble, concrete
 * s*j? i; ^ifaggregates, or for similar purposes. For purposes of this para;•'

graph, the term 'all other minerals' does not include— " (A) soil, sod, dirt, turf, water, or mosses; or . ' " (B) minerals from sea water, the air, or similar inexhaustible sources. For the purposes of this subsection, minerals (other than sodium chloride) extracted from brines pumped from a saline perennial lake within the United States shall not be considered minerals from an inexhaustible source." (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to taxable years beginning after October 9, 1969. SEC. 502. TREATMENT PROCESSES IN THE CASE OF OIL SHALE. 26 USC 61"." (^) IN GENERAL.—Section 613(c)(4) (relating to treatment processes considered as mining) is amended by striking out "and" at the end of subparagraph (G), by redesignating subparagraph (H) as subparagraph (I), and by inserting after subparagraph (G) the following new subparagraph: " (H) in the case of oil shale—extraction from the ground, crushing, loading into the retort, and retorting, but not hydrogenation, refining, or any other process subsequent to retorting; and", (b) EFFECTIVE DATE.—The amendments made by subsection (a) shall apply to taxable years beginning after the date of the enactment of this Act. 26 USC^*6n-^' 632.

SEC. 503. MINERAL PRODUCTION PAYMENTS. (^) -"-^ GENERAL.—Subchapter I of chapter 1 (relating to natural resources) is amended by adding at the end thereof the following new part: "PART IV—MINERAL PRODUCTION PAYMENTS "Sec. 636. Income tax treatment of mineral production payments. "SEC. 636. INCOME TAX TREATMENT OF MINERAL PRODUCTION PAYMENTS. " (a) CARVED-OUT PRODUCTION PAYMENT.—A production payment

Ante, p. 629.

carved out of mineral property shall be treated, for purposes of this subtitle, as if it were a mortgage loan on the property, and shall not qualify as an economic interest in the mineral property. I n the case of a production payment carved out for exploration or development 01 a mineral property, the preceding sentence shall apply only if and to the extent gross income from the property (for purposes of section g^g) would be realized, in the absence of the application of such sentence, by the person creating the production payment. "(b)

RETAINED PRODUCTION PAYMENT ON SALE OF MINERAL PEOP-

ERTY.—A production payment retained on the sale of a mineral property shall be treated, for purposes of this subtitle, as if it were a purchase money mortgage loan and shall not qualify as an economic interest in the mineral property. "(c)

RETAINED PRODUCTION PAYMENT ON LEASE OF MINERAL PROP-

ERTY.—A production payment retained in a mineral property by the

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Page:United States Statutes at Large Volume 83.djvu/659

 83 STAT. ]

PUBLIC LAW 91-172-DEC. 30, 1969

igggor in a leasing transaction shall be treated, for purposes of this subtitle, insofar as the lessee (or his successors in interest) is concerned, as if it were a bonus granted by the lessee to the lessor payable in installments. The treatment of the production payment in the hands of the lessor shall be determined without regard to the provisions of this subsection. ,.,. "(d) DEFINITION.—As used m this section, the term 'mineral property' has the meaning assigned to the term 'property' in section 614(a). "(e) REGULATIONS.—The Secretary or his delegate shall prescribe such regulations as may be necessary to carry out the purposes of this section." (b) CLERICAL AMENDMENT.—The table of parts for subchapter I of chapter 1 is amended by adding at the end thereof the following:

631

^^A Stat. 210. ^^ ^^^ ^^'^' .«. x.«.«-. m

"Part IV. Mineral production payments." (c) EFFECTIVE D A T E S. — (1) GENERAL RULE.—The amendments made by this section

shall apply with respect to mineral production payments created on or after August 7, 1969, other than mineral production payments created before January 1, 1971, pursuant to a binding contract entered into before August 7, 1969. (2) ELECTION.—At the election of the taxpayer (made at such time and in such manner as the Secretary of the Treasury or his delegate prescribes by regulations), the amendments made by this section shall apply with respect to all mineral production payments which the taxpayer carved out of mineral properties after the beginning of his last taxable year ending before August 7, 1969. No interest shall be allowed on any refund or credit of any overpayment resulting from such election for any taxable year ending before August 7, 1969. (3) SPECIAL RULE.—With respect to a taxpayer who does not elect the treatment provided in paragraph (2) and who carves out one or more mineral production payments on or after August 7, 1969, during the taxable year which includes such date, the amendments made by this section shall apply to such production payments only to the extent the aggregate amount of such production payments exceeds the lesser of— (A) the excess of— (i) the aggregate amount of production payments < carved out and sold by the taxpayer during the 12-month V period immediately preceding his taxable year which includes August 7, 1969, over f ' (ii) the aggregate amount of production payments carved out before August 7, 1969, by the taxpayer during his taxable year which includes such date, or (B) the amount necessary to increase the amount of the taxpayer's gross income, within the meaning of chapter 1 of subtitle A of the Internal Revenue Code of 1954, for the tax- / S A stat S: 78 Stat. 116. able year which includes August 7, 1969, to an amount equal 26 USC 1to the amount of deductions (other than any deduction under i5j4.^ ^^^ section 172 of such Code) allowable for such year under such ^"^l] l\ ^^g\ chapter. The preceding sentence shall not apply for purposes of determining the amount of any deduction allowable under section 611 or 26 USC e n. the amount of foreign tax credit allowable under section 904 of such Code. ^°^'' P' "^-

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Page:United States Statutes at Large Volume 83.djvu/660

 632

PUBLIC LAW 91-172-DEC. 30, 1969

68A Stat. 211; 80 Stat 76 S

26 USC 615.

'^*Hd ^atf 6c 80 Stat. 759.

67 Stat. 462.

[83 STAT

SEC. 504. EXPLORATION EXPENDITURES. (a) AMENDMENTS TO SECTION 615.—Section 615 (relating to PTi^u •

T

\

'

T I

O ^

^•*|J10-

ration expenditures) IS amended— (1) by striking out the heading and inserting in lieu thereof"SEC. 615. PRE-1970 EXPLORATION EXPENDITURES."; and (2) by adding at the end thereof the following new subsection•'(h) TERMINATION.—The provisions of this section shall not apply with respect to expenditures paid or incurred after December 3i 1969." ^\)^ AMENDMENTS TO SECTION 617.—Section 617 (relating to additional exploration expenditures in the case of domestic mining) ig amended— (1) by striking out the heading and inserting in lieu thereof: "SEC. 617. DEDUCTION AND RECAPTURE OF CERTAIN MINING EXPLORATION EXPENDITURES."; (2) by striking out in subsection (a)(1) "in the United States or on the Outer Continental Shelf (within the meaning of section 2 of the Outer Continental Shelf Lands Act, as amended and supplcmeutcd; 43 U.S.C. 1331)"; and (3) by striking out subsection (h) and inserting the following in lieu thereof: " (h) LIMITATION.-—

53 Stat. 40.

Post,

p. 633.

r'^^,

^^68A Stat. 104-

"(1) IN GENERAL.—Subsection (a) shall apply to any amount paid or incurred after December 31, 1969, with respect to any deposit of ore or other mineral located outside the United States, only to the extent that such amount, when added to the amounts which are or have been deducted under subsection (a) and section 615 (a) and the amounts which are or have been treated as deferred expenses under section 615(b), or the corresponding provisions of prior law, does not exceed $400,000. "(2) AMOUNTS TAKEN INTO ACCOUNT.—For purposes of paragraph (1), there shall be taken into account amounts deducted and amounts treated as deferred expenses by— " (A) the taxpayer, and " (B) any individual or corporation who has transferred to the taxpayer any mineral property. "(3) APPLICATION OF PARAGRAPH (2)(B). — Paragraph (2)(B) shall apply with respect to all amounts deducted and all amounts treated as deferred expenses which were paid or incurred 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; " (B) the taxpayer would be entitled under section 381(c) ' (10) to deduct expenses deferred under section 615(b) had the ' distributor or transferor corporation elected to defer such w ' expenses; or " (C) the taxpayer acquired any mineral property from ' the individual or corporation under circumstances which make section 334(b), 362 (a) and (b), 372(a), 373(b) (Ijj 1051, OT 1082 apply to such transfer." .^..

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633

(c) CONFORMING AMENDMENTS.—

^

(1) Section 243(b)(3)(C) (iii) is amended by striking out "section 615(c)(1) " and inserting in lieu thereof "sections 615(c) (1) and 617(h)(1)". (2) Paragraph (10) of section 381(c) is amended— (A) by striking out so much as precedes the second sentence and inserting in lieu thereof: "(10)

78 Stat. 53. 26 USC 243.

^SA Stat. 127.

T R E A T M E N T OF CERTAIN M I N I N G EXPLORATION AND DEVEL-

O P M E N T EXPENSES OF DISTRIBUTOR OR TRANSFEROR CORPORATION,

The acquiring corporation shall be entitled to deduct, as if it were the distributor or transferor corporation, expenses deferred under sections 615 and 616 (relating to pre-1970 exploration expenditures and development expenditures, respectively) if the distributor or transferor corporation has so elected."; and (B) by adding at the end thereof the following new sentence: "For the purpose of applying the limitation provided in section 617, if, for any taxable year, the distributor or transferor corporation was allowed the deduction in section 615(a) or section 617(a) or made the election provided in section 615(b), the acquiring corporation shall be deemed to have been allowed such deduction or deductions or to have made such election, as the case may be." (3) Section 703(b) is amended by striking out "(relating to exploration expenditures) or under section 617 (relating to additional exploration expenditures in the case of domestic mining)" and inserting in lieu thereof "(relating to pre-1970 exploration expenditures) or under section 617 (relating to deduction and recapture of certain mining exploration expenditures)". (4) Paragraph (10) of section 1016(a) is amended by inserting "pre-1970" after "certain". (5) The table of sections for part I of subchapter I of Chapter 1 is amended— (A) by striking out the item relating to section 615 and inserting in lieu thereof: "Sec. 615. Pre-1970 exploration expenditures."; and (B) by striking out the item relating to section 617 and inserting in lieu thereof:

^e use 616. --j -.u* " '

^"'^' P- ^^2.

26 USC 703.

^^^ ^'^t- ^oo.

"Sec. 617, Deduction and recapture of certain mining exploration expenditures." (d) EFFECTIVE

DATE.—

(1) IN GENERAL,—The amendments made by this section shall apply with respect to exploration expenditures paid or incurred after December 31, 1969. (2) PRESUMPTION OF ELECTION UNDER SECTION 617.—For purposes of section 617 of the Internal Revenue Code of 1954, an election under section 615(e) of such Code, which is effective with respect to exploration expenditures paid or incurred before January 1, 1970, shall be treated as an election under section 617(a) of such Code with respect to exploration expenditures paid or incurred after December 31, 1969. The preceding sentence shall not apply to any taxpayer who notifies the Secretary of the Treasury or his delegate (at such time and in such manner as the Secretary or his delegate prescribes by regulations) that he does not desire his election under section 615(e) to be so treated.

• '

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Page:United States Statutes at Large Volume 83.djvu/662

 634

68A Stat. 207; Ante, p. 630. 26 USC 611636.

PUBLIC LAW 91-172-DEC. 30, 1969

[83 STAT.

SEC. 505. CONTINENTAL SHELF AREAS. (a) IN GENERAL.—Subchapter I of chapter 1 (relating to natur 1 resources) is amended by adding after part IV (added by section 5m of this Act) the following new part: "PART V—CONTINENTAL S H E L F AREAS "Sec. 638. Continental shelf areas. "SEC. 638. CONTINENTAL SHELF AREAS.

"For purposes of applying the provisions of this chapter (includiriff 8o'lfat^1s4r'' sections 861(a)(3) and 862(a)(3) in the case of the performance of 26 USC 861", 862. persoual services) with respect to mines, oil and gas wells, and other natural deposits— "United "(1) the term 'United States' when used in a geographical States." sense includes the seabed and subsoil of those submarme areas which are adjacent to the territorial waters of the United States and over which the United States has exclusive rights, in accordance with international law, with respect to the exploration and exploitation of natural resources; and "Foreign " (2) the terms 'foreign country' and 'possession of the United country." States' when used in a geographical sense include the seabed and " P o s s e s s i o n of the United subsoil of those submarine areas which are adjacent to the terriStates." torial waters of the foreign country or such possession and over which the foreign country (or the United States in case of such possession) has exclusive rights, in accordance with international law, with respect to the exploration and exploitation of natural resources, but this paragraph shall apply in the case of a foreign country only if it exercises, directly or indirectly, taxing jurisdiction with respect to such exploration or exploitation. No foreign country shall, by reason of the application of this section, be treated as a country contiguous to the United States." 68A Stat. 357; 80 Stat. 1553.

(b) SOURCE OF INCOME FOR WITHHOLDING OF TAX.—Section 1441

(relating to withholding of tax on nonresident aliens) is amended by adding at the end thereof the following new subsection: "(f) CONTINENTAL SHELF AREAS.— "For sources of income derived from, or for services performed with respect to, the exploration or exploitation of natural resources on submarine areas adjacent to the territorial waters of the United States, see section 638." (c) CLERICAL AMENDMENT.—The table of parts for subchapter I of

chapter 1 is amended by adding at the end thereof the following new item: "Part V. Continental shelf areas." SEC. 506. FOREIGN TAX CREDIT WITH RESPECT TO CERTAIN FOREIGN MINERAL INCOME. (a) LIMITATION ON AMOUNT OF FOREIGN TAXES ALLOWED.—Section 68A Stat. 285; 80 Stat. 1569.

901 (relating to taxes of foreign countries and possessions of the United States) is amended— (1) by r e d e s i ^ a t i n g subsection (e) as subsection (f),and (2) by inserting after subsection (d) the following new subsection: " (e) FOREIGN TAXES ON MINERAL INCOME.— " (1) REDUCTION I N AMOUNT ALLOWED.—Notwithstanding sub-

section (b), the amount of any income, war profits, and excess profits taxes paid or accrued during the taxable year to any foreign country or possession of the United States with respect to foreigii

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Page:United States Statutes at Large Volume 83.djvu/663

 83 STAT. ]

PUBLIC LAW 91-172-DEC. 30, 1969

635

mineral income from sources within such country or possession which would (but for this paragraph) be allowed under such subsection shall be reduced by the amount (if any) by which " (A) the amount of such taxes (or, if smaller, the amount of the tax which would be computed under this chapter with respect to such income determined without the deduction allowed under section 613), exceeds " (B) the amount of the tax computed under this chapter with respect to such income. "(2)

FOREIGN MINERAL INCOME DEFINED.—For p u r p O S e S

Ante, p. 629.

of

paragraph (1), the term 'foreign mineral income' means income derived from the extraction of minerals from mines, wells, or other natural deposits, the processing of such minerals into their primary products, and the transportation, distribution, or sale of such minerals or primary products. Such term includes, but is n.., ».' not limited to-y jr- i.;u^ " (A) dividends received from a foreign corporation in respect of which taxes are deemed paid by the taxpayer under section 902, to the extent such dividends are attributable to ^^ Stat. 999. foreign mineral income, and ^^ ^^^ ^°^" " (B) that portion of the taxpayer's distributive share of the income of partnerships attributable to foreign mineral income" (b) ELECTION OF OVERALL LIMITATION.—Section 904(b) (relating '^'* ^*^*- lo^oto election of overall limitation) is amended— (1) by striking out "with the consent of the Secretary or his delegate with respect to any taxable year" in paragraph (1) and inserting in lieu thereof " (A) with the consent of the Secretary or his delegate with respect to any taxable year or (B) for the taxpayer's first taxable year beginning after December 31, 1969", and (2) by striking o u t ' ' I f a taxpayer" in paragraph (2) and insert-, ing in lieu thereof "Except in a case to which paragraph (1)(B) applies, if the taxpayer". (c) EFFECTIVE DATE.—The amendments made by this section shall apply with respect to taxable years beginning after December 31, 1969.

Subtitle B—Capital Gains and Losses

SEC. 511. INCREASE IN ALTERNATIVE CAPITAL GAINS TAX. (a) DEFINITION OF N E T SECTION 1201 GAIN.—Section 1222 (relating

^^^ ^'^'- ^^'^^

to definition of terms applicable to capital gains and losses) is amended by adding at the end thereof the following new paragraph: " (11) N E T SECTION 1201 GAIN.—The term 'net section 1201 gain' means the excess of the net long-term capital gain for the taxable year over the net short-term capital loss for such year." (b) INCREASE I N ALTERNATIVE TAX EATES.—Section 1201 (relating

to alternative tax) is amended to read as follows: "SEC. 1201. ALTERNATIVE TAX. ' "(a) CORPORATIONS.—If for any taxable year a corporation has a net section 1201 gain, then, in lieu 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 a tax computed on the taxable income reduced by the amount of the net section 1201 gain, at the rates and in the manner as if this subsection had not been enacted, plus—

26 USC 1201.

7/ltat^ 997; ' Ante. pp. 536, 585. ""^

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Page:United States Statutes at Large Volume 83.djvu/664

 636

PUBLIC LAW 91-172-DEC. 30, 1969

'''"'-

Post, p. 678. " ^' ^' " •

[93 5^^

" (1) in the case of a taxable year beginning before Januarv 1 1975— ^ ^' " (A) a tax of 25 percent of the lesser of— " (i) the amount of the subsection (d) gain, or "(ii) the amount of the net section 1201 gain and " (B) a tax of 30 percent (28 percent in the case of a taxable 19*q/• t • ygg^j. beginning after December 31, 1969, and before January 1 1971) of the excess (if any) of the net section 1201 gain over the subsection (d) gain; and " (2) in the case of a taxable year beginning after December 3i 1974, a tax of 30 percent of the net section 1201 gain. ' "(b) OTHER TAXPAYERS.—If for any taxable year a taxpayer other than a corporation has a net section 1201 gain, then, in lieu of the tax imposed by sections 1 and 511, 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 an amount equal to 50 percent of the net section 1201 gain, at the rates and in the manner as if this subsection had not been enacted " (2) a tax of 25 percent of the lesser of— " (A) the amount of the subsection (d) gain, or " (B) the amount of the net section 1201 gain, and "(3) if the amount of the net section 1201 gain exceeds the amount of the subsection (d) gain, a tax computed as provided in subsection (c) on such excess. " (c) COMPUTATION OF TAX ON CAPITAL G A I N I N EXCESS OF SIBSECTioN (d) G A I N. —

"(1) IN GENERAL.—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 section 1201 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 subsection (d) gain. "(2) LIMITATION.—Notwithstanding paragraph (1), the tax computed for purposes of subsection (b)(3) shall not exceed an amount equal to the following percentage of the excess of the net section 1201 gain over the subsection (d) gain: " (A) 291/^ percent, in the case of a taxable year beginning after December 31, 1969, and before January 1, 1971, or " (B) 321/^ percent, in the case of a taxable year beginning after December 31, 1970, and before January 1, 1972. " (d) SUBSECTION (d) G A I N DEFINED.—For purposes of this section, the term 'subsection (d) gain' means the sum of the long-term capital gains for the taxable year arising— " (1) in the case of amounts received before January 1, 1975, from sales or other dispositions pursuant to binding contracts (other than any gain from a transaction described in section 631 3 ^ 8 Stat. 213, 2g A or 1235) cutered into on or before October 9, 1969, including sales 26 USC 631, or other dispositions the income from which is returned on the 1235. basis and in the manner prescribed in section 453(a)(1), 26 USC 45^^.' " (2) in respect of distributions from a corporation made ^rior to October 10, 1970, which are pursuant to a plan of complete hquidation adopted on or before October 9, 1969, and

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Page:Tom Swift and His Airship.djvu/179

Rh "Mr. Sharp doesn't seem to be accused of doing anything at all," remarked Tom, reading the article for perhaps the tenth time.

"Oh, I guess I'm a sort of general all-around bad man, who helped you burglars to escape with the booty," answered the balloonist, with a laugh. "I expect to be arrested along with you two."

"But must we be arrested?" inquired Tom anxiously. "I don't like that idea at all. We haven't done anything."

"This is my plan," went on Mr. Sharp. "We'll get back to Shopton as quickly as we can. We'll arrive at night, so no one will see us, and, leaving the airship in some secluded spot, we'll go to the police and explain matters. We can easily prove that we had nothing to do with the robbery. Why we were all home the night it happened! Mr. Swift, Mr. Jackson and Mrs. Baggert can testify to that."

"Yes," agreed Mr. Damon. "I guess they can. Bless my bank book, but that seems a good plan. We'll follow it."

Proceeding on the plan which they had decided was the best one, the Red Cloud was sent high into the air. So high up was it that, at times, it was above the clouds. Though this caused some little discomfort at first, especially to Mr. Damon, he soon became used to it, as did the others. And

title: Page:Tom Swift and His Airship.djvu/179


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Page:United States Statutes at Large Volume 83.djvu/665

 83 STAT. ]

PUBLIC LAW 91-172-DEC. 30, 1969

637

"(3) in the case of a taxpayer other than a corporation, from any other source, but the amount taken into account from such other sources for the purposes of this paragiuph shall be limited to an amount equal to the excess (if any) of $50,000 ($25,000 in the case of a married individual filing a separate return) over the sum of the gains to which paragraphs (1) aoid (2) apply. «(e) CROSS REFERENCES.—

"For computation of the alternative tax— "(1) in the case of life insurance companies, see section 802(a)(2); "(2) in''the case of regulated investment companies and their shareholders, see section 852(b)(3)(A) and (D); and "(3) in the case of real estate investment trusts, see section 857(b) (3)(A)." (c)

^

CONFORMING AMENDMENTS. —

(1) Section 802(a)(2)(B) (relating to alternative tax in case H use gVa""' of capital gains of life insurance companies) is amended to read as follows: " (B) an amount determined as provided in section 1201 (a) on such excess." ^"'^' p- ^^s. (2) Section 852(b)(3) (relating to method of taxation of reg- 68A Stat. 271. ulated investment companies and their shareholders in the case of capital gains) is amended: (A) by striking out "of 25 percent of" in subparagraph (A) and inserting in lieu thereof ", determined as provided in section 1201(a), on", (B) by adding at the end of subparagraph (C) the following new sentence: "For purposes of subparagraph (A) (ii), the deduction for dividends paid shall, in the case of a taxable year beginning before January 1, 1975, first be made from the amount subject to tax in accordance with section 1201(a)(1)(B), to the extent thereof, and then from the amount subject to tax in accordance with section 1201(a) (1)(A).", (C) by striking out "of 25 percent" in subparagraph (D) 70 Stat. 530. (ii),and (D) by amending subparagraph (D) (iii) to read as follows: "(iii) The adjusted basis of such shares in the hands of the shareholder shall be increased, with respect to the amounts required by this subparagraph to be included in computing his long-term capital gains, by 75 percent of so nuich 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 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)." (3) Section 857(b)(3) (relating to imposition of tax in the 74 Stat. 1006. case of capital gains of real estate investment trusts) is amended: (A) by striking out "of 25 percent of" in subparagraph (A) and inserting in lieu thereof ", determined as provided in section 1201(a), on", and (B) by adding at the end of subparagraph (C) the following new sentence: "For purposes of subparagraph (A) (ii), in the case of a taxable year beginning before January 1, 1975, the deduction for dividends paid shall first be made

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Page:United States Statutes at Large Volume 83.djvu/666

 638 Ante, p. 635. 80 Stat. 113. 26 USC 1378.

PUBLIC LAW 91-172-DEC. 30, 1969

[33 g^^

from the amount subject to tax in accordance with seo tion 1201(a)(1)(B), to the extent thereof, and then from the amount subject to tax in accordance with spotiA 1201(a)(1)(A)." "^^ (4) Section 1378 (relating to tax imposed on certain capital gains of an electing small business corporation) is amended: (A) by striking out "25 percent of" in subsection (b) (1 \ and inserting in lieu thereof "the tax, determined as provided " * *> r in section 1201(a), on", ». ' (B) by adding at the end of subsection (b) the followiiiff new sentence: "In applying section 1201(a)(1)(A) and (B^ for purposes of paragraph (1), the $25,000 limitation shall first be deducted from the amount (determined without
 * regard to this subsection) subject to tax in accordance with

section 1201(a)(1)(B), to the extent thereof, and then from the amount (determined without regard to this subsection) subject to tax in accordance with section 1201(a)(1)(A)." and (C) by striking out "25 percent of' in subsection (c)(3) and inserting in lieu thereof "a tax, determined as provided in section 1201(a), on", (d) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 1969. SEC. 512. CAPITAL LOSSES OF CORPORATIONS. (a)

78 Stat. 860.

68A Stat. 63.

THREE-YEAR CARRYBACK OF N E T CAPITAL LOSSES.—Section

1212(a)(1) (relating to capital loss carryover for corporations) is amended to read as follows: " (1) IN GENERAL.—If a corporation has a net capital loss for any taxable year (hereinafter in this paragraph referred to as the 'loss year'), the amount thereof shall be— " (A) a capital loss carryback to each of the 3 taxable years preceding the loss year, but only to the extent— "(1) such loss is not attributable to a foreign expropriation capital loss, and " (ii) the carryback of such loss does not increase or produce a net operating loss (as defined in section 172(c)) for the taxaWc year to wMch it Is being carricd back; and " (B) a capital loss carryover to each of the 5 taxable years (10 taxable years to the extent such loss is attributable to a foreign expropriation capital loss) succeeding the loss year, and shall be treated as a short-term capital loss in each such taxable year. The entire amount of the net capital loss for any taxable year shall be carried to the earliest of the taxable years to which such loss may be carried, and the portion of such loss which shall be carried to each of the other taxable years to which such loss may be carried shall be the excess, if any, of such loss over the total of the net capital gains for each of the prior taxable years to which such loss may be carried. For purposes of the preceding sentence, the net capital gain for any such prior taxable year shall be computed without regard to the net capital loss for the loss year or for any taxable year thereafter. I n the case of any net capital loss which cannot be carried back in full to a preceding taxable year by reason of clause (ii) of subparagraph (A), the net ' capital gain for such prior taxable year shall in no case be treated

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 83 STAT. ]

PUBLIC LAW 91-172-DEC. 30, 1969

as greater than the amount of such loss which can be carried back to such preceding taxable year upon the application of such clause (ii)." ^ (b) SPECIAL RULES.—Section 1212(a) (relating to net capital losses of corporations) is amended by adding at the end thereof the following new paragraphs: "(3) ELECTING

SMALL

BUSINESS

639

^"'®' P- ^^S. ^^ "^^ ^^^^"

CORPORATIONS.—Paragraph

(1)(A) shall not apply to the net capital loss of a corporation for any taxable year for which it is an electing small business corporation under subchapter S, and a net capital loss of a corporation ^°^^' P- 654. (for a year for which it is not such an electing small business corporation) shall not be carried back under paragraph (1)(A) to a taxable year for which it is an electing small business corporation. "(4) SPECIAL RULES ON CARRYBACKS.—A net capital loss of a corporation shall not be carried back under paragraph (1)(A) to a taxable year— " (A) for which it is a foreign personal holding company (as defined in section 552); 68A Stat. 195. " (B) for which it is a regulated investment company (as 26 USC 851. defined in section 851); "(C) for which it is a real estate investment trust (as defined in section 856); or 74 Stat. ioo4. " (D) for which an election made by it under section 1247 is applicable (relating to election by foreign investment companies to distribute income currently)." (c) CERTAIN CORPORATE ACQUISITIONS.—Section 381(b)(3) (relating to operating rules for carryovers in certain corporate acquisitions) is amended by striking out "a net operating loss" and inserting in lieu thereof "a net operating loss or a net capital loss". (d) TENTATIVE CARRYBACK ADJUSTMENTS.—Section 6411 (relating g^^stat^^yaV^*^' to quick refunds in respect of tentative carryback adjustments) is amended— (1) by striking out the first two sentences of subsection (a) and inserting in lieu thereof "A taxpayer may file an application for a tentative carryback adjustment of the tax for the prior taxable year affected by a net operating loss carryback provided in section ? lT2(b), by an investment credit carryback provided in section yg^gtalr'^v^^^' 46(b), or by a capital loss carryback provided in section 1212(a) Post, p. eee. (1), from any taxable year. The application shall be verified in 26 USC 6065. the manner prescribed by section 6065 in the case of a return of such taxpayer, and shall be filed, on or after the date of filing of the return for the taxable year of the net operating loss, net capital loss, or unused investment credit from which the carryback results and within a period of 12 months from the end of such taxable year (or, with respect to any portion of an investment credit carryback from a taxable year attributable to a net operating loss carryback or a capital loss carryback from a subsequent taxable year, within a period of 12 months from the end of such subsequent taxable year), in the manner and form required by regulations prescribed by the Secretary or his delegate.", and (2) by striking out "net operating loss or unused investment credit", wherever such term appears in subsections (a)(1), (b), and, (c), and inserting in lieu thereof "net operating loss, net capital loss, or unused investment credit". (e) STATUTES OF LIMITATIONS AND INTEREST RELATING TO CAPITAL

Loss CARRYBACKS.— O H * >",3>J> f'l'

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Page:United States Statutes at Large Volume 83.djvu/668

 640 72 Stat. 1663; ^^26 USC 6501.

PUBLIC LAW 91-172-DEC. 30, 1969

[83 STAT

(1) ASSESSMENT AXD COLLECTION.—Section 6501 (relating t limitations on assessment and collection) is amended— ^ (A) by striking out "Loss CARRYBACKS" in the heading of subsection (h) and inserting in lieu thereof "Loss OR CAPITAL T^ss CARRYBACKS",

76 Stat. 889. 26 USC 172. 81 Stat. 7 3 1.

68A Stat. 808;

(B) by striking out "loss carryback" in subsection (h) and inserting in lieu thereof "loss carryback or a capital loss ' carryback", "^''[ (C) by striking out "operating loss which" in subsection ' • ' • " ' (h) and inserting in lieu thereof "operating loss or net capital '•'^•' •'. loss which", •' • •' (D) by striking out "assessed, or within 18 months" and all '• ' that follows thereafter in subsection (h) and inserting in lieu thereof "assessed. I n the case of a deficiency attributable to ' the application of a net operating loss carryback, such deficiency may be assessed within 18 months after the date on ' ' which the taxpayer files in accordance with section 172(b)(3) a copy of the certification (with respect to the taxable year of the net operating loss) issued under section 317 of the Trade Expansion Act of 1962, if later than the date prescribed by ' ' the preceding sentence.", (E) by striking out "loss carryback" in subsection (j) and inserting in lieu thereof "loss carryback or a capital loss carryback", and (F) by striking out "net operating loss carryback or an investment credit carryback" in subsection (m) and inserting in lieu thereof "net operating loss carryback, a capital loss carryback, or an investment credit carryback". (£) CREDIT OR REFUND.—Subsection (d) of section 6511 (relating to limitations on credit or refund) is amended— (A) by striking out "LOSS CARRYBACKS" in the heading of

paragraph (2) and inserting in lieu thereof

"LOSS OR CAPITAL

LOSS CARRYBACKS",

' '• • = •

'. ' /^ ' ',' •^'

(B) by striking out "loss carryback" in that part of paragraph (2)(A) which precedes clause (i) thereof and inserting in lieu thereof "loss carryback or a capital loss carryback"', (C) by striking out "operating loss which" in that part of paragraph (2)(A) which precedes clause (i) thereof and inserting in lieu thereof "operating loss or net capital loss which", (D) by striking out "loss carryback" in the first sentence of paragraph (2)(B)(i) and inserting in lieu thereof "loss carryback or a capital loss carryback". (E) by amending the last sentence of paragraph (2)(B) (i) to read as follows: " I n the case of any such claim for credit or refund or any such application for a tentative carryback adjustment, the determination by any court, including the Tax Court, in any proceeding in which the decision of the court has become final, shall be conclusive except with respect to the net operating loss deduction, and the effect of such deduction, or with respect to the determination of a shortterm capital loss, and the effect of such short-term capitaj loss, to the extent that such deduction or short-term capital loss is affected by a carryback which was not an issue in such proceeding.", (F) by striking out "loss carryback" in paragraph (2)(B) (ii) and inserting in lieu thereof "loss carryback or a capital loss carryback, as the case may be,", and

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Page:United States Statutes at Large Volume 83.djvu/669

 83 STAT. ]

PUBLIC LAW 91-172-DEC. 30, 1969

(G) by striking out ''loss carryback" in paragraph (4)(A) and inserting m lieu thereof "loss carryback or a capital loss carryback". (3) INTEREST ON UNDERPAYMENTS.—Section 6601(e) (relating to computation of interest in case of carryback or adjustment for certain unused deductions) is amended—

641 81 Stat. 7 3 1.

76 Stat. 972. ^^ "^^ ^^°^'

(A) by striking out "LOSS CARRYBACK" in the heading of paragraph (1) and inserting in lieu thereof "LOSS OR CAPITAL LOSS CARRYBACK",

(B) by striking out "net operating loss" wherever it appears in paragraph (1) and inserting in lieu thereof "net operating loss or net capital loss", and (C) by striking out "loss carryback" in paragraph (2) and inserting in lieu thereof "loss carryback or a capital loss carryback". (4) INTEREST ON OVERPAYMENTS.—Section 6611(f) (relating to interest in case of refund of income tax caused by carryback or adjustment for certain unused deductions) is amended—

si Stat. 731. ^e Stat. 972.

(A) by striking out "LOSS CARRYBACK" in the heading of paragraph (1) and inserting in lieu thereof "LOSS OR CAPITAL LOSS C A R R Y B A C K ",

(B) by striking out "net operating loss" wherever it appears in paragraph (1) and inserting in lieu thereof "net operating loss or net capital loss", and (C) by striking out "loss carryback" in paragraph (2) and inserting in lieu thereof "loss carryback or a capital loss carryback". (f) TECHNICAL AMENDMENTS.—

(1) The heading of section 1212 is amended by striking out "CARRYOVER" and inserting in lieu thereof "CARRYBACKS AND CARRYOVERS'*. (2) The item relating to section 1212 in the table of sections for part II of subchapter P of chapter 1 is amended by striking out "carryover" and inserting in lieu thereof "carrybacks and carryovers". (3) Section 246(b)(1) (relating to dividends received deduction) is amended by striking out "and 247" and inserting in lieu thereof "and 247, and without regard to any capital loss carryback to the taxable year under section 1212(a)(1). " (4) Section 481(b)(3)(A) (relating to changes in method of accounting) is amended by striking out "loss carryover" and inserting in lieu thereof "loss carryback or carryover", (5) Section 535(b)(6) (relating to improper accumulations of surplus) is amended— (A) by striking out "capital loss carryover" in the first sentence and inserting in lieu thereof "capital loss carryback or carryover", and (B) by striking out "capital loss carryover" in subparagraph (B) and inserting in lieu thereof "capital loss carryback and carryover". (6) Paragraph (7) of section 535(b) (relating to treatment of capital loss carryovers) is amended to read as follows: "CS") CAPITAL LOSS.—NO allowance shall be made for the capital loss carrvback or carryover provided in section 1212." (7) Section 1314(a) (relating to mitigation of limitations) is amended by striking out "capital loss carryover" and inserting in lieu thereof "capital loss carryback or carryover".

68A s t a t. 74.

72 s t a t. 1631.

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Page:United States Statutes at Large Volume 83.djvu/670

 642 68A Stat. 340. 26 USC 1314.

PUBLIC LAW 91-172-DEC. 30, 1969

[33 s^^

(8) The last sentence of section 1314(b) (relating to method f adjustment) is amended to read as follows: " I n the case of a adjustment resulting from an increase or decrease in a net ope? ating loss or net capital loss which is carried back to the year of adjustment, interest shall not be collected or paid for any period prior to the close of the taxable year in which the net operatin loss or net capital loss arises." ^ (g) EFFECTIVE DATE.—The amendments made by this section shall apply with respect to net capital losses sustained in taxable years beginning after December 31, 1969. SEC. 513. CAPITAL LOSSES OF INDIVIDUALS. (a)

LIMITATION ON ALLOWANCE OF CAPITAL LOSSES.—Section 1211

(b) (relating to limitation on capital losses of taxpayers other than corporations) is amended to read as follows: "(b)

Post, p. 675.

78 Stat. 99.

OTHER TAXPAYERS.—

"(1) IN GENERAL.—In the case of a taxpayer other than a corporation, losses from sales or exchanges of capital assets shall be allowed only to the extent of the gains from such sales or exchanges, plus (if such losses exceed such gains) whichever of the following is smallest: " (A) the taxable income for the taxable year, " (B) $1,000, or " (C) the sum of— " (i) the excess of the net short-term capital loss over the net long-term capital gain, and " (ii) one-half of the excess of the net long-term capital loss over the net short-term capital gain. "(2) MARRIED INDIVIDUALS.—In the case of a husband or wife Avho files a separate return, the amount specified in paragraph (1)(B) shall be $500 in lieu of $1,000. " (3) COMPUTATION OF TAXABLE INCOME.—For purposes of paragraph (1), taxable income shall be computed without regard to gains or losses from sales or exchanges of capital assets and without regard to the deductions provided in section 151 (relating to personal exemptions) or any deduction in lieu thereof. If the taxpayer elects to pay the optional tax imposed by section 3, 'taxable income' as used in this subsection shall read as 'adjusted gross income'." (b) CAPITAL Loss CARRYOVER.—Section 1212(b) (relating to capital loss carryover of taxpayers other than corporations) is amended by striking out "beginning after December 31, 1963" at the beginning of paragraph (1), by striking out the last sentence of paragraph (bi and by striking out paragraph (2) and inserting in lieu thereof the following new paragraphs: "(2)

wi^rv
 * - I;.;

S P E C I A L RULES.—

" (A) For purposes of determining the excess referred to in paragraph (1)(A), an amount equal to the amount allowed for the taxable year under section 1211(b)(1)(A), (B),or (C) shall be treated as a short-term capital gain in such year. " (B) For purposes of determining the excess referred to in paragraph (1)(B), an amount equal to the sum of— " (i) the amount allowed for the taxable year under section 1211(b)(1)(A), (B), o r (C), and "(ii) the excess of the amount described in clause (1) regard to this subsection) for such year, shall be treated as a short-term capital gain in such year.
 * ^^'^^ t^® 1"'^^ short-term capital loss (determined without

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Page:United States Statutes at Large Volume 83.djvu/671

 g3 STAT. 1

PUBLIC LAW 91-172-DEC. 30, 1969

"(8) TRANSITIONAL RULE.—In the case of any amount which, under paragraph (1) and section 1211(b) (as in effect for taxable years beginning before January 1, 1970), is treated as a capital loss in the first taxable year beginning after December 31, 1969, paragraph (1) and section 1211(b) (as in effect for taxable years beginning before January 1, 1970) shall apply (and paragraph (1) and section 1211(b) as in effect for taxable years beginning after December 31, 1969, shall not apply) to the extent such amount exceeds the total of any net capital gains (determined without regard to this subsection) of taxable years beginning after December 31, 1969." (c) CONFORMING AMENDMENT.—Section 1222(9) (defining net capital <^ain) is amended by striking out "In the case of a corporation, the" ancTinserting in lieu thereof "The". (d) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 1969.

643

Ante,

p. 642.

78 Stat. loo. ^^ ^^'^ ^^""

SEC. 514. LETTERS, MEMORANDUMS, ETC. (a) TREATMENT AS PROPERTY W H I C H I S NOT A CAPITAL ASSET.—

Section 1221(3) (relating to definition of capital asset) is amended to read as follows: "(3) a copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property, held by— " (A) a taxpayer whose personal efforts created such propert}[, " (B) in the case of a letter, memorandum, or similar property, a taxpayer for whom such property was prepared or proclucecl, or " (C) a taxpayer in whose hands the basis of such property is determined, for purposes of determining gain from a sale or exchange, in whole or part by reference to the basis of such property in the hands of a taxpayer described in subparagraph (A) or (B);". (b) CONFORMING AMENDMENTS.—

(1) Section 341(e)(5)(A) (iv) (relating to definition of subsection (e) asset in the case of collapsible corporations) is amended to read as follows: "(iv) property (unless included under clause (i), (ii), or (iii)) which consists of a copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property, or any interest in any such property, if the property was created in whole or in part by the personal efforts of, or (in the case of a letter, memorandum, or similar property) was prepared, or produced in whole or in part for, any individual w ho ow ns more than 5 percent in value of the stock of the corporation." (2) Section 1231(b)(1)(C) (relating to definition of property used in the trade or business) is amended by inserting ", a letter or memorandum" before ", or similar property". (c) EFFECTIVE DATE.—The amendments made by this section shall apply to sales and other dispositions occurring after July 25, 1969.

68A Stat. 3 2 1.

72 Stat. 1618.

SEC. 515. TOTAL DISTRIBUTIONS FROM QUALIFIED PENSION, ETC., PLANS. (a) LIMITATION ON CAPITAL GAINS TREATMENT.—

(1) EMPLOYEES'TRUST.—Section 402(a) (relating to taxability of beneficiary of exempt trust) is amended by adding at the end thereof the following new paragraph: "(5) LIMFIATION ON CAPITAL GAINS TREATMENT.—The first

.Itf^^'^'^

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Page:United States Statutes at Large Volume 83.djvu/672

 644

PUBLIC LAW 91-172-DEC. 30, 1969

.

sentence of paragraph (2) shall apply to a distribution paid aft December 31, 1969, only to the extent that it does not exceed fh^ sum of— ^ " (A) the benefits accrued by the employee on behalf f whom it is paid during plan years beginning before T a uary 1, 1970, and ^^• "(^B) the portion of the benefits accrued by such emplovep during plan years beginning after December 31, 1969, which the distributee establishes does not consist of the employee's allocable share of employer contributions to the trust by which such distribution is paid. The Secretary or his delegate shall prescribe such regulations as may be necessary to carry out the purposes of this paragraph " (2) EMPLOYEE ANNUITIES.—Section 403(a)(2) (relating to capital gains treatment for certain distributions under a qualified annuity plan) is amended by adding at the end thereof the following new subparagraph:

'

a^usc «3'^"

"(C)

76 Stat. 824.

• I- ' ' o

TREATMENT OF TOTAL DISTRIBUTIONS.— "(1) APPLICATION OF SUBSECTION.— " (A) GENERAL RULE.—This subsection

' '

shall apply to

amounts— " (i) distributed to a distributee, in the case of an employees' trust described in section 401(a) which is exempt from tax under section 501(a), or "(ii) paid to a payee, in the case of an annuity plan described in section 403(a), if the total distributions or amounts payable to the distributee or payee with respect to an employee (including an individual who is an employee within the meaning of section 401(c)(1)) are paid to the distributee or payee wiliiin one taxable year 01 the distributee or payee, but only to the extent that section 402(a)(2) or 403(a)(2)(A) does not apply to such amounts. "(B)

LIMITATION ON CAPITAL GAINS TREATMENT.—Subpara-

graph (A) shall apply to a payment paid after December 31, 1969, only to the extent it does not exceed the sum of— "(1) the benefits accrued by the employee on behalf of whom it is paid during plan years beginning before January 1, 1970, and "(ii) the portion of the benefits accrued by such employee during plan years beginning after December 31, 1969, which the payee establishes does not consist of the employee's allocable share of employer contributions under the plan under which the annuity contract is purchased. The Secretary or his delegate shall prescribe such regulations as may be necessary to carry out the purposes of this subparagraph." (jj) LIMITATION ON TAX.—Section 72(n) (relating to treatment of certain distributions with respect to contributions by self-employed individuals) is amended— (1) by striking out so much thereof as precedes paragraph (2) and inserting m lieu thereof the following: " (n)

[33 g^

DISTRIBUTIONS TO WHICH APPLICABLE.—This subsec-

tion shall apply only to distributions or amounts paid— V.:^ 0 ! " (i) on account of the employee's death, " (ii) with respect to an individual who is an ©^^P'PP f^^n without regard to section 401(c)(1), on account 01 o» separation from the service,

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Page:United States Statutes at Large Volume 83.djvu/673

 83 STAT. ]

PUBLIC LAW 91-172-DEC. 30, 1969

" (iii) with respect to an employee "svithin the meaning of section 401(c)(1), after lie has attained the age of 591/2 years, or " (iv) with respect to an employee within the meaning of sectioji 401(c)(1), after he has become disibled (within the meaning of subsection (m)(7)). " (C) MINIMUM PERIOD or SERVICE.—This subsection shall apply to amounts distributed or paid to an employee from or under a plan only if he has been a participant in the plan for 5 or more taxable years prior to the taxable year in which such amounts are distributed or paid, " (D) AMOUNTS SUHJECT TO I^EXALTY.—This subsection shall not apply to amounts described in clauses (ii) and (iii) of subparagraph (A) of subsection (m)(5) (but, in the case of auiounts described in clause (ii) of such subparagraph, only to the extent that subsection (m)(5) applies to such amounts)."; and (2) by adding at the end thereof the following new paragraph: "(4)

645 26 USC 401.

SPECIAL RULE FOR EMPLOYEES WITHOUT REOARD TO SECTION

401(C) (IK—111 the case of amounts to which this subsection applies which are distributed or paid with respect to an individual who is an employee without regard to section 401(c)(1), paragraph (2) shall be applied with the following modifications: " (A) '7 times' shall be substituted for '5 times', and '14% percent' shall be substituted for '20 percent'. " (B) Any amount which is received during the taxable year by the employee as compensation (other than as deferred compensation within the meaning of section 404) for personal services performed for the employer in respcct of whom the amounts distributed or paid are received shall not be taken, into account. " (C) No portion of the total distributions or amounts payable (of which the amounts distributed or paid are a part) to which section 402(a)(2) or 403(a)(2)(A) applies shall be taken into account. Subparagraph (B) shall not apply if the employee has not attained the age of 591/^ years, unless he has died or become disabled (within the meaning of subsection (m)(7)). " (c)

TECHNICAL AND CONFORMING AMENDMENTS.—

(1) Section 405(e) (relating to capital gains treatment not to apply to bonds distributed by trusts) is amended—

76 Stat. 82 7.

(A)

by striking out "CAPITAL GAINS TREATMENT" in the heading and inserting in lieu thereof "CAPITAL GAINS TREATMENT AND LIMITATION OF T A X ";

(B) by striking out "Section 402(a)(2) " and inserting in lieu thereof "Section 72(n) and section 402(a)(2) "; and (C) by striking out "section" and inserting in lieu thereof "sections". (2) Section 400(c) (relating to termination of status as deemed employee not to be treated as separation from service for purposes of capital gain provisions) is amended— (A) by striking out "PROVISIONS." in the heading and inserting in lieu thereof "PROVISIONS AND LIMITATION OF TAX.'*; and

! i i. i n n n - 70 - 4S

''^ Stat. 59.

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Page:Tom Swift and His Airship.djvu/180

170 it had the advantage of concealing them from the persons below who might be on the lookout.

"For we don't want to be shot at again," explained Mr. Sharp. "It isn't altogether healthy, and not very safe. If we keep high up they can't see us; much less shoot at us. They'll take us for some big bird. Then, too, we can go faster."

"I suppose there will be another alarm sent out, from those negroes having sighted us," ventured Tom.

"Oh, yes, but those colored fellows were so excited they may describe us as having horns, hoofs and a tail, and their story may not be believed. I'm not worrying about them. My chief concern is to drive the Red Cloud for all she is worth. I want to explain some things back there in Shopton."

As if repenting of the way it had misbehaved over the forest fire, the airship was now swinging along at a rapid rate. Seated in the cabin the travelers would have really enjoyed the return trip had it not been for the accusation hanging over them. The weather was fine and clear, and as they skimmed along, now and then coming out from the clouds, they caught glimpses below them of the earth above which they were traveling. They had a general idea of their location, from knowing the town where the paper had given

title: Page:Tom Swift and His Airship.djvu/180


text:
Page:United States Statutes at Large Volume 83.djvu/674

 646

PUBLIC LAW 91-172-DEC. 30, 1969

26 USC 402. 78 Stat. 61.

[83 STAT.

(g) Ijy striking out "section 402(a)(2) " and inserting in lieu thereof "section 72(n), section 402(a)(2),". ^3^ Section 407(c) (relating to termination of status as deemed employee not to be treated as separation from service for purposes of capital gain provisions) is amended— (A)

by striking out "PROVISIONS." in the heading and inserting in lieu thereof "PROVISIONS AND LIMITATION OF T A X. "; and

78 Stat. 108.

68A Stat. 295;

" ^' ^'

•

(B) by striking out "section 402(a)(2) " and inserting in lieu thereof "section 72(n), section 402(a)(2),". (4) Section 1304(b)(2) (relating to certain provisions inapplicable) is amended to read as follows: "(2) section 72(n)(2) (relating to limitation of tax in case of total distribution),", (d) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years ending after December 31, 1969. SEC. 516. OTHER CHANGES IN CAPITAL GAINS TREATMENT. (a) SALES OF TERM INTERESTS.—Section 1001 (relating to determina-

tion of amount of and recognition of gain or loss) is amended by adding at the end thereof the following new subsection: " (e) CERTAIN TERM INTERESTS.—

^g2 USC 1014,

" (1) IN GENERAL.—In determining gain or loss from the sale or other disposition of a term interest in property, that portion of the adjusted basis of such interest which is determined pursuant to section 1014 or 1015 (to the extent that such adjusted basis is a portion of the entire adjusted basis of the property) shall be disregarded. " (2) TERM INTEREST I N PROPERTY DEFINED.—For purposes of

68A Stat. 325.

paragraph (1), the term 'term interest in property' means— " (A) a life interest in property, " (B) an interest in property for a term of years, or " (C) an income interest in a trust. "(3) EXCEPTION.—Paragraph (1) shall not apply to a sale or other disposition which is a part of a transaction in which the entire interest in property is transferred to any person or persons." (b) CERTAIN CASUALTY LOSSES UNDER SECTION 1231.—Section 1231 ^g^^ (relating to property used in the trade or business and involuntary conversions) is amended by striking out all that follows paragraph (1) and inserting in lieu thereof the following: "(2) losses (including losses not compensated for by insurance or otherwise) upon the destruction, in whole or in part, theft or seizure, or requisition or condemnation of (A) property used in the trade or business or (B) capital assets held for more than 6 months shall be considered losses from a compulsory or involuntary conversion. I n the case of any involuntary conversion (subject to the provisions of this subsection but for this sentence) arising from fire, storm, shipwreck, or other casualty, or from theft, of any property used in the trade or business or of any capital asset held for more than 6 months, this subsection shall not apply to such conversion (whether resulting in gain or loss) if during the taxable year the recognized losses from such conversions exceed the recognized gains from such conversions."

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Page:United States Statutes at Large Volume 83.djvu/675

 83 STAT. ] (c)

PUBLIC LAW 91-172-DEC. 30, 1969

647

TRANSFERS OF FRANCHISES, TRADEMARKS AND TRADE XAMES.—

(1) IN GENERAL.—Part IV of subchapter P of chapter 1 (relating to special rules for determining capital gains and losses) is amended by adding after section 1252 (added by section 214 of this Act) the following new section:

26 USC 12311252. Ante,

p. 572.

"SEC. 1253. TRANSFERS OF FRANCHISES, TRADEMARKS, AND TRADE NAMES.

''(a) GENERAL RULE.—A transfer of a franchise, trademark, or trade name shall not be treated as a sale or exchange of a capital asset if the transferor retains any significant powder, right, or continuing interest with respect to the subject matter of the franchise, trademark, or trade name. "(b) DEFINITIONS.—For purposes of this section— "(1) FRANCHISE.—The term "franchise" includes an agreement which gives one of the parties to the agreement the right to distribute,- sell, or provide goods, services, or facilities, within a specified area. "(2)

SIGNIFICANT POWER, RIGHT, OR CONTINUING INTEREST.—

The term 'significant power, right, or continuing interest' includes, but is not limited to, the following rights with respect to the interest transferred: " (A) A right to disapprove any assignment of such interest, or any part thereof. " (B) A right to terminate at will. " (C) A right to prescribe the standards of quality of products used or sold, or of services furnished, and of the equipment and facilities used to promote such products or services. " (D) A right to require that the transferee sell or advertise only products or services of the transferor. " (E) A right to require that the transferee purchase substantially all of his supplies and equipment from the transferor. " (F) A right to payments contingent on the productivity, use, or disposition of the subject matter of the interest transferred, if such payments constitute a substantial element under the transfer agreement. "(3) TRANSFER.—The term 'transfer' includes the renewal of a franchise, trademark, or trade name. "(c)

TREATMENT OF CONTINGENT PAYMENTS BY TRANSFEROR.—

Amounts received or accrued on account of a transfer, sale, or other disposition of a franchise, trademark, or trade name which are contingent on the productivity, use, or disposition of the franchise, trademark, or trade name transferred shall be treated as amounts received or accrued from the sale or other disposition of property which Is not a capital asset. "(d)

TREATMENT OF PAYMENTS BY TRANSFEREE.— "(1) CONTINGENT PAYMENTS.—Amounts paid or

incurred during the taxable year on account of a transfer, sale, or other disposition of a franchise, trademark, or trade name which are contingent on the productivity, use, or disposition of the franchise, trademark, or trade name transferred shall be allowed as a deduction under section 162(a) (relating to trade or business expenses). "(2) OTHER PAYMENTS.—If a transfer of a franchise, trademark, or trade name is not (by reason of the application of subsection (a)) treated as a sale or exchange of a capital asset, any

SSA Stat. 4s

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Page:United States Statutes at Large Volume 83.djvu/676

 648

PUBLIC LAW 91-172-DEC. 30, 1969

[83 STAT.

payment not described in paragraph (1) which is made in discharge of a principal sum agreed upon in the transfer agreement shall be allowed as a deduction— " (A) in the case of a single payment made in discharge of such principal sum, ratably over the taxable years in the period beginning with the taxable year in which the payment IS made and ending with the ninth succeeding taxable year or ending with the last taxable year beginning in the period of the transfer agreement, whichever period is shorter; " (B) in the case of a payment which is one of a series of approximately equal payments made in discharge of such prmcipal sum, which are payable over— "(i) the period of the transfer agreement, or "(ii) a period of more than 10 taxable years, whether ending before or after the end of the period of the transfer agreement, in the taxable year in which the payment is made; and " (C) in the case of any other payment, in the taxable year or years specified in regulations prescribed by the Secretary or his delegate, consistently with the preceding provisions of this paragraph. "(e) EXCEPTION.—This section shall not apply to the transfer of a franchise to engage in professional football, basketball, baseball, or other professional sport." (2) CONFORMING AMENDMENTS,—

P°^^'P-7io.

68A Stat. 299; '^^26 USC%i6.

Ante, p. 647.

(A) Section 162(h) (as redesignated by section 902) is amended by striking out "For" and inserting in lieu thereof "(1) For", and by adding at the end thereof the following: "(2) For special rule relating to the treatment of payments by a transferee of a franchise, trademark, or trade name, see section 1253." (B) Section 1016(a) (relating to adjustments to basis) is amended by striking out the period at the end of paragraph (21) and inserting in lieu thereof a semicolon, and by inserting after paragraph (21) the following new paragraph: " (22) for amounts allowed as deductions for payments made on account of transfers of franchises, trademarks, or trade names Under section 1253(d)(2)." (C) The table of sections for part IV of subchapter P of chapter 1 is amended by adding at the end thereof the following new item: "Sec. 1253. Transfers of franchises, trademarks, and trade names." (d) EFFECTIVE DATES.—

(1) The amendment made by subsection (a) shall apply to sales or other dispositions after October 9, 1969. (2) The amendment made by subsection (b) shall apply to taxable years beginning after December 31, 1969. (3) The amendments made by subsection (c) shall apply to transfers after December 31, 1969, except that section 1253(d)(1) of the Internal Revenue Code of 1954 (as added by subsection (c)) shall, at the election of the taxpayer (made at such time and in such manner as the Secretary or his delegate may by regulations prescribe), apply to transfers before January 1, 1970, but only with respect to payments made in taxable years ending after December 31, 1969, and beginning before January 1, 1980.

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text:
Page:United States Statutes at Large Volume 83.djvu/677

 83 STAT. ]

PUBLIC LAW 91-172-DEC. 30, 1969

649

Subtitle C—Real Estate Depreciation SEC. 521. DEPRECIATION OF REAL ESTATE. (a)

SECTION

1250

PROPERTY AND REHABILITATION

PROPERTY.—

Section 167 (relating to depreciation) is amended by redesignating subsection (j) as subsection (m), and by inserting after subsection (i) the following new subsections: •' (j) SPECIAL RULES FOR SECTION 1250 PROPERTY.— "(1) GENERAL RULE.—Except as provided in paragraphs (2)

and (3), in the case of section 1250 property, subsection (b) shall not apply and the term 'reasonable allowance' as used in subsection (a) shall include an allowance computed in accordance with regulations prescribed by the Secretary or his delegate, under any of the following methods: " (A) the straight line method, " (B) the declining balance method, using a rate not exceeding 150 percent of the rate which would have been used had the annual allowance been computed under the method described in subparagraph (A), or " (C) any other consistent method productive of an annual allowance which, when added to all allowances for the period commencing with the taxpayer's use of the property and including the taxable year, does not, during the first twothirds of the useful life of the property, exceed the total of such allowances which would have been used had such allowances been computed under the method described in subparagraph (B). Nothing in this paragraph shall be construed to limit or reduce an allowance otherwise allowable under subsection (a) except where allowable solely by reason of paragraph (2), (3), or (4) of subsection (b). "(2)

RESIDENTIAL RENTAL PROPERTY.—

" (A) IN GENERAL.—Paragraph (1) of this subsection shall not apply, and subsection (b) shall apply in any taxable year, to a building or structure— " (i) which is residential rental property located within the United States or any of its possessions, or located within a foreign country if a method of depreciation for such property comparable to the method provided in subsection (b)(2) or (3) is provided by the laws of such country, and "(ii) the original use of which commences with the taxpayer. I n the case of residential rental property located within a foreign country, the original use of which commences with the taxpayer, if the allowance for depreciation provided under the laws of such country for such property is greater than that provided under paragraph (1) of this subsection, but less than that provided under subsection (b), the allowance for depreciation under subsection (b) shall be limited to the amount provided under the laws of such country. " (B) DEFINITION.—For purposes of subparagraph (A)j a building or structure shall be considered to be residential rental property for any taxable year only if 80 percent or more of the gross rental income from such building or structure for such year is rental income from dwelling units (within the meaning of subsection (k)(3)(C)). For purposes of the preceding sentence, if any portion of such building or structure is occupied by the taxpayer, the gross rental

80 Stat. 1513; Ante, p. 625.

26 USC le?

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