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PUBLIC LAW 91-172-DEC. 30, 1969

563

" (2) Second, as a capital gain to the extent of the capital gain of the trust for the year and the undistributed capital gain of the trust for prior years; «(3) Third, as other income to the extent of such income of the trust for the year and such undistributed income of the trust for prior years; and " (4) Fourth, as a distribution of trust corpus. For purposes of this section, the trust shall determine the amount of its undistributed capital gain on a cumulative net basis. "(c) EXEMPTION FROM INCOME TAXES.—A charitable remainder annuity trust and a charitable remainder unitrust shall, for any taxable year, not be subject to any tax imposed by this subtitle, unless such trust, for such year, has unrelated business taxable income (within the meaning of section 512, determined as if part III of subchapter F ^"'e, pp. 537, applied to such t r u s t). " s, 492. "(d)

DEFINITIONS.— "(1) CHARITABLE REMAINDER ANNUITY TRUST.—For purposes

of this section, a charitable remainder annuity trust is a trust— " (A) from which a sum certain (which is not less than 5 percent of the initial net fair market value of all property placed in trust) is to be paid, not less often than annually, to one or more persons (at least one of which is not an organization described in section 170(c) and, in the case of individuals, only to an individual who is living at the time of the creation of the trust) for a term of years (not in excess of 20 years) or for the life or lives of such individual or individuals, " (B) from which no amount other than the payments described in subparagraph (A) may be paid to or for the use of any person other than an organization described in section 170(c), and " (C) following the termination of the payments described in subparagraph (A), the remainder interest in the trust is to be transferred to, or for the use of, an organization described in section 170(c) or is to be retained by the trust for such a use. "(2) CHARITABLE REMAINDER UNITRUST.—For purposes of this section, a charitable remainder unitrust is a trust— " (A) from which a fixed percentage (which is not less than 5 percent) of the net fair market value of its assets, valued annually, is to be paid, not less often than annually, to one or more persons (at least one of which is not an organization described in section 170(c) and, in the case of individuals, only to an individual who is living at the time of the creation of the trust) for a term of years (not in excess of 20 years) or for the life or lives of such individual or individuals, " (B) from which no amount other than the payments described in subparagraph (A) may be paid to or for the use of any person other than an organization described in section 170(c), and " (C) following the termination of the payments described in subparagraph (A), the remainder interest in the trust is to be transferred to, or for the use of, an organization described in section 170(c) or is to be retained by the trust for such a use. "(3) EXCEPTION.—Notwithstanding the provisions of paragraphs (2)(A) and (B), the trust instrument may provide that the trustee shall pay the income beneficiary for any year— " (A) the amount of the trust income, if such amount is less than the amount required to be distributed under paragraph (2)(A), and

^"'^' P- ^53.

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Page:United States Statutes at Large Volume 83.djvu/592

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PUBLIC LAW 91-172-DEC. 30, 1969

[33 s^^^

" (B) any amount of the trust income which is in excess of the amount required to be distributed under paragraph (2\ (A), to the extent that (by reason of subparagraph (A)) the aggregate of the amounts paid in prior years was less than the aggregate of such required amounts. "(e)

VALUATION FOR PURPOSES or CHARITABLE CONTRIBUTIGN.—.p^j.

purposes of determining the amount of any charitable contribution the remainder interest of a charitable remainder annuity trust or charitable remainder unitrust shall be computed on the basis that an amount equal to 5 percent of the net fair market v-alue of its assets (or a greater amount, if required under the terms of the trust instrument) is to be distributed each year." (2) The table of sections for subpart C of part I of subchapter J of chapter 1 (relating to estates and trusts which may accumulate income or which distribute corpus) is amended by adding at the end thereof: "Sec. 664. Charitable remainder trusts." 68A Stat. 296.

^£^ B A R G A I N S A L E S TO C H A R I T A B L E ORGANIZATIONS.

S e c t i o U 1011

(relating to adjusted basis for determining gain or loss) is amended— (1) by striking out "The" at the beginning and inserting in lieu thereof: " (a) GENERAL RULE.—The", and

Ante, p. 549.

(2) by adding at the end thereof the following new subsection: "(b) BARGAIN SALE TO A CHARITABLE ORGANIZATION.—If a deduc^JQJ^ jg allowable under section lYO (relating to charitable contributions) by reason of a sale, then the adjusted basis for determining the gain from such sale shall be that portion of the adjusted basis which bears the same ratio to the adjusted basis as the amount realized bears to the fair market value of the property." (g)

Post, p. 643.

Ante, p. 558.

,

EFFECTIVE DATES.—

(1)(A) Except as provided in subparagraphs (B) and (C),the amendments made by subsection (a) shall apply to taxable years beginning after December 31, 1969. (B) Subsections (e) and (f)(1) of section ITO of the Internal Revenue Code of 1954 (as amended by subsection (a)) shall apply to contributions paid after December 31, 1969, except that, with respect to a letter or memorandum or similar property described in section 1221(3) of such Code (as amended by section 514 of this Act), such subsection (e) shall apply to contributions paid after July 25, 1969. (C) Paragraphs (2), (3), and (4) of section 170(f) of such Code (as amended by subsection (a)) shall apply to transfers in trust and contributions made after July 31, 1969. (D) For purposes of applying section 170(d) of such Code (as amended by subsection (a)) with respect to contributions paid in a taxable year beginning before January 1, 1970, subsection (b)(1)(D), subsection (e), and paragraphs (1), (2), (3), and (4) of subsection (f) of section 170 of such Code shall not apply(2) The amendments made by subsection (b) shall apply with respect to amounts paid, permanently set aside, or to be used for a charitable purpose in taxable years beginning after December 31, 1969, except that section 642(c)(5) of the Internal Revenue Code of 1954 (as added by subsection (b)) shall apply to transfers in trust made after July 31, 1969. (3) The amendment made by subsection (c) shall apply *^ transfers in trust made after April 22, 1969.

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


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Page:United States Statutes at Large Volume 83.djvu/593

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PUBLIC LAW 91-172-DEC. 30, 1969

(4)(A) Except as provided in subparagraphs (B) and (C), the amendments made by paragraphs (1) and (2) of subsection (d) shall apply in the case of decedents dying after December 31, 1969. (B) ouch amendments shall not apply in the case of property passing under the terms of a will executed on or before October 9, 1969— (i) if the decedent dies before October 9, 1972, without having republished the will after October 9, 1969, by codicil or otherwise, (ii) if the decedent at no time after October 9, 1969, had the right to change the portions of the will which pertain to the passing of the property to, or for the use of, an organization described in section 2055(a), or (iii) if the will is not republished by codicil or otherwise before October 9, 1972, and the decedent is on such date and at all times thereafter under a mental disability to republish the will by codicil or otherwise. (C) Such amendments shall not apply in the case of property transferred in trust on or before October 9, 1969— (i) if the decedent dies before October 9, 1972, without having amended after October 9, 1969, the instrument governing the disposition of the property, (ii) if the property transferred was an irrevocable interest to, or for the use of, an organization described in section 2055 (a) J or (iii) if the instrument governing the disposition of the property was not amended by the decedent before October 9, 1972, and the decedent is on such date and at all times thereafter under a mental disability to change the disposition of theproperty. (D) The amendment made by paragraph (3) of subsection (d) shall apply to gifts made after December 31, 1969, except that the amendments made to section 2522(c)(2) of the Internal Revenue Code of 1954 shall apply to gifts made after July 31, 1969. (E) The amendments made by paragraph (4) of subsection (d) shall apply to gifts and transfers made after December 31, 1969. (5) The amendment made by subsection (e) shall apply to transfers in trust made after July 31, 1969. (6) The amendments made by subsection (f) shall apply with respect to sales made after December 19, 1969. (h)

ELIGIBILITY FOR UNLIMITED CHARITABLE DEDUCTION.—

(1) Section 1 7 0 (b)(1)(C) (relating to unlimited charitable deduction for certain individuals), as amended by subsection (a) of this section, is amended by adding at the end thereof the following new sentence: "In the case of a separate return for the taxable year by a married individual who previously filed a joint return with a former deceased spouse for any of the 10 preceding ta,xable years, the amount of charitable contributions and taxes paid for any such preceding taxable year, for which a joint return was filed with the former deceased spouse, shall be determined in the same manner as if the taxpayer had not remarried after the death of such former spouse." (2) The amendment made by this subsection shall apply to taxable years beginning after December 31, 1968.

31-100 O - 7 0 - 38

565

^^te, p. se i.

Ante,

p. 561.

Ante,

p. 549,

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Page:United States Statutes at Large Volume 83.djvu/594

 566

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[33 STAT

Subtitle B—Farm Losses, Etc. SEC. 211. GAIN FROM DISPOSITION OF PROPERTY USED IN FARMlNr WHERE FARM LOSSES OFFSET NONFARM INCOME. 68A Stat. 325. 26 USC 1231.

(a) IN GENERAL.—Part IV of subchapter P of chapter 1 (relatingto special rules for determining capital gains and losses) is amended by adding at the end thereof the following new section: "SEC. 1251. GAIN FROM DISPOSITION OF PROPERTY USED IN FARMING WHERE FARM LOSSES OFFSET NONFARM INCOME. " (a) CIRCUMSTANCES UNDER W H I C H SECTION APPLIES.—This section

shall apply with respect to any taxable year only if— " (1) there is a farm net loss for the taxable year, or " (2) there is a balance in the excess deductions account as of the close of the taxable year after applying subsection (b)(3)(A). " (b) EXCESS DEDUCTIONS ACCOUNT.—

" (1) REQUIREMENT.—Each taxpayer subject to this section shall for purposes of this section, establish and maintain an excess deductions account. " (2) ADDITIONS TO ACCOUNT.— " (A) GENERAL RULE.—There shall be added to the excess

72 Stat. 1650. 26 USC 1371.

deductions account for each taxable year an amount equal to the farm net loss. " (B) EXCEPTIONS.—In the case of an individual (other than a trust) and, except as provided in this subparagraph, in the case of an electing small business corporation (as defined in section 1371(b)), subparagraph (A) shall apply for a taxable year— "(i) only if the taxpayers nonfarm adjusted gross income for such year exceeds $50,000, and " (ii) only to the extent the taxpayer's farm net loss for such year exceeds $25,000. This subparagraph shall not apply to an electing small business corporation for a taxable year if on any day of such year a shareholder of such corporation is an individual who, for his taxable year with which or within which the taxable year of the corporation ends, has a farm net loss. " (C) MARRIED INDIVIDUALS.—In the case of a husband or wife who files a separate return, the amount specified in subparagraph (B)(i) shall be $25,000 in lieu of $50,000, and in subparagraph (B) (ii) shall be $12,500 in lieu of $25,000. This subparagraph shall not apply if the spouse of the taxpayer does not have any nonfarm adjusted gross income for the taxable year. " (D) NONFARM ADJUSTED GROSS INCOME.—For purposes of

this section, the term 'nonfarm adjusted gross income' means adjusted gross income (taxable income, in the case of an electing small business corporation) computed without regard to income or deductions attributable to the business of farming. "(3) SUBTRACTIONS FROM ACCOUNT.—If there is any amount m the excess deductions account at the close of any taxable year (determined before any amount is subtracted under this paragraph for such year) there shall be subtracted from the accountr-" (A) an amount equal to the farm net income for such year, plus the amount (determined as provided in regulations prescribed by the Secretary or his delegate) necessary to adjust the account for deductions which a i d not result in a reduction of the taxpayer's tax under this subtitle for the taxable year or any preceding taxable year, and

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Page:United States Statutes at Large Volume 83.djvu/595

 83 STAT. ]

PUBLIC LAW 91-172-DEC. 30, 1969

" (B) after applying paragraph (2) or subparagraph (A) of this paragraph (as the case may be), an amount equal to the sum of the amounts treated, solely by reason of the application of subsection (c), as gain from the sale or exchange of property which is neither a capital asset nor property described in section 1231. "(4)

EXCEPTION FOR TAXPAYERS USING CERTAIN ACCOUNTING

567

esA Stat. 325. 26 USC 1231.

METHODS.—

" (A) GENERAL, RULE.—Except to the extent that the taxpayer has succeeded to an excess deductions account as provided in paragraph (5), additions to the excess deductions account shall not be required by a taxpayer who elects to compute taxable income from farming (i) by using inventories, and (ii) by charging to capital account all expenditures paid or incurred which are properly chargeable to capital account (including such expenditures which the taxpayer may, under this chapter or regulations prescribed thereunder, otherwise treat or elect to treat as expenditures which are not chargeable to capital account). " (B) T I M E, MANNER, AND EFFECT or ELECTION.—An election under subparagraph (A) for any taxable year shall be filed within the time prescribed by law (including extensions thereof) for filing the return for such taxable year, and shall be made and filed in such manner as the Secretary or his delegate shall prescribe by regulations. Such election shall be binding on the taxpayer for such taxable year and for all subsequent taxable years and may not be revoked except with the consent of the Secretary or his delegate. " (C) CHANGE or METHOD or ACCOUNTING, ETC.—If, in order to comply with the election made under subparagraph (A), a taxpayer changes his method of accounting in computing taxable income from the business of farming, such change shall be treated as having been made with the consent of the Secretary or his delegate and for purposes of section 481(a)(2) shall be treated as a change not initiated by the taxpayer. ''(5)

72 Stat. 1626.

TRANSFER OF ACCOUNT.— " (A) CERTAIN CORPORATE TRANSACTIONS.—In the case of

a transfer described in subsection (d)(3) to which section 371 (a), 374 (a), or 381 applies, the acquiring corporation shall 68A Stat. 121, succeed to and take into account as of the close of the day of i^^jro Stat. 402. distribution or transfer, the excess deductions account of the transferor. "(B)

CERTAIN GIFTS.—If—

" (i) farm recapture property is disposed of by gift, and "(ii) the potential gain (as defined in subsection (e) (5)) on farm recapture property disposed of by gift during any one-year period in which any such gift occurs is more than 25 percent of the potential gain on farm recapture property held by the donor immediately prior to the first of such gifts, each donee of the property shall succeed (at the time the first of such gifts is made, but in an amount determined as of the close of the donor's taxable year in which the first of such gifts is made) to the same proportion of the donor's excess deductions account (determined, after the application of paragraphs (2) and (3)

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Page:United States Statutes at Large Volume 83.djvu/596

 568

Post, 676.

PUBLIC LAW 91-172-DEC. 30, 1%9

p p. 675,

with respect to the donor, as of the close of such taxable year) as the potential gain on the property received by such donee beai^j to the aggregate potential gain on farm recapture property held by the donor immediately prior to the first of such gifts. "(6) JOINT RETURN.—In the case of an addition to an excess deductions account for a taxable year for which a joint return was filed under section 6013, for any subsequent taxable year for which a separate return was filed the Secretary or his delegate shall provide rules for allocating any remaining amount of such addition in a manner consistent with the purposes of this section. "(c)

68A Stat. 325. 26 USC 1231. o^ T c^ 10,, Tr

[33 STAT

ORDINARY INCOME.— "(1) GENERAL RULE.—Except as otherwise provided in this

section, if farm recapture property (as defined in subsection (e)(1)) is disposed of during a taxable year beginning after December 31, 1969, the amount by which— " (A) in the case of a sale, exchange, or involuntary conversion, the amount realized, or " (B) in the case of any other disposition, the fair market value of such property, exceeds the adjusted basis of such property shall be treated as gain from the sale or exchange of property which is neither a capital assct uor property described in section 1231. Such gain shall be recognized notwithstanding any other provision of this subtitle. "(2)

LIMITATION.— " (A) AMOUNT I N

EXCESS

DEDUCTIONS

ACCOUNT.—The

aggregate of the amounts treated under paragraph (1) as gain from the sale or exchange of property which is neither a capital asset nor property described in section 1231 for any taxable year shall not exceed the amount in the excess deductions account at the close of the taxable year after applying subsection (b)(3)(A). "(B)

DISPOSITIONS TAKEN INTO ACCOUNT.—If the aggregate

of the amounts to which paragraph (1) applies is limited by the application of subparagraph (A), paragraph (1) shall apply in respect of such dispositions (and in such amounts) as provided under regulations prescribed by the Secretary or his delegate. " (C) SPECIAL RULE FOR DISPOSITIONS OF LAND.—In applying subparagraph (A), any gain on the sale or exchange of land shall be taken into account only to the extent of its potential gain (as defined in subsection (e)(5)). " (d)

68A Stat. 102121; 70 Stat. 402.

68A Stat. 176.

EXCEPTIONS AND SPECIAL RULES.—

" (1) GIFTS.—Subsection (c) shall not apply to a disposition by gift. "(2) TRANSFER AT DEATH.—Except as provided in section 691 (relating to income in respect of a decedent), subsection (c) shall not apply to a transfer at death. "(3) CERTAIN CORPORATE TRANSACTIONS.—If the basis of property in the hands of a transferee is determined by reference to its basis in the hands of the transferor by reason of the application of sections 332, 351, 361, 371(a), or 374(a), then the amount of gain taken into account by the transferor under subsection (c)(1) shall not exceed the amount of gain recognized to the transferor on the transfer of such property (determined without regard to this section). This paragraph shall not apply to a disposition to an organization (other than a cooperative described in section 5^1) which Is excmpt from the tax imposed by this chapter.

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164 and capture it. I don't want to be arrested, even if I am innocent, and I certainly don't want the airship to fall into the hands of the police. They might damage it."

"We must go see Mr. Sharp," declared Mr. Damon, and back to where the Red Cloud was concealed they went.

To say that the balloonist was astonished is putting it mildly. He was even more excited than was Mr. Damon.

"Wait until I get hold of that Andy Foger!" he cried. "I'll make him sweat for this! I see he's already laid claim to the reward," he added, reading further along in the article. "He thinks he has put the police on our trail."

"So he seems to have done," added Tom. "The whole country has been notified to look out for us," the paper says. "We're likely to be fired upon whenever we pass over a city or a town."

"Then we'll have to avoid them," declared the balloonist.

"But we must go back," declared Tom.

"Of course. Back to be vindicated. We'll have to give up our trip. My, my! But this is a surprise!"

"I don't see what makes Andy say he saw me with burglar tools," commented Tom, with a puzzled air.

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text:
Page:United States Statutes at Large Volume 83.djvu/597

 PUBLIC LAW 91-172-DEC. 30, 1969

63 STAT.1

569

" (4) LiBa: KIND EXCHANGES; INVOLUNTARY CONVERSION, E T C. —

If property is disposed of and gain (determined without regard to this section) is not recognized in whole or in part under section Stat. 302. 1031 or 1033, then the amount of gain taken into account by the 68Au s e 1031, 26 transferor under subsection (c)(1) shall not exceed the sum of— 1033. " (A) the amount of gain recognized on such disposition (determined without regard to this section), plus " (B) the fair market value of property acquired with respect to which no gain is recognized under subparagraph (A), but which is not farm recapture property. "(5)

PARTNERSHIPS.—

" (A) IN GENERAL.—In the case of a partnership, each partner shall take into account separately his distributive share of the partnership's farm net losses, gains from dispositions of farm recapture property, and other items in applying this section to the partner. " (B) TRANSFERS TO PARTNERSHIPS.—If farm recapture property is contributed to a partnership and gain (determined without regard to this section) is not recognized under section 721, then the amount of gain taken into account by the transferor under subsection (c)(1) shall not exceed the excess of the fair market value of farm recapture property transferred over the fair market value of the partnership interest attributable to such property. If the partnership agreement provides for an allocation of gain to the contributing partner with respect to farm recapture property contributed to the partnership (as provided in section 704(c)(2)), the partnership interest of the contributing partner shall be deemed to be attributable to such property. "(6)

PROPERTY TRANSFERRED TO CONTROLLED CORPORATIONS.—

Except for transactions described in subsection (b)(5)(A), in the case of a transfer, described in paragraph (3), of farm recapture property to a corporation, stock or securities received by a transferor in the exchange shall be farm recapture property to the extent attributable to the fair market value of farm recapture property (or, in the case of land, if less, the adjusted basis plus the potential gain (as defined in subsection (e)(5)) on farm recapture property) contributed to the corporation by such transferor. " (e) DEFINITIONS.—For purposes of this section— "(1) FARM RECAPTURE PROPERTY.—The term 'farm recapture property' means— " (A) any property (other than section 1250 property) described in paragraph (1) (relating to business property held for more than 6 months), (3) (relating to livestock), or (4) (relating to an unharvested crop) of section 1231(b) which is or has been used in the trade or business of farming by the taxpayer or by a transferor in a transaction described in subsection (b)(5), and " (B) any property the basis of which in the hands of the taxpayer is determined with reference to the adjusted basis of property which was farm recapture property in the hands of the taxpayer within the meaning of subparagraph (A). "(2) FARM NET LOSS.—The term 'farm net loss' means the amount by which— " (A) the deductions allowed or allowable by this chapter which are directly connected wnth the carrying on of the trade or business of farming, exceed

26 USC 721.

26 USC 704.

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Page:United States Statutes at Large Volume 83.djvu/598

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PUBLIC LAW 91-172-DEC. 30, 1969

[83 STAT.

" (B) the gross income derived from such trade or business Gains and losses on the disposition of farm recapture property referred to in section 1231(a) (determined without regard to th^ section or section 1245(a)) shall not be taken into account. "(3) FARM NET INCOME.—The term 'farm net income' means the amount by which the amount referred to in paragraph (2) (B\ exceeds the amount referred to in paragraph (2)(A).

Post, p. 646. Post, p. 571.

it

" (4) TRADE OR BUSINESS OF FARMING.— " (A) HORSE RACING.—In the case of a taxpayer engaged

 * f

in the raising of horses, the term 'trade or business of farming' includes the racing of horses. " (B) SEVERAL BUSINESSES OF FARMING.—If a taxpayer is

engaged in more than one trade or business of farming all such trades and businesses shall be treated as one trade or business. "(5) POTENTIAL GAIN.—The term 'potential gain' means an amount equal to the excess of the fair market value of property over its adjusted basis, but limited in the case of land to the extent of the deductions allowable in respect to such land under sections ^"^^ (relating to soil and water conservation expenditures) and 182 (relating to expenditures by farmers for clearing land) for the taxable year and the 4 preceding taxable years."

ll%l^c\7V' 76 Stat. 1063.

(b) CONFORMING AMENDMENTS.—

(1) Section 301(b)(1)(B) (ii) (relating to corporate distributions of property) is amended by striking out "or 1250(a)" and inserting in lieu thereof "1250(a), 1251(c), or 1252(a)". (2) Section 301(d)(2)(B) (relating to the basis of property distributed by a corporation) is amended by striking out "or 1250(a)" and inserting in lieu thereof "1250(a), 1251(c), or 1252(a)". (3) Section 312(c)(3) (relating to adjustment to corporate earnings and profits) is amended by striking out "or 1250 (a)" and inserting in lieu thereof "1250 (a),1251 (c), or 1252 (a) ". (4) Section 341(e) (12) (relating to nonapplication of section 1245(a) with respect to collapsible corporations) is amended by striking out "and 1250(a)" and inserting in lieu thereof "1250(a), 1251(c), and 1252(a)". (5) Section 453(d)(4)(B) (relating to distribution of installment obligations under certain liquidations) is amended by striking out "or 1250(a)" and inserting in lieu thereof "1250(a), 1251 (c), or 1252(a)". (6) Section 751(c) (relating to unrealized receivables in partnership transactions) is amended by striking out "and section 1250 property (as defined in section 1250(c))" and inserting in lieu thereof "section 1250 property (as defined in section 1250(c)), farm recapture property (as defined in section 1251(e)(1))? ^^^ farm land (as defined in section 1252(a))"; and by striking out "1250(a)" and inserting in lieu thereof "1250(a), 1251(c), or 1252(a)". (7) The table of sections for part IV of subchapter P of chapter 1 is amended by adding at the end thereof the following: '

"Sec. 1251. Gain from disposition of property used in farming where farm losses offset nonfarm income." (c) EFFECTIVE DATES.—The amendments made by this section shall

apply to taxable years beginning after December 31, 1969.

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Page:United States Statutes at Large Volume 83.djvu/599

 83 STAT. ]

PUBLIC LAW 91-172-DEC. 30, 1969

571

SEC. 212. LIVESTOCK. (a) DEPRECIATIOX RECAPTURE.— (1) GENERAL RULE.—Section 1245(a)(2)

(relating to recomputed basis with respect to gain from disposition of certain depreciable property) is amended by striking out "or" at the end of subparagraph (A), and by inserting immediately after subparagraph (B) the following: " (C) with respect to livestock, its adjusted basis recomputed by adding thereto all adjustments attributable to periods after December 31, 1969, or". (2) CONFORMING AMENDMENT.—Section 1245(a)(3) (relating to section 1245 property) is amended by striking out " (other than livestock)". (3) EFFECTIVE DATE.—The amendments made by paragraphs (1) and (2) shall apply with respect to taxable years begmning after December 31, 1969.

(b) LIVESTOCK U S E D I N TRADE OR B U S I N E S S. — (1) AMENDMENT OF SECTION 1231.—Section 1231(b)(3) (relat-

76 Stat. 1032. Je'usc'u^s

68A Stat. 325.

ing to property used in a trade or business) is amended to read as follows: " (3) LIVESTOCK.—Such term includes— " (A) cattle and horses, regardless of age, held by the taxpayer for draft, breeding, dairy, or sporting purposes, and held by him for 24 months or more from the date of acquisition, and " (B) other livestock, regardless of age, held by the taxpayer for draft, breeding, dairy, or sporting purposes, and held by him for 12 months or more from the date of acquisiti(m. Such term does not include poultry." (2) EFFPX'TIVE DATE.-—llie amendments made by paragraph (1) shall apply to livestock acquired after December 31, 1969. (c) EXCHANGES OF LIVESTOCK OF DIFFERENT SEXES.— (1) NOT TO BE TREATED AS LIKE KIND EXCHANGES.—Section 1031

26^sc?*io3°i^"

(relating to exchange of property held for productive use or for investment) is amended by adding at the end thereof the following new subsection: "(e) EXCHANGES OF LIVESTOCK OF DIFFERENT SEXES.—For purposes of this section, livestock of different sexes are not property of a like kind." (2) EFFECTIVE DATE.—The amendment made by paragraph (1) shall apply to taxable years to which the Internal Revenue Code of 1954 applies. SEC. 213. DEDUCTIONS ATTRIBUTABLE TO ACTIVITIES NOT ENGAGED IN FOR PROFIT. 26 . (a) GENERAL RULE. — Part VI of subchapter B of chapter 1 (relat- 182. u s e 161ing to itemized deductions for individuals and corporations) is amended by adding at the end thereof the following new section: "SEC. 183. ACTIVITIES NOT ENGAGED IN FOR PROFIT. . "(a) GENERAL RULE. — I n the case of an activity engaged in by an individual or an electing small business corporation (as defined in section 1371(b)), if such activity is not engaged in for profit, no deduction attributable to such activity shall be allowed under this chapter ^^fPt as provided in this section. (b) DEDUCTIONS ALLOWABLE.—In the case of an activity not engaged in for profit to which subsection (a) applies, there shall be allowed—

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Page:United States Statutes at Large Volume 83.djvu/600

 572

PUBLIC LAW 91-172-DEC. 30, 1%9

[83STAT

"(1) the deductions which would be allowable under this chapter for the taxable year without regard to whether or not such activity is engaged in for profit, and "(2) a deduction equal to the amount of the deductions which would be allowable under this chapter for the taxable year only if such activity were engaged in for profit, but only to the extent that the gross income derived from such activity for the taxable year exceeds the deductions allowable by reason of paragraph (1). "(c)

Post, p. 710. 68A Stat. 69.

K^p^ai-

ACTIVITY NOT ENGAGED I N FOR PROFIT DEFINED.—For pm-i

poses of this section, the term 'activity not engaged in for profit' means any activity other than one with respect to which deductions are allowable for the taxable year under section 162 or under para^^aph (1) or (2) of section 212. " (d) PRESUMPTION.—If the gross income derived from an activity for 2 or more of the taxable years in the period of 5 consecutive taxable years which ends with the taxable year exceeds the deductions attributable to such activity (determined without regard to whether or not such activity is engaged in for profit), then, unless the Secretary or his delegate establishes to the contrary, such activity shall be presumed for purposes of this chapter for such taxable year to be an activity engaged in for profit. I n the case of an activity which consists in major part of the breeding, training, showing, or racing of horses, the preceding sentence shall be applied by substituting the period of 7 consecutive taxable years for the period of 5 consecutive taxable years." (b) TECHNICAL AMENDMENT.—Section 270 (relating to limitation on deductions allowable to certain individuals) is repealed. (c) CLERICAL AMENDMENTS.—

(1) The table of sections for part VI of subchapter B of chapter 1 is amended by adding at the end thereof the following new item: "Sec. 183. Activities not engaged in for profit"

Ante, p. 566.

(2) The table of sections for part IX of subchapter B of chapter 1 is amended by striking out the item relating to section 270. (3) Section 6504 (relating to cross references) is amended by striking out the item relating to section 270. (d) EFFECTIA'F: DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 1969. SEC. 214. GAIN FROM DISPOSITION OF FARM LAND. (a) 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 1251 (added by section 211 of this Act) the following new section: "SEC. 1252. GAIN FROM DISPOSITION OF FARM LAND. "(a)

26^?c*i7y.' 76 Stat. 1063.

GENERAL RULE. — "(1) ORDINARY INCOME.—Except as otherwise provided in this

section, if farm land which the taxpayer has held for less than 10 years is disposed of during a taxable year beginning after December 31, 1969, the lower of— 1 " (A) the applicable percentage of the aggregate of the mttm deductions allowed under sections 175 (relating to soil and ' watcr conservation expenditures) and 182 (relating to expenditures by farmers for clearing land) for expenditures made by the taxpayer after December 31, 1969, with respect to the farm land or ia,.,

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PUBLIC LAW 91-172-DEC. 30, 1969

573

" (B) the excess of— " (i) the amount realized (in the case of a sale, exchange, or involuntary conversion), or the fair market value of the farm land (in the case of any other disposition), over " (ii) the adjusted basis of such land, shall be treated as gain from the sale or exchange of property which is neither a capital asset nor property described in section 1231. Such gain shall be recognized notwithstanding anv other provision of this subtitle, except that this section shall not apply to the extent section 1251 applies to such gain. "(2) FARMLAND.—For purposes of this section, the term ' f a r m land' means any land with respect to which deductions have been allowed under sections 175 (relating to soil and water conservation expenditures) or 182 (relating to expenditures by farmers for clearing land). "(3) APPLICABLE PERCENTAGE.—For purposes of this section— "If the farm land is disposed of—

^

^^A Stat. 325. ^^ ^^^ ^^^^' ^"'e, p. see.

'^ ^*^*- ^o^^.

The applicable percentage is—

Within 5 years after the date it was acquired 100 percent. Within the sixth year after it was acquired 80 percent. Within the seventh year after it was acquired 60 percent. Within the eighth year after it was acquired 40 percent. Within the ninth year after it was acquired 20 percent. 10 years or more years after it was acquired 0 percent. "(b) SPECIAL RULES.—Under regulations prescribed by the Secretary or his delegate, rules similar to the rules of section 1245 shall be applied for purposes of this section." (b) CLERICAL AMENDMENT.—The table of sections for part IV of subchapter P of chapter 1 is amended by adding at the end thereof the following:

Ante, p. 5 7 1.

"Sec. 1252. Gain from the disposition of farm land."

(c) EEFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 1969. SEC. 215. CROP INSURANCE PROCEEDS. (a) YEAR I N W H I C H INCLUDED I N INCOME.—Section 451 (relating 79^|fat?382^^^'

to general rule for taxable year of inclusion) is amended by adding at the end thereof the following new subsection: "(d) SPECIAL RULE FOR CROP INSURANCE PROCEEDS,—In the case of insurance proceeds received as a result of destruction or damage to crops, a taxpayer reporting on the cash receipts and disbursements method of accounting may elect to include such proceeds in income for the taxable year following the taxable year of destruction or damage, if he establishes that, under his practice, income from such crops would have been reported in a following taxable year. An election under this subsection for any taxable year shall be made at such time and in such manner as the Secretary or his delegate prescribes." (b) EEFECTIVE DATE.—The amendment made by subsection (a) shall apply to taxable years ending after the date of the enactment of this Act. SEC. 216. CAPITALIZATION OF COSTS OF PLANTING AND DEVELOPING CITRUS GROVES. (a) REQUIREMENT OF CAPITALIZATION.—Part IX of subchapter B of chapter 1 (relating to items not deductible) is amended by adding after section 277 (added by section 121(b)(3) of this Act) the following new section:

^^e. p. 540.

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Page:United States Statutes at Large Volume 83.djvu/602

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,

PUBLIC LAW 91-172-DEC. 30, 1969

H

[83

STAT.

"SEC. 278. CAPITAL EXPENDITURES INCURRED IN PLANTING AXD np VELOPING CITRUS GROVES. "*" (a) GbrNERAL RULE,—Except as provided in subsection (b) anv amount (allowable as a deduction without regard to this section) which is attributable to the planting, cultivation, maintenance or development of any citrus grove (or part thereof), and which is incurred before the close of the fourth taxable year beginning with the taxable year in which the trees were planted, shall be charged to capital account. For purposes of the preceding sentence, the portion of a citrus grove planted in one taxable year shall be treated separately from the portion of such grove planted in another taxable year. " (b) EXCEPTIONS.—Subsection (a) shall not apply to amounts allowable as deductions (without regard to this section), and attributable to a citrus grove (or part thereof) which was: "(1) replanted after having been lost or damaged (while in the hands of the taxpayer), by reason of freeze, disease, drought, pests or casualty, or " (2) planted or replanted prior to the enactment of this section." (b) CLERICAL AMENDMENT.—The table of sections for such part IX is amended by adding at the end thereof the following new item: "Sec. 278. Capital expenditures incurred in planting and developing citrus groves."

(c) Eri^CTiVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 1969. Subtitle C—Interest SEC. 221. INTEREST. (a) L I M I T A T I O N ON I N T E R E S T DEDUCTION ATTRIBUTABLE TO INVEST-

68A Stat. 46; 26 USC'i63.

]\iENT INDEBTEDNESS.—Section 163 (relating to interest) is amended by redesignating subsection (d) as (e), and by inserting after subsection (c) the following new subsection: "(d)

LIMITATION ON INTEREST ON INVESTMENT INDEBTEDNESS.—

" (1) IN GENERAL.—In the case of a taxpayer other than a corporation, the amount of investment interest (as defined in paragraph (3)(D)) otherwise allowable as a deduction under this chapter shall be limited, in the following order, to— " (A) $25,000 ($12,500, in the case of a separate return by a married individual), plus " (B) the amount of the net investment income (as defined in paragraph (3)(A)), plus " (C) an amount equal to the amount by which the net long-term capital gain exceeds the net short-term capital loss for the taxable year, plus " (D) one-half of the amount by which investment interest exceeds the sum of the amounts described in subparagraphs (A),(B),and(C). . I n the case of a trust, the $25,000 amount specified in subparagraph (A) and in paragraph (2)(A) shall be zero. In determining the amount described in subparagraph (C), only gains and losses attributable to the disposition of property held for investment shall be taken into account. " (2) C A R R Y O V E R OF D I S A L L O W E D INVESTMENT INTEREST.—

"(A) interest interest amount

IN GENERAL.—The amouut of disallowed investment for any taxable year shall be treated as investment paid or accrued in the succeeding taxable year. The of the interest so treated which is allowable as a

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PUBLIC LAW 91-172-DEC. 30, 1969

575

deduction by reason of the first sentence of this paragraph for any taxable year shall not exceed one-half of the amount by which— "(i) the net investment income for such taxable year plus $25,000, exceeds "(ii) the investment interest paid or accrued during such taxable year (determined without regard to this paragraph) or $25,000, whichever is greater. "(B)

REDUCTIOlSr FOR CAPITAL GAIN DEDUCTION.

If—

"(i) an amount of disallowed investment interest treated under subparagraph (A) as investment interest paid or accrued in the taxable year is not allowable as a deduction for such taxable year by reason of the second sentence of subparagraph (A), and "(ii) the taxpayer is entitled to a deduction under section 1202 for such taxable year (whether or not the taxpayer claims such deduction), the amount of such disallowed investment interest shall be reduced by an amount equal to the amount of the deduction allowable under section 1202. "(3) DEFINITIONS.—For purposes of this subsection— " (A) N E T INVESTMENT INCOME.—The term 'net investment income' means the excess of investment income over investment expenses. " ^

"(^)

68A Stat. 320. ^e use 1202,

INVESTMENT INCOME.—The term 'investment income'

means— " (i) the gross income from interest, dividends, rents, and royalties, " (ii) the net short-term capital gain attributable to the disposition of property held for investment, and "(iii) any amount treated under sections 1245 and 76 Stat. 1032. 1250 as gain from the sale or exchange of property which Post. p. 6S2. is neither a capital asset nor property described in section 1231, 68A Stat. 325. but only to the extent such income, gain, and amounts are not derived from the conduct of a trade or business. "(C) INVESTMENT EXPENSES.—The term 'investment expenses' means the deductions allowable under sections 164(a) (1) or (2), 166, 167, 171, 212, or 611 directly connected with ^J^ 1,'^^-^^I^QJ the production of investment income. For purposes of this subparagraph, the deduction allowable under section 167 with Post, pp. 625, respect to any property may be treated as the amount which 649. would have been allowable had the taxpayer depreciated the property under the straight line method for each taxable year of its useful life for which the taxpayer has held the property, and the deduction allowable under section 611 with respect to any property may be treated as the amount which would have been allowable had the taxpayer determined the deduction under section 611 without regard to section 613 for each tax- _^°^^' PP- ^29, 630. able year for which the taxpayer has held the property. " (D) INVESTMENT INTEREST.—The term 'investment interest' means interest paid or accrued on indebtedness incurred or continued to purchase or carry property held for investment. " (E) DISALLOWED IN%TESTMENT INTEREST.—The term 'disallowed investment interest' means with respect to any taxable year, the amount not allowable as a deduction solely by reason of the limitations in paragraphs (1) and (2)(A).

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Page:United States Statutes at Large Volume 83.djvu/604

 576

PUBLIC LAW 91-172-DEC. 30, 1969 "(4)

Post, p. 710. •

SPECIAL RULES.— " (A) PROPERTY SUBJECT TO NET LEASE.—For purposes of

this subsection, property subject to a lease shall be treated as property held for investment, and not as property used in a trade or business, for a taxable year, if— "(i) for such taxable year the sum of the deductions with respect to such property which are allowable solely by reason of section 162 is less than 15 percent of the rental income produced by such property, or "(ii) the lessor is either guaranteed a specified return or is guaranteed in whole or m part against loss of income " (B) PARTNERSHIPS.—In the case of a partnership, each partner shall, under regulations prescribed by the Secretary or his delegate, take into account separately his distributive share of the partnership's investment interest and the other items of income and expense taken into account under this subsection. "(C)

26 USC m? "

Post, p. 635. 68A Stat. 320. Post, p. 581.

26 USC 1231.

[33 3^.^^

S H A R E H O L D E R S o r ELECTING SMALL BUSINESS CORPORA-

TioNS.—In the case of an electing small business corporation ^^^ defined in section 1371(b)), the investment interest paid or accrued by such corporation and the other items of income and expense which would be taken into account if this subsection applied to such corporation shall, under regulations prescribed by the Secretary or his delegate, be treated as investment interest paid or accrued by the shareholders of such corporation and as items of such shareholders, and shall be apportioned pro rata among such shareholders in a manner consistent with section 1374(c)(1). " (D) CONSTRUCTION INTEREST.—For purposes of this subsection, interest paid or accrued on indebtedness incurred or continued in the construction of property to be used in a trade or business shall not be treated as investment interest. "(5) CAPITAL GAINS.—For purposes of sections 1201(b) (relat[^g ^Q alternative capital gains tax), 1202 (relating to deduction fQj. capital gains), and 57(a)(9) (relating to treatment of capital gains as a tax preference), an amount equal to the amount of investment interest which is allowable as a deduction under this chapter by reason of subparagraph (C) of paragraph (1) shall be treated as gain from the sale or other disposition of property which is neither a capital asset nor property described in section 1231. " (6) EXCEPTIONS.—This subsection shall not apply with respect to investment interest, investment income, and investment expenses attributable to a specific item of property, if the indebtedness with respect to such property— " (A) is for a specified term, and " (B) was incurred before December 17, 1969, or is incurred after December 16, 1969, pursuant to a written contract or commitment which, on such date and at all times thereafter prior to the incurring of such indebtedness, is binding on the taxpayer." (b) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 1971.

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Page:United States Statutes at Large Volume 83.djvu/605

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PUBLIC LAW 91-172-DEC. 30, 1969

577

Subtitle D—Moving Expenses SEC. 231. MOVING EXPENSES. (a) DEDUCTION FOR MOVING EXPENSES.—Section 217 (relating to

moving expenses) is amended to read as follows: «SEC. 217. MOVING EXPENSES. "(a) DEDUCTION ALLOWED.—There shall be allowed as a deduction moving expenses paid or incurred during the taxable year in connection with the commencement of work by the taxpayer as an employee or as a self-employed individual at a new principal place of work. "(b) DEFINITION OF MOVING EXPENSES.—

"(1) IN GENERAL.—For purposes of this section, the term 'moving expenses' means only the reasonable expenses— " (A) of moving household goods and personal effects from the former residence to the new residence, " (B) of traveling (including meals and lodging) from the former residence to the new" place of residence, "(C) of traveling (including meals and lodging), after obtaining employment, from the former residence to the general location of the new principal place of work and return, for the principal purpose of searching for a new residence, " (D) of meals and lodging while occupying temporary quarters in the general location of the new principal place of work during any period of 30 consecutive days after obtaining employment, or " (E) constituting qualified residence sale, purchase, or lease expenses. "(2) QUALIFIED RESIDENCE SALE, ETC., EXPENSES.—For purposes of paragraph (1)(E), the term 'qualified residence sale, purchase, or lease expenses' means only reasonable expenses incident to— " (A) the sale or exchange by the taxpayer or his spouse of the taxpayer's former residence (not including expenses for work performed on such residence in order to assist in its sale) which (but for this subsection and subsection (e)) would be taken into account in determining the amount realized on the sale or exchange, " (B) the purchase by the taxpayer or his spouse of a new residence in the general location of the new principal place of work which (but for this subsection and subsection (e)) would be taken into account in determining— " (i) the adjusted basis of the new residence, or " (ii) the cost of a loan (but not including any amounts which represent payments or prepayments of interest), " (C) the settlement of an unexpired lease held by the taxpayer or his spouse on property used by the taxpayer as his former residence, or " (D) the acquisition of a lease by the taxpayer or his spouse on property used by the taxpayer as his new residence in the general location of the new principal place of work (not including amounts which are payments or prepayments of rent). "(3) LIMITATIONS.— " (A) DOLLAR LIMITS.—The aggregate amount allowable as

a deduction undar subsection (a) in connection with a commencement of work which is attributable to expenses described in subparagraph (C) or (D) of paragraph (1)

78 Stat. 5 1. 26 USC 217.

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[83 STAT

shall not exceed $1,000. The aggregate amount allowable as deduction under subsection (a) which is attributable to qualf fied residence sale, purchase, or lease expenses shall not exceed $2,500j reduced by the aggregate amount so allowable which is attributable to expenses described in subparagraph (C) or (D) of paragraph (1). " (B) HUSBAND AND WIFE.—If a husband and wdfe both commence work at a new principal place of work within the same general location, subparagraph (A) shall be applied ^s if there was only one commencement of work. In the case of a husband and wife filing separate returns, subparagraph (A^ shall be applied by substituting '$500' for '$1,000', and by substituting '$1,250' for '$2,500'. ^ " (C) INDIVIDUALS OTHER THAN TAXPAYER.—In the case of any individual other than the taxpayer, expenses referred to in subparagraphs (A) through (D) of paragraph (1) shall be taken into account only if such individual has both the former residence and the new residence as his principal place of abode and is a member of the taxpayer's household. "(c) CONDITIONS FOR ALLOW^VNCE.—Xo deduction shall be allowed under this section unless— " (1) the taxpayer's new principal place of work— " (A) is at least 50 miles farther from his former residence than was his former principal place of work, or " (B) if he had no former principal place of work, is at least 50 miles from his former residence, and "(2) either—^ " (A) during the 12-month period immediately following his arrival in the general location of his new principal place of work, the taxpayer is a full-time employee, in such general location, during at least 39 weeks, or " (B) during the 24-month period imme<liately following his arrival in the general location of his new principal place of ^vork, the taxpayer is a full-time employee or performs services as a self-employed individual on a full-time basis, in such general location, during at least 78 weeks, of which not less than 39 weeks are during the 12-month period referred to in subparagraph (A). For purposes of paragraph (1), the distance between two points shall be the shortest of the more commonly traveled routes between such tw-o points. "(d)

RULES FOR APPLICATION or SUBSECTION (C)(2). —

"(1) The condition of subsection (c)(2) shall not apply if the taxpayer is unable to satisfy such condition by reason of— " (A) death or disability, or " (B) involuntary separation (other than for willful misconduct) from the service of, or transfer for the benefit of, an employei' after obtaining full-time employment in which the taxpayer could reasonably have been expected to satisfy such condition. "(2) If a taxpayer has not satisfied the condition of subsection (c)(2) before the time prescribed by law (including extensions thereof) for filing the return for the taxable year during which he paid or incurred moving expenses which would otherwise be deductible under this section, but may still satisfy such condition, then such expenses may (at the election of the taxpayer) be deducted for such taxable year notwithstanding subsection (c)(2)' "(3) If—

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PUBLIC LAW 91-172-DEC. 30, 1969

579

" (A) for any taxable year moving expenses have been deducted in accordance with the rule provided in paragraph (2), and " (B) the condition of subsection (c)(2) cannot be satisfied at the close of a subsequent taxable year, then an amount equal to the expenses which were so deducted shall be included in gross income for the first such subsequent taxable year. •'(e) DENIAL OF DOUBLE BENEFIT.—The amount realized on the sale of the residence described in subparagraph (A) of subsection (b)(2) shall not be decreased by the amount of any expenses described in such subparagraph which are allowed as a deduction under subsection (a), and the basis of a residence described in subparagraph (B) of subsection (b)(2) shall not be increased by the amount of any expenses described in such subparagraph which are allowed as a deduction under subsection (a). This subsection shall not apply to any expenses with respect to which an amount is included in gross income under subsection (d)(3).

"

''

"(f) RULES FOR S E L F - E M P L O Y E D INDIVIDUALS.

"(1) DEFINITION.—For purposes of this section, the term 'selfemployed individual' means an individual who performs personal services— " (A) as the owner of the entire interest in an unincorporated trade or business, or " (B) as a partner in a partnership carrying on a trade or business. " (2) RULE FOR APPLICATION OF SUBSECTIONS (b)(1)

(c) AND

(D).—For purposes of subparagraphs (C) and (D) of subsection (b)(1), an individual who commences work at a new principal place of work as a self-employed individual shall be treated as having obtained employment when he has made substantial arrangements to commence such work. "(g) REGULATIONS.—The Secretary or his delegate shall prescribe such regulations as may be necessary to carry out the purposes of this section." (b) INCLUSION IN GROSS INCOME OF MOVING EXPENSE REIMBURSE-

MENTS.—Part II of subchapter B of chapter 1 (relating to items spe- 8o^sfat!*fi52?' cifically included in gross income) is amended by adding after section 26 USC 71-81. 81 the following new section: "SEC. 82. REIMBURSEMENT FOR EXPENSES OF MOVING. "There shall be included in gross income (as compensation for services) any amount received or accrued, directly or indirectly, by an individual as a payment for or reimbursement of expenses of moving from one residence to another residence which is attributable to employment or self-employment." (c) CONFORMING AMENDMENTS.—

(1) The table of sections for part II of subchapter B of chapter 1 is amended by adding at the end thereof the following new item: "Sec. 82. Reimbursement of moving expenses."

(2) Section 1001 (relating to determination of amount and recognition of gain or loss) is amended by adding after subsection (e) (as added by section 516(a) of this Act) the following new subsection: "(f)

CROSS REFERENCE.— r. "For treatment of certain expenses incident to the sale of a residence which were aeauciea as moving expenses by the taxpayer or his spouse TTiucn SCX'tinn 9 1 7 / ' Q " \ COO moving 917fo^ " were deducted as aoftinn expenses idpr under section 217(a), see section 217(e)."

Post,

p. 646.

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Page:United States Statutes at Large Volume 83.djvu/608

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PUBLIC LAW 91-172-DEC. 30, 1969

68A Stat. 301.

(3) Section 1016(c) is amended to read as follows: "(c)

Ante, p. 577.

[33 STAT

CROSS REFERENCES.—

"(1) For treatment of certain expenses incident to the purchase of a residence which were deducted as moving expenses by the taxpayer OP his spouse under section 217(a), see section 217(e). ^ "(2) For treatment of separate mineral interests as one property see section 614." ^' (d) EFFECTIVE DATES.—The amendments made by this section shall apply to taxable years beginning after December 31, 1969, except that-. (1) section 217 of the Internal Revenue Code of 1954 (as amended by subsection (a)) shall not apply to any item to the extent that the taxpayer received or accrued reimbursement or other expense allowance for such item in a taxable year beginning on or before December 31, 1969, which was not included in his gross income; and (2) the amendments made by this section shall not apply (at the election of the taxpayer made at such time and manner as the Secretary of the Treasury or his delegate prescribes) with respect to moving expenses paid or incurred before July 1, 1970, in connection with the commencement of work by the taxpayer as an employee at a new principal place of work of which the taxpayer had been notified by his employer on or before December 19, 1969.

TITLE III—MINIMUM TAX; ADJUSTMENTS PRIMARILY AFFECTING INDIVIDUALS Subtitle A—Minimum Tax

SEC. 3 1 MINIMUM TAX FOR TAX PREFERENCES. 0. s^t^^^V?^' 82f Stat. 252 26 USC 1-51.

(^) ^ ^ GENERAL.—Subchapter A of chapter 1 (relating to determination of tax liability) is amended by adding at the end thereof the following new part: "PART VI—MINIMUM T A X FOR T A X P R E F E R E N C E S

26 USC 531,

541

68A Stat. 13. 76 Stat. 962.

"Sec. 56. Imposition of tax. "Sec. 57. Items of tax preference. "Sec. 58. Rules for application of this part. "SEC. 56. IMPOSITION OF TAX. " (a) IN GENERAL.—In addition to the other taxes imposed by this chapter, there is hereby imposed for each taxable year, with respect to the income of every person, a tax equal to 10 percent of the amount (if any) by which— " (1) the sum of the items of tax preference in excess of $30,000, is greater than "(2) the taxes imposed by this chapter for the taxable year (computed without regard to this part and without regard to the taxes imposed by sections 531 and 541) reduced by the sum of the credits allowable under— u ^^^ section 33 (relating to foreign tax credit), " (B) section 37 (relating to retirement income), and " (C) section 38 (relating to investment credit). " (b) DEFERRAL or TAX LIABILITY I N CASE OF CERTAIN N E T OPERATING LOSSES.—

Post, p. 619.

" (1) IN GENERAL.—If for any taxable year a person— " (A) has a net operating loss any portion of which (under section 172) remains as a net operating loss carryover to a succeeding taxable year, and " (B) has items of tax preference in excess of $30,000,

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Page:Tom Swift and His Airship.djvu/175

Rh Mr. Sharp thought for a moment. Then he exclaimed:

"It was that bag of tools I sent you after—the long wrenches, the pliers, and the brace and bits. You"

"Of course!" cried Tom. "I remember now. The bag dropped and opened, and Andy and Sam saw the tools. But the idea of taking them for burglar tools!"

"Well, I suppose the burglars, whoever they were, did use tools similar to those to break open the vault," put in Mr. Damon. "Andy probably thought he was a smart lad to put the police on our track."

"I'll put him on the track, when I return," declared Mr. Sharp. "Well, now, what's to be done?"

"We've got to have food," suggested Tom.

"Yes, but I think we can manage that. I've been looking over the ship, as best I could in the dark. It seems to be all right. We can start early in the morning without anyone around here knowing we paid their town a visit. You and Mr. Damon go back to town, Tom, and order some stuff. Have the man leave it by the roadside early to-morrow morning. Tell him it's for some travelers, who will stop and pick it up. Pay him well, and tell him to keep quiet, as it's

title: Page:Tom Swift and His Airship.djvu/175


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Page:United States Statutes at Large Volume 83.djvu/609

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581

then an amount equal to the lesser of the tax imposed by subsection (a) or 10 percent of the amount of the net operating loss carryover described in subparagraph (A) shall be treated as tax liability not imposed for the taxable year, but as imposed for the succeeding taxable year or years pursuant to paragraph (2). "(2) YEAR OF LIABILITY.—In any taxable year in which any portion of the net operating loss carryover attributable to the excess described in paragraph (1)(B) reduces taxable income, the amount of tax liability described in paragraph (1) shall be treated as tax liability imposed in such taxable year in an amount equal to 10 percent of such reduction.

d 36X.« "

"(3) PRIORITY OF APPLICATION.—For purposes of paragraph

(2), if any portion of the net operating loss carryover described in paragraph (1)(A) is not attributable to the excess described in paragraph (1)(B), such portion shall be considered as being applied in reducing taxable income before such other portion. "SEC. 57. ITEMS OF TAX PREFERENCE. «(a) IN GENERAL.—For purposes of this part, the items of tax preference are— "(1) EXCESS INVESTMENT INTEREST.—The amount of the excess

investment interest for the taxable year (as determined under subsection (b)). "(2) ACCELERATED DEPRECIATION ON REAL PROPERTY.—With

respect to each section 1250 property (as defined in section 1250 (c)), the amount by which the deduction allowable for the taxable year for exhaustion, wear and tear, obsolescence, or amortization exceeds the depreciation deduction which would have been allowable for the taxable year had the taxpayer depreciated the property under the straight line method for each taxable year of its useful life (determined without regard to section 167(k)) for which the taxpayer has held the property.

26 USC 1256.

Post.

p. 651.

" (3) ACCELERATED DEPRECIATION ON PERSONAL PROPERTY SUBJECT

TO A NET LEASE.—With respect to each item of section 1245 property (as defined in section 1245(a)(3)) which is the subject of Po^t^^'.^yV^' a net lease, the amount by which the deduction allowable for the taxable year for exhaustion, wear and tear, obsolescence, or amortization exceeds the depreciation deduction which would have been allowable for the taxable year had the taxpayer depreciated the property under the straight line method for each taxable year of its useful life for which the taxpayer has held the property. "(4) AMORTIZATION or CERTIFIED POLLUTION CONTROL FACILI-

TIES.—With respect to each certified pollution control facility for which an election is in effect under section 169, the amount by ^°«^' P- ^^''^ which the deduction allowable for the taxable year under such section exceeds the depreciation deduction which would otherwise be allowable under section 167. . ..^°^'' P^' ^^^' 649. "(5) AMORTIZATION OF RAILROAD ROLLING STOCK.—With respect to each unit of railroad rolling stock for which an election is in effect under section 184, the amount by which the deduction allow- Post, p. 6 7 0. able for the taxable year under such section exceeds the depreciation deduction which would otherwise be allowable under section 167. " (6) STOCK oPTiONS.With respect to the transfer of a share of stock pursuant to the exercise of a qualified stock option (as de78 Stat. 6 4. fined in section 422(b)) or a restricted stock option (as defined in

31-100 0 - 70 - 39

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PUBLIC LAW 91-172-DEC. 30, 1969

78 Stat. 69.

section 424(b)), the amount by which the fair market value of tV share at the time of exercise exceeds the option price. "(7)

Post, p. 616. Post, p. 6 20.

..

72 Stat. 1650. Ante, p. 528.

KESERVES FOR LOSSES OX BAD DEBTS or FIXANCIAL INSTITU.

Tioxs.—In the case of a financial institution to which section 585 or 593 applies, the amount by which the deduction allowable for the taxable year for a reasonable addition to a reserve for bad debts exceeds the amount that would have been allowable had the institution maintained its bad debt reserve for all taxable years on the basis of actual experience. " (8) DEPLETIOX.—With respect to each property (as defined in section 614), the excess of the deduction for depletion allowable under section 611 for the taxable year over the adjusted basis of the property at the end of the taxable year (determined without regard to the depletion deduction for the taxable year).

68A Stat. 210. 26 USC 614.

78 Stat. 25. Post, p. 635.

[33 ST^T

''(9) CAPITAL GAixs.—

" (A) INDIVIDUALS.—In the case of a taxpayer other than a corporation, an amount equal to one-half of the amount by which the net long-term capital gain exceeds the net shortterm capital loss for the taxable year. " (B) CORPORATIONS.—In the case of a corporation, if the net long-term capital gain exceeds the net short-term capital loss for the taxable year, an amount equal to the product obtained by multiplying such excess by a fraction the numerator of which is the sum of the normal tax rate and the surtax rate under section 11, minus the alternative tax rate under section 1201(a), for the taxable year, and the denominator of which is the sum of the normal tax rate and the surtax rate under section 11 for the taxable year. I n the case of a corporation to which section 1201(a) does not apply, the amount under this subparagraph shall be determined under regulations prescribed by the Secretary or his delegate in a manner consistent with the preceding sentence. Paragraph (1) shall apply only to taxable years beginning before January 1, 1972. Paragraphs (1) and (3) shall not apply to a corporation other than an electing small business corporation (as defined in section 1371(b)) and a personal holding company (as defined in section 542). "(b)

EXCESS INVESTMENT INTEREST.—

"(1) IN GENERAL.—For purposes of paragraph (1) of subsection (a), the excess investment interest for any taxable year is the amount by which the investment interest expense for the taxable year exceeds the net investment income for the taxable year. ,,. "''", "(2) DEFINITIONS.—For purposes of this subsection— " (A) N E T INVESTMENT INCOME.—The term 'net investment '' _ income' means the excess of investment income over invest; .,, „,^„:i^ ment expenses. .? ^^ ^ " (B) INVESTMENT INCOME.—The term 'investment income ^! r' means— <:•,,#\4.c,^ -'^ ..jifc "(^) *^^^ gross income from interest, dividends, rents, ^V'" * and royalties,
 * ,j H.rt,

nj. "(ii) the net short-term capital gain attributable to the disposition of property held for investment, and pVstl'.lll'. "(^j^) amounts treated under sections 1245 and 1250 as gain from the sale or exchange of property which is neither a capital asset nor property described in section 68A Stat. 325.

1231

but only to the extent such income, gain, and amounts are not derived from the conduct of a trade or business.

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text:
Page:United States Statutes at Large Volume 83.djvu/611

 83 STAT. ]

PUBLIC LAW 91-172-DEC. 30, 1969

583

" (C) INVESTMENT EXPENSES.—The term 'investment expenses' means the deductions allowable under sections 164(a)(1) or (2), 166, 167, 171, 212, 243, 244, 245, or 611 78 Stat. 4o, 52, directly connected with the production of investment income. 207-^80 s t a*1558, ^* t 50For purposes of this subparagraph, the deduction allowable under section 167 with respect to any property may be treated ^°sf, pp. 625, as the amount which would have been allowable had the tax- ^^^' payer depreciated the property under the straight line method for each taxable year of its useful life for which the taxpayer has held the property, and the deduction allowable under section 611 with respect to any property may be treated as the amount which would have been allowable had the taxpayer determined the deduction under section 611 without regard to section 613 for each taxable year for which ^°®'' PP- ^29, the taxpayer has held the property. " (D) INVESTMENT INTEREST EXPENSE.—The term 'investment interest expense' means interest paid or accrued on indebtedness incurred or continued to purchase or carry property held for investment. For purposes of the preceding sentence, interest paid or accrued on indebtedness incurred or, continued in the construction of property to be used in a trade or business shall not be treated as an investment interest expense. "(3) PROPERTY SUBJECT TO NET LEASE.—For purposes of this subsection, property which is subject to a net lease entered into after October 9, 1969, shall be treated as property held for invest• '• ment, and not as property used in a trade or business. '/ "(c) NET LEASES.—For purposes of this section, property shall be considered to be subject to a net lease for a taxable year if— "(1) for such taxable year the sum of the deductions with respect to such property which are allowable solely by reason of section 162 is less than 15 percent of the rental income produced ^°^'' P- ^^°by such property, or " (2) the lessor is either guaranteed a specified return or is guaranteed in whole or in part against loss of income. -SEC. 58. RULES FOR APPLICATION OF THIS PART. "(a) HUSBAND AND W I F E. — I n the case of a husband or wife who files a separate return for the taxable year, the $30,000 amount specified in section 56 shall be $15,000. "(b) MEMBERS or CONTROLLED GROUPS.—In the case of a controlled group of corporations (as defined in section 1563(a)), the $30,000 Post,p.602. amount specified in section 56 shall be divided equally among the component members of such group unless all component members consent (at such time and in such manner as the Secretary or his delegate prescribes by regulations) to an apportionment plan providing for an unequal allocation of such amount. "(c) ESTATES AND TRUSTS.—In the case of an estate or trust— "(1) the sum of the items of tax preference for any taxable year of the estate or trust shall be apportioned between the estate or trust and the beneficiaries on the basis of the income of the estate Or trust allocable to each, and "(2) the $30,000 amount specified in section 56 applicable to such estate or trust shall be reduced to an amount which bears the same ratio to $30,000 as the portion of the sum of the items of tax preference allocated to the estate or trust under paragraph (1) ^ bears to such sum. (d) ELECTING S M A L L B U S I N E S S CORPORATIONS AND THE I R S II A R E H0IJ)ERS.—

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text:
Page:United States Statutes at Large Volume 83.djvu/612

 584

PUBLIC LAW 9M72-DEC. 30, 1969

72 Stat. 1650.

" 80 Stat. 113. Ante, p. 580.

68A Stat. 203.

74^ltlt!'loor^' 26 USC 851*, ^^^-

Post,

p. 637.

[33 5^^^

"(1) IN GENERAL.—Except as provided in paragraph (2) R items of tax preference of an electing small business corporati (as defined in section 1371(b)) for each taxable year of the cori?'^ ration shall be treated as items of tax preference of the sharp holders of such corporation, and, except as provided in paragraph (2), shall not be treated as items of tax preference of such corpora tion. The sum of the items so treated shall be apportioned pro rata among such shareholders in a manner consistent with section I374 (c)(1). For purposes of this paragraph, this part shall be treated as applying to such corporation. " (2) CERTAIN CAPITAL GAINS.—If for a taxable year of an electing small business corporation a tax is imposed on the income of such corporation under section 1378, such corporation shall notwithstanding the provisions of section 1371(b)(1), be subject to f]r^Q. ^^x imposed by section 56, but computed only with reference to the item of tax preference set forth in section 57(a)(9)(B) to the extent attributable to gains subject to the tax imposed by '• section 1378. "(e) PARTICIPANTS I N A COMMON TRUST FUND.—The items of tax preference of a common trust fund (as defined in section 584(a)) for each taxable year of the fund shall be treated as items of tax preference of the participants of such fund and shall be apportioned pro rata among such participants. For purposes of this subsection, this part shall be treated as applying to such fund. "(f) REGULATED INVESTMENT COMPANIES, E T C. — I n the case of a regulated investment company to which part I of subchapter M applies or a real estate investment trust to which part II of subchapter M applies— "(1) the item of tax preference set forth in section 57(a)(9) shall not be treated as an item of tax preference of such company or such trust for each taxable year to the extent that such item is attributable to amounts taken into account as income by the shareholders of such company under section 852(b)(3), or by the shareholders or holders of beneficial interests of such trust under section 857(b)(3), and " (2) the items of tax preference of such company or such trust for each taxable year (other than the item of tax preference set forth in section 57(a)(9) and, in the case of a real estate investment trust, the item of tax preference set forth in section 57(a) (2)) shall be treated as items of tax preference of the shareholders of such company, or the shareholders or holders of beneficial interests of such trust (and not as items of tax preference of such company or such t r u s t), in the same proportion that the dividends (other than capital gain dividends) paid to each such shareholder, or holder of beneficial interest, bears to the taxable income of such company or such trust determined without regard to the deduction for dividends paid. ,i "(g)

( ,t •

TAX PREFERENCES ATTRIBUTABLE TO FOREIGN SOURCES.—

" (1) IN GENERAL.—For purposes of section 56, the items of tax preference set forth in section 57(a) (other than in paragraphs (6) and (9) of such section) which are attributable to sources within any foreign country or possession of the United States shall be taken into account only to the extent that such items reduce the tax imposed by this chapter (other than the tax imposed by section 56) on income derived from sources withm the United States. For purposes of the preceding sentence, items of tax preference shall be treated as reducing the tax imposed by this chapter before items which are not items of tax preference.

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text:
Page:United States Statutes at Large Volume 83.djvu/613

 83 STAT. ]

PUBLIC LAW 9 M 7 2 - D E C. 30, 1969

585

"(2) CAPITAL GAINS AND STOCK OPTIONS.—For purposes of section 56, the items of tax preference set forth in paragraphs (6) and (9) of section 57(a) which are attributable to sources within any foreign country or possession of the United States shall not be taken into account if, under the tax laws of such country or possession— " (A) in the case of the item set forth in paragraph (6) of section 57(a), preferential treatment is not accorded transfers of shares of stock pursuant to stock options described in such paragraph, and " (B) in the case of the item set forth in paragraph (9) of section 57(a), preferential treatment is not accorded gain from the sale or exchange of capital assets (or property treated as capital assets)." ^,»., n (b) TECHNICAL AND CONFORMING AMENDMENTS.—

^"^^- P- SSO

.ii'*e

p54

(1) The table of parts for subchapter A of chapter 1 is amended by adding at the end thereof the following new item: "Part VI. Minimum tax for tax preferences."

i

(2) Section 5(a) (relating to cross references to other rates of tax on individuals, etc.) is amended by adding at the end thereof the following new paragraph: "(5) For minimum tax for tax preferences, see section 56." (3) Section 12 (relating to cross references relating to tax on corporations) is amended by adding at the end thereof the following new paragraph: "(8) For minimum tax for tax preferences, see section 56." (4) Section 46(a)(3) (relating to lia;bility for tax for determining amount of investment credit) is amended by inserting "section 56 (relating to minimum tax for tax preferences)," before "section 531". (5) Section 51(b)(1) (relating to adjusted tax for purposes of tax surcharge) is amended by inserting "section 56," after "this section,". (6) Section 443 (relating to returns for a period of less than 12 months) is amended by redesignating subsection (d) as subsection (e) and inserting after subsection (c) the following new subsection:

82 Stat. 252. je'uscT 443"*^

"(d) ADJUSTMENT I N EXCLUSION FOR COMPUTING MINIMUM TAX

F R TAX PREFERENCES.—If a return is made for a short period by reaO son of subsection (a), then the $30,000 amount specified in section 56 ^"'e, p. sso. (relating to minimum tax for tax preferences), modified as provided by section 58, shall be reduced to the amount which bears the same i^tio to such specified amount as the number of days in the short period bears to 365." (7) Section 453(c)(3) (relating to rule for change from accrual to installment basis) is amended by inserting ", other than by section 56," after "prior revenue laws)". (8) Section 511 (relating to tax on unrelated business income Ante, p. sae. of charitable, etc., organizations) is amended by adding after subsection (c) (as added by section 121(a)(3) of this Act) the following new subsection: ''(d) TAX PREFERENCES.—The tax imposed by section 56 shall apply to an organization subject to tax under this section with respect to Items of tax preference which enter into the computation of unrelated business taxable income." (9) The last sentence of section 901(a) (relating to allowance 26 USC 901. of credit for taxes of foreign countries and of possessions of the United States) is amended by inserting "against the tax imposed

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text:
Page:United States Statutes at Large Volume 83.djvu/614

 586

PUBLIC LAW 91-172-DEC. 30, 1969

[335^^^

by section 56 (relating to minimum tax for tax preferences)," afte "not be allowed". ' r (10) Section 1373(c) (relating to definition of "undistributed taxable income) is amended by striking out "tax imposed by section 1378(a)" and inserting in lieu thereof "taxes imposed by sections 56 and 1378(a)". ^ (H) Section 1375(a)(3) (relating to reduction for taxes imposed) is amended—

80 Stat. 114. 26 USC 1373. 72 Stat. 1654.

(A)

•" •

by striking out "TAX IMPOSED BY SECTIOX ISTS" in the heading of such section and inserting in lieu thereof "TAXES IMPOSED"; and

- •' '

80 Stat. 62.

Ante. p. 580.

(B) by striking out "tax imposed by section 1378(a) on the income of" in the text of such section and inserting in lieu thereof "taxes imposed by sections 56 and 1378(a) on". (12) Section 6015(c) (relating to definition of estimated tax) is -*-* amended by inserting after "taxable year" in paragraph (1) "(other than the tax imposed by section 56)". (13) Section 6654(f) (relating to definition of tax) is amended by inserting after "chapter 1" in paragraph (1) "(other thanbv section 56)". (c) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years ending after December 31, 1969. In the case of a taxable year beginning in 1969 and ending in 1970, the tax imposed by section 56 of the Internal Revenue Code of 1954 (as added by subsection (a)) shall be an amount equal to the tax imposed by such section (determined without regard to this sentence) multiplied by a fraction— (1) the numerator of which is the niunber of days in the taxable year occurring after December 31, 1969, and (2) the denominator of which is the number of days in the entire taxable year. Subtitle B—Income Averaging

78 Stat. 105.

SEC. 311. INCOME AVERAGING. (^Q^-j LIMITATION ox TAX.—Section 1301 (relating to limitation on tax) is amended by striking out "20 percent of such income" and all that follows and inserting m lieu thereof "20 percent of such income to 120 percent of average base period income." (b) AVERAGABLE INCOME.—Section 1302 (relating to the definition of averagable income and related definitions) is amended to read as follows: "SEC. 1302. DEFINITION OF AVERAGABLE INCOME; RELATED DEFINITIONS.
 * •••:"(a)

AVERAGABLE INCOME.—

"(1) IN GENERAL.—For purposes of this part, the term 'aAeragable income' means the amount by which taxable income for the computation year (reduced as provided in paragraph (2)) .fit; - 5 ^ » exceeds 120 percent of average base period income. f "(2) REDUCTIONS.—The taxable income for the computation a year shall be reduced by— " (A) the amount (if any) to which section 72(ni)(3) f applies, and " (B) the amounts included in the income of a beneficiary Post, p. 594. of a trust under section 668(a). "(b) AVEILVGE BASE PERIOD INCOME.—For purposes of this part"^ "(1) IN GENERAL.—The term 'average base period income means one-fourth of the sum of the base period incomes for the base period.

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text:
Page:United States Statutes at Large Volume 83.djvu/615

 83 STAT.

]

PUBLIC LAW 91-172-DEC. 30, 1969

587

"(2) BASE PERIOD INCOME.—The base period income for anv taxable year is the taxable income for such year— " (A) increased by an amount equal to the excess of— " (i) the amount excluded from gross income under section 911 (relating to earned income from sources without the United States) and subpart D of part III of subchapter N (sec. 931 and following, relating to income from sources within possessions of the United States), over "(ii) the deductions which would have been properly allocable to or chargeable against such amount but for the exclusion of such amount from gross income; and " (B) decreased by the amounts included in the income of P o s t, p. 594. a beneficiary of a trust under section 668(a). "(c) OTHER RELATED DEFINITIONS.—For purposes of this part— "(1) COMPUTATION YEAR.—The term 'computation year' means the taxable year for which the taxpayer chooses the benefits of this part. "(2) BASE PERIOD.—The term 'base period'means the 4 taxable years immediately preceding the computation year. " (3) BASE PERIOD YEAR.—The term 'base period year' means any of the 4 taxable years immediately preceding the computation year. "(4) JOINT RETURN.—The term 'joint return' means the return of a husband and wife made under section 6013." ^os'. PP- ^75, (c) SPECIAL, RULES.—Section 1304(b) (relating to special rules ^^yg Stat. los. applicable to income averaging) is amended— (1) by striking out "and" at the end of paragraph (3); (2) by striking out the period at the end of paragraph (4) and inserting in lieu thereof a comma; and (3) by adding at the end thereof the following new paragraphs; " (5) section 1201(b) (relating to alternative capital gains tax), P o s t, p. 635. and "(6) section 1348 (relating to 50-percent maximum rate on Post, p. ess. earned income)." (d) CONFORMING AMENDMENTS.—

(1) Section 1303(c)(2)(B) is amended by striking out "adjusted". (2) Section 1304 is amended— (A) by striking out paragraph (3) of subsection (c) and by redesignating paragraphs (4) and (5) of such subsections as paragraphs (3) and (4), respectively; (B) by striking out "Paragraphs (2), (3), and (4) " in subsection (c)(1) and inserting in lieu thereof "Paragraphs (2) and (3) "; (C) by striking out "paragraph (4) " in subsection (c)(1) (B) and inserting in lieu thereof "paragraph (3) "; (D) by striking out "adjusted" in subparagraph (B) of subsection (c)(3) (as redesignated); (E) by striking out in subsection (d) ", and the $3,000 figure contained in section 1302(b)(2)(C) shall be applied to the aggregate net incomes"; (F) by striking out subsections (e) and (f) and inserting in lieu thereof the following: '(e)

TREATMENT OF CERTAIN OTHER ITEMS.—

78 Stat. 107.

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text:
Page:United States Statutes at Large Volume 83.djvu/616

 588 '^ ^'^'- ^''-

Ante, p. 586.

78 Stat. 111. 26 USC 6511.

Ante, p. 586.

Ante, p. 579.

PUBLIC LAW 91-172-DEC. 30, 1969

[33 g^^

" (1) SECTION 72(111)(5).—Section 72(m)(5) (relating to r^ alties applicable to certain amounts received by owner-employe \" shall be applied as if this part had not been enacted. ^^' " (2) OTHER ITEMS.—Except as otherwise provided in this MH the order and manner in which items of income or limitationc tax shall be taken into account in computing the tax imposed b^ this chapter on the income of any eligible individual to ^ho^ section 1301 applies for any computation year shall be determined under regulations prescribed by the Secretary or his deleo-ntp » and ^ = (G) by redesignating subsection (g) as (f). (3) Section 6511(d)(2)(B) (ii) is amended— (A) by striking out "1302(e)(1)" and inserting in lipn thereof "1302(c)(1) "; and (B) by striking out "1302(e)(3)" and inserting in lipn thereof "1302 (c)(3) ". (e) EFFECTIVE DATE.—The amendments made by this section shall apply with respect to computation years (within the meaning of section 1302(c)(1) of the Internal Revenue Code of 1954) beginning after December 31, 1969, and to base period years (within the meaning of section 1302(c)(3) of such Code) applicable to such computation years. Subtitle C—Restricted Property SEC. 321. RESTRICTED PROPERTY. (a) IN GENERAL.—Part II of subchapter B of chapter 1 (relating to items specifically included in gross income) is amended by adding after section 82 (as added by section 221(b) of this Act( the following new section: "SEC. 83. PROPERTY TRANSFERRED IN CONNECTION WITH PERFORM. ANCE OF SERVICES. " (a) GENERAL RULE.—If, in connection with the performance of services, property is transferred to any person other than the person for whom such services are performed, the excess of— "(1) the fair market value of such property (determined without regard to any restriction other than a restriction which by its terms will never lapse) at the first time the rights of the person having the beneficial interest in such property are transferable or are not subject to a substantial risk of forfeiture, whichever occurs earlier, over " (2) the amount (if any) paid for such property, shall be included in the gross income of the person who performed such services in the first taxable year in which the rights of the person having the beneficial interest in such property are transferable or are not subject to a a substantial risk of forfeiture, whichever is applicable. The preceding sentence shall not apply if such person sells or otherwise disposes of such property in an arm's length transaction before his rights in such property become transferable or not subject to a substantial risk of forfeiture. "(b) ELECTION TRANSFER.—

<.

To

INCLUDE

IN

GROSS

INCOME

I N YEAR OF

"(1) IN GENERAL.—Any person who performs services in connection with which property is transferred to any person may elect to include in his gross income, for the taxable year in which such property is transferred, the excess of—, , " (A) the fair market value of such property at the time 01 transfer (determined without regard to any restriction other than a restriction which by its terms will never lapse), over

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Page:United States Statutes at Large Volume 83.djvu/617

 g3 STAT. ]

PUBLIC LAW 91-172-DEC. 30, 1969

589

" (B) th& amount (if any) paid for such property. If such election is made, subsection (a) shall not apply with respect to the transfer of such p r o p r t y, and if such property is subsequently forfeited, no deduction shall be allowed in respect of such forfeiture. . ,. "(2) ELECTION.—An election under paragraph (1) with respect to any transfer of property shall be made in such manner as the Secretary or his delegate prescribes and shall be made not later than 30 days after the date of such transfer (or, if later, 30 days after the date of the enactment of the Tax Reform Act of 1969). Such election may not be revoked except with the consent of the Secretary or his delegate. "(c) SPECIAL RULES.—For purposes of this section— "(1) SUBSTANTIAL RISK o r FORFEITURE.—The rights of a person

in property are subject to a substantial risk of forfeiture if such person's rights to full enjoyment of such property are conditioned upon the future performance of substantial services by any individual. "(2) TRANSFERABILITY OF PROPERTY.—The rights of a person in property are transferable only if the rights in such property of any transferee are not subject to a substantial risk of forfeiture. "(d) CERTAIN RESTRICTIONS W H I C H W I L L NEVER LAPSE.—

"(1) VALUATION.—In the case of property subject to a restriction which by its terms will never lapse, and which allows the transferee to sell such property only at a price determined under a formula, the price so determined shall be deemed to be the fair market value of the property unless established to the contrary by the Secretary or his delegate, and the burden of proof shall be on the Secretary or his delegate with respect to such value. " (2) CANCELLATION.—If, in the case of property subject to a restriction which by its terms will never lapse, the restriction is canceled, then, unless the taxpayer establishes— " (A) that such cancellation was not compensatory, and " (B) that the person, if any, who would be allowed a deduction if the cancellation were treated as compensatory, will treat the transaction as not compensatory, as evidenced in such manner as the Secretary or his delegate shall prescribe by regulations, the excess of the fair market value of the property (computed without regard to the restrictions) at the time of cancellation over the sum of— " (C) the fair market value of such property (computed by taking the restriction into account) immediately before the cancellation, and " (D) the amount, if any, paid for the cancellation, shall be treated as compensation for the taxable year in which such cancellation occurs. "(^) APPLICABILITY OF SECTION.—This section shall not apply to— " (1) a transaction to which section 421 applies, "(2) a transfer to or from a trust described in section 401(a) or a transfer under an annuity plan which meets the requirements of section 404(a)(2), "(3) the transfer of an option without a readily ascertainable fair market value, or " (4) the transfer of property pursuant to the exercise of an option with a readily ascertainable fair market value at the date of grant.

^^ ^^^^ ^^ 26 USC 421'.

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Page:Tom Swift and His Airship.djvu/176

166 for a racing party. That's true enough. We're going to race home to vindicate our reputations. I think that will be all right."

"The man may get suspicious," said Mr. Damon.

"I hope not," answered the balloonist. "We've got to take a chance, anyhow."

The plan worked well, however, the store keeper promising to have the supplies on hand at the time and place mentioned. He winked as Tom asked him to keep quiet about it.

"Oh, I know yo' automobile fellers," he said with a laugh. "You want to get some grub on the fly, so you won't have to stop, an' can beat th' other fellow. I know you, fer I see them automobile goggles stickin' out of your pocket."

Tom and Mr. Damon each had a pair, to use when the wind was strong, but the young inventor had forgotten about his. They now served him a good turn, for they turned the thoughts of the storekeeper into a new channel. The lad let it go at that, and, paying for such things as he and Mr. Damon could not carry, left the store.

The aeronauts passed an uneasy night. They raised their ship high in the air, anchoring it by a rope fast to a big tree, and they turned on no lights, for they did not want to betray their position. They descended before it was yet daylight,

title: Page:Tom Swift and His Airship.djvu/176


text:
Page:United States Statutes at Large Volume 83.djvu/618

 590

PUBLIC LAW 91-172-DEC. 30, 1969

68A Stat 309.

Post. p. 710.

., _^
 * r*. '{• • I

•'(f) HOLDING PERIOD.—In determining the period for which tK taxpayer has held property to which subsection (a) applies, there sh 1 ^ be included only the period beginning at the first time his rights in s^ v! property are transferable or are not subject to a substantial risk i forfeiture, whichever occurs earlier. ''(g) CERTAIN EXCHANGES.—If property to which subsection (^\ applies is exchanged for property subject to restrictions and condition substantially similar to those to which the property given in such exchange was subject, and if section 354, 355, 356, or 1036 (or so mucli of section 1031 as relates to section 1036) applied to such exchange or if such exchange was pursuant to the exercise of a convers'ior privilege— "(1) such exchange shall be disregarded for purposes of subsection (a), and " (2) the property received shall be treated as property to which subsection (a) applies. described in subsection (d), there shall be allowed as a deduction under section 162, to the person for whom were performed the services in connection with which such property was transferred, an amount equal to the amount included under subsection (a), (b), or (d)(2) in the gross income of the person who performed such services. Such deduction shall be allowed for the taxable year of such person in which or with which ends the taxable year in which such amount is included in the gross income of the person who performed such services. " (i) TRANSITION RULES.—This section shall apply to property transferred after June 30, 1969, except that this section shall not apply to property transferred— '' (1) pursuant to a binding written contract entered into before April 22, 1969, "(2) upon the exercise of an option granted before April 22, 1969, "(3) before May 1, 1970, pursuant to a written plan adopted and approved before July 1, 1969, "(4) before January 1, 1973, upon the exercise of an option granted pursuant to a binding written contract entered into before April 22, 1969, between a corporation and the transferor requiring the transferor to grant options to employees of such corporation (or a subsidiary of such corporation) to purchase a determinable number of shares of stock of such corporation, but only if the transferee was an employee of such corporation (or a subsidiary of such corporation) on or before April 22, 1969, or "(5) in exchange for (or pursuant to the exercise of a conversion privilege contained in) property transferred before July Ij 1969, or for property to which this section does not apply (by reason of paragraphs (1), (2), (3), or (4)), if section 354, 355, 356, or 1036 (or so much of section 1031 as relates to section 1036) V applies, or if gain or loss is not otherwise required to be recogr- nized upon the exercise of such conversion privilege, and if the property received in such exchange is subject to restrictions and > conditions substantially similar to those to which the property given in such exchange was subject." (b)
 * '(h) DEDUCTION BY EMPLOYER.—In the case of a transfer of property to which this section applies or a cancellation of a restriction

68A Stat. 136. 26 USC 402.

[335^^

NONEXEMPT TRUSTS AND NONQUALIFIED ANNUITIES.— (1) BENEFICIARY OF NONEXEMPT TRUST.—Section 402(b)

(relat^j^g ^Q taxability of beneficiary of nonexempt trust) is amended to read as follows:

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text:
Page:United States Statutes at Large Volume 83.djvu/619

 83 STAT.

]

PUBLIC LAW 91-172-DEC. 30, 1969

591

«/|)) TAXABILITY OF BENEFICIARY OF NONEXEMPT TRUST.—Contri-

butions to an employees' trust made by an employer during a taxable year of the employer which ends within or with a taxable year of the trust for which the trust is not exempt from tax under section 501(a) shall be included in the gross income of the employee in accordance with section 83 (relating to property transferred in connection with performance of services), except that the value of the employee's iiiterest in the trust shall be substituted for the fair market value of the property for purposes of applying such section. The amount actually distributed or made available to any distributee by any such trust shall be taxable to him in the year in which so distributed or made available, under section 72 (relating to annuities), except that distributions of income of such trust before the annuity starting date (as defined in section 72(c)(4)) shall be included in the gross income of the employee without regard to section 72(e)(1) (relating to amount not received as annuities). A beneficiary of any such trust shall not be considered the owner of any portion of such trust under subpart E of part I of subchapter J (relating to grantors and others treated as substantial owners)."

26^scf*5o\"' ^"'^' P- ^SS.

(2) BENEFICIARY UNDER NONQUALIFIED ANNUITY.—Section 403 7 2^|fau*i62o^^'

(relating to taxation of employee annuities) is amended by strik- 1622. ing out subsections (c) and (d) and inserting in lieu thereof the following new subsection: "(c) TAXABILITY OF BENEFICIARY UNDER NONQUALIFIED ANNUITIES O UNDER ANNUITIES PURCHASED BY EXEMPT ORGANIZATIONS.— R

jPremiums paid by an employer for an annuity contract which is not subject to subsection (a) shall be included in the gross income of the employee in accordance with section 83 (relating to property transferred in connection with performance of services), except that the value of such contract shall be substituted for the fair market value of the property for purposes of applying such section. The preceding sentence shall not apply to that portion of the premiums paid which is excluded from gross income under subsection (b). The amount actually paid or made available to any beneficiary under such contract shall be taxable to him in the year in which so paid or made available under section 72 (relating to annuities)." (3) DEDUCTIBILITY OF EMPLOYER CONTRIBUTIONS.—Section 404

(a)(5) (relating to deduction for contributions of an employer to an employees' trust, etc.) is amended to read as follows: "(5) OTHER PLANS.—If the plan is not one included in paragraph (1), (2), or (3), in the taxable year in which an amount attributable to the contribution is includible in the gross income of employees participating in the plan, but, in the case of a plan in which more than one employee participates only if separate accounts are maintained for each employee." (c) CLERICAL AMENDMENT.—The table of sections for part II of subchapter B of chapter 1 is amended by adding at the end thereof the following new item: "Sec. 83. Property transferred in connection with performance of services." (d) EFFECTIVE DATES.—The amendments made by subsections (a)

^nd (c) shall apply to taxable years ending after June 30, 1969. The amendments made by subsection (b) shall apply with respect to contributions made and premiums paid after August 1, 1969.

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