text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/643

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 595

(c) CLARIFICATION OF FAIR MARKET VALUE IN THE CASE OF NONRE-

COURSE INDEBTEDNESS.—Section 7701 (relating to definitions), as

26 USC 7701.

amended by this Act, is amended by redesignating subsection (g) as subsection (h) and by inserting after subsection (f) the following new subsection:

Ante, p. 567.

"(g) CLARIFICATION OF FAIR MARKET VALUE IN THE CASE OF NONRECOURSE INDEBTEDNESS.—For purposes of subtitle A, in determining

the amount of gain or loss (or deemed gain or loss) with respect to any property, the fair market value of such property shall be treated as being not less than the amount of any nonrecourse indebtedness to which such property is subject." (d) CLERICAL AMENDMENT.—The table of parts for subchapter C of chapter 1 is amended by adding at the end thereof the following new item: "Part VII. Miscellaneous corporate provisions." (e) EFFECTIVE DATE.—The amendments made by this section shall apply to distributions, sales, and exchanges made after March 31, 1984, in taxable years ending after such date. SEC. 76. APPLICATION OF SECTION 751 IN THE CASE OF TIERED PARTNERSHIPS. (a) GENERAL RULE.—Section 751 (relating to unrealized receivables and inventory items) is amended by adding at the end thereof the following new subsection:

26 USC 386 note. r; r j. j; < 26 USC 751.

"(f) SPECIAL RULES IN THE CASE OF TIERED PARTNERSHIPS, ETC.—In

determining whether property of a partnership is— "(1) an unrealized receivable, or "'"^"' ^ -^^''^ "(2) an inventory item, such partnership shall be treated as owning its proportionate share of the property of any other partnership in which it is a partner. Under regulations, rules similar to the rules of the preceding sentence shall also apply in the case of interests in trusts.' (b) EFFECTIVE DATE.—The amendment made by subsection (a) 26 USC 751 note. shall apply to distributions, sales, and exchanges made after March 31, 1984, in taxable years ending after such date. SEC. 77. SECTION 1031 NOT APPLICABLE TO PARTNERSHIP INTERESTS; LIMITATION ON THE PERIOD DURING WHICH LIKE KIND EXCHANGES MAY BE MADE. (a) IN GENERAL.—Subsection (a) of section 1031 (relating to nonrec- 26 USC 1031. ognition of gain or loss from exchanges solely in kind) is amended to read as follows: "(a) NONRECOGNITION OF GAIN OR Loss FROM EXCHANGES SOLELY IN KIND.—

"(1) IN GENERAL.—No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment. "(2) EXCEPTION.—This subsection shall not apply to any exchange of— , "(A) stock in trade or other property held primarily for sale, "(B) stocks, bonds, or notes, "(C) other securities or evidences of indebtedness or interest, "(D) interests in a partnership,

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/644

 98 STAT. 596 ';

PUBLIC LAW 98-369—JULY 18, 1984 "(E) certificates of trust or beneficial interests, or "(F) choses in action. "(3) REQUIREMENT THAT PROPERTY BE IDENTIFIED AND THAT EXCHANGE BE COMPLETED NOT MORE THAN 180 DAYS AFTER TRANS-

FER OF EXCHANGED PROPERTY.—For purposes of this subsection, any property received by the taxpayer shall be treated as property which is not like-kind property if— "(A) such property is not identified as property to be received in the exchange before the day which is 45 days after the date on which the taxpayer transfers the property relinquished in the exchange, or "(B) such property is received after the earlier of— "(i) the day which is 180 days after the date on which the taxpayer transfers the property relinquished in the exchange, or "(ii) the due date (determined with regard to extension) for the transferor's return of the tax imposed by this chapter for the taxable year in which the transfer of the relinquished property occurs." 26 USC 1031

^°^-

(b) EFFECTIVE DATES.—

(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendment made by subsection (a) shall apply to transfers made after the date of the enactment of this Act in taxable years ending after such date. (2) BINDING CONTRACT EXCEPTION FOR TRANSFER OF PARTNER-

Ante, p. 595.

SHIP INTERESTS.—Paragraph (2)(D) of section 1031(a) of the Internal Revenue Code of 1954 (as amended by subsection (a)) shall not apply in the case of any exchange pursuant to a binding contract in effect on March 1, 1984, and at all times thereafter before the exchange. (3) REQUIREMENT THAT PROPERTY BE IDENTIFIED WITHIN 45 DAYS AND THAT EXCHANGE BE COMPLETED WITHIN 180 DAYS.—PARA-

'^-•^ 'i •

graph (3) of section 1031(a) of the Internal Revenue Code of 1954 (as amended by subsection (a)) shall apply— (A) to transfers after the date of the enactment of this Act, and (B) to transfers on or before such date of enactment if the property to be received in the exchange is not received before January 1, 1987. In the case of any transfer on or before the date of the enactment of this Act which the taxpayer treated as part of a likekind exchange, the period for assessing any deficiency of tax attributable to the amendment made by subsection (a) shall not expire before January 1, 1988. (4) SPECIAL RULE WHERE PROPERTY IDENTIFIED IN BINDING CON-

TRACT.—If the property to be received in the exchange is identified in a binding contract in effect on June 13, 1984, and at all times thereafter before the transfer, paragraph (3) shall be applied— (A) by substituting "January 1, 1989" for "January 1, 1987", and (B) by substituting "January 1, 1990" for "January 1, 1988". (5) SPECIAL RULE FOR LIKE-KIND EXCHANGE OF PARTNERSHIP

INTERESTS.—Paragraph (2)(D) of section 1031(a) of the Internal Revenue Code of 1954 (as amended by subsection (a)) shall not apply to any exchange of an interest as general partner pursu-

�

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


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/645

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 597

ant to a plan of reorganization of ownership interest under a contract which took effect on March 29, 1984, and which was executed on or before March 31, 1984, but only if all the exchanges contemplated by the reorganization plan are completed on or before December 31, 1984. SEC. 78. ELIMINATION OF BASIS STRIPS UNDER SECTION 734(b). (a) GENERAL RULE.—Subsection (b) of section 734 is amended by 26 USC 734. adding at the end thereof the following new sentence: "Paragraph (I)(B) shall not apply to any distributed property which is an interest in another partnership with respect to which the election provided in section 754 is not in effect." (b) EFFECTIVE DATE.—The amendment made by subsection (a) 26 USC 734 note. shall apply to distributions after March 1, 1984, in taxable years ending after such date. SEC. 79. OVERRULING OF RAPHAN CASE.

(a) GENERAL RULE.—Section 752 of the Internal Revenue Code of 26 USC 752 note. 1954 (and the regulations prescribed thereunder) shall be applied without regard to the result reached in the case of Raphan vs the United States, 3 CI. Ct. 457 (1983). (b) REGULATIONS.—In amending the regulations prescribed under section 752 of such Code to reflect subsection (a), the Secretary of the Treasury or his delegate shall prescribe regulations relating to liabilities, including the treatment of guarantees, assumptions, inH;$;4U; demnity agreements, and similar arrangements.

Subtitle F—Trust Provisions SEC. 81. TREATMENT OF PROPERTY DISTRIBUTED IN KIND. (a) GENERAL RULE.—Section 643 (relating to definitions applicable 26 USC 643. to subchapters A, B, C, and D) is amended by adding at the end Post, p. 975. thereof the following new subsection: "(d) TREATMENT OF PROPERTY DISTRIBUTED IN KIND.—

"(1) BASIS OF BENEFICIARY.—The basis of any property re-

ceived by a beneficiary in a distribution from an estate or trust shall be— -ac-ri s t a OH'}^>k "(A) the adjusted basis of such property in the hands of the estate or trust immediately before the distribution, adjusted for '(B) any gain or loss recognized to the estate or trust on the distribution. "(2) AMOUNT OF DISTRIBUTION.—In the case of any distribution of property (other than cash), the amount taken into account under sections 661(a)(2) and 662(a)(2) shall be the lesser of— . -i ' r.i. "(A) the basis of such property in the hands of the beneficiary (as determined under paragraph (1)), or iis*i "(B) the fair market value of such property. "(3) ELECTION TO RECOGNIZE GAIN.—

x;:-:', L

"(A) IN GENERAL.—In the case of any distribution of property (other than cash) to which an election under this paragraph applies— "(i) paragraph (2) shall not apply, "(ii) gain or loss shall be recognized by the estate or trust in the same manner as if such property had been sold to the distributee at its fair market value, and

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/646

 98 STAT. 598

^''

PUBLIC LAW 98-369—JULY 18, 1984 "(iii) the amount taken into account under sections 661(a)(2) and 662(a)(2) shall be the fair market value of such property. V "(B) ELECTION.—Any election under this paragraph shall be made by the estate or trust on its return for the taxable year for which the distribution was made. Any such election, once made, may be revoked only with the consent of the Secretary. "(4)

EXCEPTION FOR DISTRIBUTIONS DESCRIBED IN SECTION

663(a).—This subsection shall not apply to any distribution described in section 663(a)." 26 USC 643 note.

(b) EFFECTIVE D A T E. —

(1) IN GENERAL.—The amendment made by subsection (a) shall apply to distributions after June 1, 1984, in taxable years ending after such date. (2) TIME FOR MAKING ELECTION.—In the case of any distribution before the date of the enactment of this Act— (A) the time for making an election under section Ante, p. 597. 643(d)(3) of the Internal Revenue Code of 1954 (as added by this section) shall not expire before January 1, 1985, and (B) the requirement that such election be made on the return of the estate or trust shall not apply. SEC. 82. TREATMENT OF MULTIPLE TRUSTS. 26 USC 643. (a) GENERAL RULE.—Section 643 (relating to definitions applicable to subparts A, B, C, and D) is amended by adding at the end thereof the following new subsection: "(e) TREATMENT OF MULTIPLE TRUSTS.—For purposes of this subchapter, under regulations prescribed by the Secretary, 2 or more trusts shall be treated as 1 trust if— "(1) such trusts have substantially the same grantor or gran^f > tors and substantially the same primary beneficiary or beneficiaries, and "(2) a principal purpose of such trusts is the avoidance of the tax imposed by this chapter. For purposes of the preceding sentence, a husbcuid and wife shall be treated as 1 person. 26 USC 643 note. (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to taxable years beginning after March 1, 1984.

Subtitle G—Accounting Changes 26 USC 461.

SEC. 91. CERTAIN AMOUNTS NOT TREATED AS INCURRED BEFORE ECONOMIC PERFORMANCE. (a) IN GENERAL.—Section 461 (relating to general rule for taxable year of deduction) is amended by adding at the end thereof the following new subsections: "(h) CERTAIN LIABIUTIES NOT INCURRED BEFORE ECONOMIC PERFORMANCE.—

"(1) IN GENERAL.—For purposes of this title, in determining whether an amount has been incurred with respect to any item during any taxable year, the all events test shall not be treated as met any earlier than when economic performance with respect to such item occurs. "(2) TIME WHEN ECONOMIC PERFORMANCE OCCURS.—Except as

provided in regulations prescribed by the Secretary, the time

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/647

 PUBLIC LAW 98-369—JULY 18, 1984 •I' <

98 STAT. 599

when economic performance occurs shall be determined under the following principles: "(A)

SERVICES AND PROPERTY PROVIDED TO THE TAX-

PAYER.—If the liability of the taxpayer arises out of— ~ "(i) the providing of services to the taxpayer by an"' other person, economic performance occurs as such person provides such services, "(ii) the providing of property to the taxpayer by another person, economic performance occurs as the person provides such property, or "(iii) the use of property by the taxpayer, economic "tJ*7 ( I ii performance occurs as the taxpa3rer uses such property. "(B)

'

SERVICES AND PROPERTY PROVIDED BY THE TAX-

PAYER.—If the liability of the taxpayer requires the taxpayer to provide property or services, economic performance occurs as the taxpayer provides such property or services.

'^ •it; K:.

w Q WORKERS COMPENSATION AND TORT LIABIUTIES OF THE ^ ^

,, TAXPAYER.—If the liability of the taxpayer requires a payV !i, Vt 'i jjjgjj^ ^Q another person and— "(i) arises under any workers compensation act, or "(ii) arises out of any tort, economic performance occurs as the payments to such ' person are made. Subparagraphs (A) and (B) shall not apply to any liability described in the preceding sentence. "(D) OTHER ITEMS.—In the case of any other liability of the taxpayer, economic performance occurs at the time determined under regulations prescribed by the Secretary. "(3) EXCEPTION FOR CERTAIN RECURRING ITEMS.—

"(A) IN GENERAL.—Notwithstanding paragraph (1) an ^.,,,,,^, item shall be treated as incurred during any taxable year

^. '

" "

1

5 iAiiii.io J. c -i;«i3-;. ~.% ^iji ^ < .V

if-

"(i) the all events test with respect to such item is met during such taxable year (determined without regard to paragraph (1)), "(ii) economic performance with respect to such item occurs within the shorter of— "(I) a reasonable period after the close of such taxable year, or "(II) SVa months after the close of such taxable year, "(iii) such item is recurring in nature and the taxpayer consistently treats items of such kind as incurred in the taxable year in which the requirements of clause (i) are met, and "(iv) either— "(I) such item is not a material item, or "(II) the accrual of such item in the taxable year in which the requirements of clause (i) are met results in a more proper match against income than accruing such item in the taxable year in which economic performance occurs. "(B) FINANCIAL STATEMENTS CONSIDERED UNDER SUBPARAGRAPH (A) (iv).—In making a determination under sub-

paragraph (A)(iv), the treatment of such item on financial statements shall be taken into account.

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/648

 98 STAT. 600

PUBLIC LAW 98-369—JULY 18, 1984 "(C) PARAGRAPH NOT TO APPLY TO WORKERS COMPENSATION

AND TORT LIABILITIES.—This paragraph shall not apply to any item described in subparagraph (C) of paragraph (2). "(4) ALL EVENTS TEST.—For purposes of this subsection, the all events test is met with respect to any item if all events have occurred which determine the fact of liability and the amount of such liability can be determined with reasonable accuracy. "(5) SUBSECTION NOT TO APPLY TO CERTAIN CASES TO WHICH OTHER PROVISIONS OF THIS TITLE SPECIFICALLY APPLY.—This Sub-

section shall not apply to any item to which any of the following provisions apply: "(A) Subsection (c) or (0 of section 166 (relating to reserves for bad debts). "(B) Section 463 (relating to vacation pay). "(C) Section 466 (relating to discount coupons). "(D) Any other provisions of this title which specifically provides for a deduction for a reserve for estimated expenses, "(i) TAX SHELTERS MAY NOT DEDUCT ITEMS EARLIER THAN WHEN ECONOMIC PERFORMANCE OCCURS.—

"(1) IN GENERAL.—In the case of a tax shelter computing taxable income under the cash receipts and disbursements method of accounting, such tax shelter shall not be allowed a deduction under this chapter with respect to any item any earlier than the time when such item would be treated as incurred under subsection (h) (determined without regard to paragraph (3) thereof). "(2) EXCEPTION (TO EXTENT OF CASH BASIS) WHEN ECONOMIC PERFORMANCE OCCURS WITHIN 90 DAYS AFTER THE CLOSE OF THE TAXABLE YEAR.—

"(A) IN GENERAL.—Paragraph (1) shall not apply to any item if economic performance with respect to such item occurs within 90 days after the close of the taxable year. "(B) DEDUCTION LIMITED TO CASH BASIS.— "(i) TAX SHELTER PARTNERSHIPS.—In

^

the case of a tax shelter which is a partnership, in applying section 704(d) to a deduction or loss for any taxable year attributable to an item which is deductible by reason of subparagraph (A), the term 'cash basis' shall be substituted for the term 'adjusted basis'. "(ii) OTHER TAX SHELTERS.—Under regulations prescribed by the Secretary, in the case of a tax shelter other than a partnership, the aggregate amount of the deductions allowable by reason of subparagraph (A) for any taxable year shall be limited in a manner similar to the limitation under clause (i).

"(C) CASH BASIS DEFINED.—For purposes of subparagraph

(B), a partner's cash basis in a partnership shall be equal to the adjusted basis of such partner's interest in the partnership, determined without regard to— "(i) any liability of the partnership, and "(ii) any amount borrowed by the partner with respect to such partnership which— "(I) was arranged by the partnership or by any person who participated in the organization, sale, or management of the partnership (or any person

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/649

 PUBLIC LAW 98-369—JULY 18, 1984 1 -

r

98 STAT. 601

related to such person within the meaning of section 168(e)(4)), or "(II) was secured by any assets of the partnership. "(D) SPECIAL CASH BASIS RULE FOR SPUDDING OF OIL OR GAS

WELLS.—Solely for purposes of applying subparagraph (A), ,.^l economic performance with respect to the act of drilling of an oil or gas well shall be treated as occurring when the drilling of the well is commenced. "(3) TAX SHELTER DEFINED.—For purposes of this subsection, the term 'tax shelter' means— "(A) any enterprise (other than a C corporation) if at any time interests in such enterprise have been offered for sale in any offering required to be registered with any Federal or State agency having the authority to regulate the offer:8t SIB- ing of securities for sale, f^ "(B) any syndicate (within the meaning of section 1256(e)(3)(B)), and ,T/> "(C) any tax shelter (within the meaning of section 6661(b)(2)(C)(ii)). "(4) SPECIAL RULES FOR FARMING.—In the case of the trade or business of farming (as defined in section 464(e))— "(A) section 464 shall be applied to any tax shelter described in paragraph (3)(C), . "(B) section 464 shall be applied before this subsection, 9, and "(C) in determining whether an entity is a tax shelter, the ijlf^i definition of farming syndicate in section 464(c) shall be substituted for subparagraphs (A) and (B) of paragraph (3). 31 "(5) ECONOMIC PERFORMANCE.—For purposes of this subsection, the term 'economic performance' has the meaning given such term by subsection (h)."

gj.^,,.4,6

(b) SPECIAL RULES FOR MINING AND SOLID WASTE RECLAMATION AND CLOSING COSTS.—

(1) IN GENERAL.—Subpart C of part II of subchapter E of chapter 1 (relating to taxable year for which deduction taken), as amended by section 92, is amended by adding at the end thereof the following new section: "SEC. 468. SPECIAL RULES FOR MINING AND SOLID WASTE RECLAMATION AND CLOSING COSTS. "(a) ESTABLISHMENT OF RESERVES FOR RECLAMATION AND CLOSING COSTS.— "(1) ALLOWANCE OF DEDUCTION.—If a taxpayer elects the a p

'^

plication of this subsection with respect to any mining or solid waste disposal property, the amount of any deduction for qualified reclamation or closing costs for any taxable year to which such election applies shall be equal to the current reclamation or closing costs allocable to— "(A) in the case of qualified reclamation costs, the portion of the reserve property which was disturbed during such taxable year, and "(B) in the case of qualified closing costs, the production from the reserve property during such taxable year. "(2) OPENING BALANCE AND ADJUSTMENTS TO RESERVE.—

"(A) OPENING BALANCE.—The opening balance of any

reserve for its first taxable year shall be zero.

26 USC 468.

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/650

 98 STAT. 602

PUBLIC LAW 98-369—JULY 18, 1984 "(B) INCREASE FOR INTEREST.—

"(i) IN GENERAL.—A reserve shall be increased each taxable year by an amount equal to the amount of interest which would be earned during such taxable year on the opening balance of such reserve for such taxable year if such interest were computed— "(I) at the Federal short-term rate or rates (determined under section 1274) in effect, and "(II) by compounding semiannually, "(ii) PHASE-IN OF INTEREST RATE.—In the case of taxable years ending before 1987, the rate determined under clause (i)(I) shall be equal to the following percentage of such rate (determined without regard to this clause):

Ante, p. 538.

"In the case of taxable years ending in: 1984 or 1985 1986

The percentage is: 70 85.

"(C) RESERVE TO BE CHARGED FOR AMOUNTS PAID.— Any

amount paid by the taxpayer during any taxable year for qualified reclamation or closing costs allocable to portions of the reserve property for which the election under paragraph (1) was in effect shall be charged to the appropriate reserve as of the close of the taxable year. "(3) ALLOWANCE OF DEDUCTION FOR EXCESS AMOUNTS PAID.—

There shall be allowed as a deduction for any taxable year the excess of— "(A) the amounts described in paragraph (2)(C) paid during such taxable year, over "(B) the closing balance of the reserve for such taxable year (determined without regard to paragraph (2)(C)). "(4) LIMITATION ON BALANCE AS OF THE CLOSE OF ANY TAXABLE YEAR.— "(A) RECLAMATION RESERVES.—In the case of any reserve

.,^
 * r;; >»

01 van lo

for qualified reclamation costs, there shall be included in gross income for any tsixable year an amount equal to the excess of^ "(i) the closing balance of the reserve for such taxable year, over "(ii) the current reclamation costs of the taxpayer for all portions of the reserve property disturbed during any taxable year to which the election under paragraph (1) applies. "(B) CLOSING COSTS RESERVES.—In the case of any reserve for qualified closing costs, there shall be included in gross income for any taxable year an amount equal to the excess of"(i) the closing balance of the reserve for such taxable year, over "(ii) the current closing cost of the taxpayer with respect to the reserve property, determined as if all production with respect to the reserve property for any taxable year to which the election under paragraph (1) applies had occurred in such taxable year.

�


title: Page:Marriagewithdece00mayow.djvu/8


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/651

 PUBLIC LAW 98-369—JULY 18, 1984 ^

"(C) ORDER OF APPLICATION.—This paragraph shall be

•

98 STAT. 603

applied after all adjustments to the reserve have been made for the taxable year. "(5) INCOME INCLUSIONS ON COMPLETION OR DISPOSITION.—

i t<

Proper inclusion in income shall be made upon— "(A) the revocation of an election under paragraph (1), or "(B) completion of the closing, or disposition of any portion, of a reserve property.

,

s f o; " •'

i2'^' >S'J J

"(b) ALLOCATION FOR PROPERTY WHERE ELECTION NOT I N EFFECT

FOR ALL TAXABLE YEARS.—If the election under subsection (a)(1) is not in effect for 1 or more taxable years in which the reserved property is disturbed (or production occurs), items with respect to the reserve property shall be allocated to the reserve in such manner as the Secretary may prescribe by regulations. "(c) REVOCATION OF ELECTION; SEPARATE RESERVES.— "(1) REVOCATION OF ELECTION.—

"(A) IN GENERAL.—The taxpayer may revoke an election under subsection (a)(1) with respect to any property. Such revocation, once made, shall be irrevocable. "(B) TIME AND MANNER OF REVOCATION.—Any revocation under subparagraph (A) shall be made at such time and in such manner as the Secretary may prescribe. "(2) SEPARATE RESERVES REQUIRED.—If a taxpayer makes an election under subsection (a)(1), the taxpayer shall establish with respect to the property for which the election was made— "(A) a separate reserve for qualified reclamation costs, and "(B) a separate reserve for qualified closing costs.

if ' ihi'

'

r«fei' -M'J Hu ''^' '•

"(d) DEFINITIONS AND SPECIAL RULES RELATING TO RECLAMATION

AND CLOSING COSTS.—For purposes of this section—

 ')'^-lJ SI

"(1) CURRENT RECLAMATION AND CLOSING COSTS.— "(A) CURRENT RECLAMATION COSTS.—The-term 'current

f o;

reclamation costs' means the amount which the taxpayer would be required to pay for qualified reclamation costs if the reclamation activities were performed currently.

^

"(B) CURRENT CLOSING COSTS.—

j^ai.%<*fo?. B -MooaCiXi

"(i) IN GENERAL.—The term 'current closing costs' means the amount which the taxpayer would be required to pay for qualified closing costs if the closing activities were performed currently. "(ii) COSTS COMPUTED ON UNIT-OF-PRODUCTION OR CAPACITY METHOD.—Estimated closing costs shall—

>

"(I) in the case of the closing of any mine site, be computed on the unit-of-production method of acly '/... counting, and "(II) in the case of the closing of any solid waste disposal site, be computed on the unit-of-capacity •'-''-'• method. "(2) QUALIFIED RECLAMATION OR CLOSING COSTS.—The term 'qualified reclamation or closing costs' means any of the following expenses: "(A) MINING RECLAMATION AND CLOSING COSTS.—Any ex-

ti;

penses incurred for any land reclamation or closing activity which is conducted in accordance with a reclamation plan (including an amendment or modification thereof)— "(i) which—

.A.f!M)i'li ^n.:

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/652

 98 STAT. 604

PUBLIC LAW 98-369—JULY 18, 1984 ^ -

30 USC 1261, 1278.

-v^vTi.

30 USC 1251.

t, u-.

42 USC 6901 note.

"(I) is submitted pursuant to the provisions of section 511 or 528 of the Surface Mining Control and Reclamation Act of 1977 (as in effect on January 1, 1984), and "(II) is part of a surface mining and reclamation permit granted under the provisions of title V of such Act (as so in effect), or "(ii) which is submitted pursuant to any other Federal or State law which imposes surface mining reclamation and permit requirements substantially similar to the requirements imposed by title V of such Act (as so in effect). "(B) SOUD WASTE DISPOSAL AND CLOSING COSTS.—

,,....•'•rj:Ksh * ^

"(i) IN GENERAL.—Any expenses incurred for any land reclamation or closing activity in connection with any solid waste disposal site which is conducted in accordance with any permit issued pursuant to— "(I) any provision of the Solid Waste Disposal Act (as in effect on January 1, 1984) requiring such activity, or "(II) any other Federal, State, or local law which imposes requirements substantially similar to the requirements imposed by the Solid Waste Disposal Act (as so in effect). "(ii)

,<;.

42 USC 9605.

EXCEPTION

FOR CERTAIN

HAZARDOUS

WASTE

SITES.—Clause (i) shall not apply to that portion of any property which is disturbed after the property is listed in the national contingency plan established under section 105 of the Comprehensive Environmental, Compensation, and Liability Act of 1980. "(3) PROPERTY.—The term 'property' has the meaning given such term by section 614. "(4) RESERVE PROPERTY.—The term 'reserve property' means any property with respect to which a reserve is established under subsection (a)(l).' (2) CONFORMING AMENDMENT.—The table of sections for subpart C of part II of subchapter E of chapter 1 is amended by adding at the end thereof the following new item:

"Sec. 468. Special rules for mining and solid waste reclamation and closing costs." (c) SPECIAL RULE FOR LIABILITIES I N CONNECTION WITH THE DECOMMISSIONING OF A NUCLEAR POWERPLANT.—

(1) IN GENERAL.—Subpart C of part II of subchapter E of chapter 1 (relating to taxable year for which deduction taken), as amended by subsection (b), is amended by adding at the end thereof the following new section: 26 USC 468A.

"SEC. 468A. SPECIAL RULES FOR NUCLEAR DECOMMISSIONING COSTS.

"(a) IN GENERAL.—If the taxpayer elects the application of this subsection, there shall be allowed as a deduction for any taxable year the amount of payments made by the taxpayer to a Nuclear Decommissioning Reserve Fund (hereinafter referred to as the 'Fund') during such taxable year. "(b) LIMITATION ON AMOUNTS PAID INTO FUND.—The amount which a taxpayer may pay into the Fund for any taxable year shall not exceed the lesser of—

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/653

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 605

"(1) the amount of nuclear decommissioning costs allocable to the Fund which is included in the taxpayer's cost of service for ratemaking purposes for such taxable year, or "(2) the ruling amount applicable to such taxable year. "(c) INCOME AND DEDUCTIONS OF THE TAXPAYER.— "(1) INCLUSION OF AMOUNTS DISTRIBUTED.—There

' p. i

shall be includible in the gross income of the taxpayer for any taxable year— "(A) any amount distributed from the Fund during such taxable year, other than any amount distributed to pay costs described in subsection (e)(2)(B), and "(B) except to the extent provided in regulations, amounts properly includible in gross income in the case of any deemed distribution under subsection (e)(6), any termination under subsection (e)(7), or the disposition of any interest in the nuclear powerplant. "(2) DEDUCTION WHEN ECONOMIC PERFORMANCE OCCURS.—In

addition to any deduction under subsection (a), there shall be allowable as a deduction for any taxable year the amount of the nuclear decommissioning costs with respect to which economic performance (within the meaning of section 461(h)(2)) occurs Ante, p. 598. during such taxable year. f "(d) RuuNG AMOUNT.—For purposes of this subsection— "(1) REQUEST REQUIRED.—No deduction shall be allowed for any payment to the Fund unless the taxpayer requests, and receives, from the Secretary a schedule of ruling amounts. "(2) RuuNG AMOUNT.—The term 'ruling amount' means, with respect to any taxable year, the amount which the Secretary determines under paragraph (1) to be necessary to— "(A) fund that portion of the nuclear decommissioning costs of the taxpayer with respect to the nuclear power-^ * plant which bears the same ratio to the total nuclear decommissioning costs with respect to such nuclear powerplant as the period for which the Fund is in effect bears to -sQ the estimated useful life of such nuclear powerplant, and "(B) prevent any excessive funding of such costs or the r funding of such costs at a rate more rapid than level ^: JJ- i funding, taking into account such discount rates as the Secretary deems appropriate. •; "(3) REVIEW OF AMOUNT.—The Secretary shall at least once during the useful life of the nuclear powerplant (or, more frequently, upon the request of the taxpayer) review, and revise if necessary, the schedule of ruling amounts determined under paragraph (1). '

"(e) NUCLEAR DECOMMISSIONING TRUST FUND.—

"(1) IN GENERAL.—Each taxpayer who elects the application of this subsection shall establish a Nuclear Decommissioning Trust Fund with respect to each nuclear powerplant to which such election applies. "(2) TAXATION OF FUND.—There is imposed on the gross income of the Fund for any taxable year a tax at a rate equal to the maximum rate in effect under section 11(b), except that— "(A) there shall not be included in the gross income of the Fund any payment to the Fund with respect to which a deduction is allowable under subsection (a), and

- • -^^^ f ' ^

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/654

 98 STAT. 606

PUBLIC LAW 98-369—JULY 18, 1984 "(B) there shall be allowed as a deduction any amount paid by the Fund described in paragraph (4)(B) (other than to the taxpayer). "(3) CONTRIBUTIONS TO FUND.—The Fund shall not accept any payments (or other amounts) other than payments with respect to which a deduction is allowable under subsection (a). "(4) USE OF FUND.—The Fund shall be used exclusively for— "(A) satisfying, in whole or in part, any liability of any person contributing to the Fund for the decommissioning of a nuclear powerplant (or unit thereof), and "(B) to pay administrative costs (including taxes) and other incidental expenses of the Fund (including legal, accounting, actuarial, and trustee expenses) in connection with the operation of the Fund. "(5) PROHIBITIONS AGAINST SELF-DEAUNG.—Under regulations prescribed by the Secretary, for purposes of section 4951 (and so much of this title as relates to such section), the Fund shall be treated in the same manner as a trust described in section 501(c)(21). "(6) DiSQUAUFiCATiON OF FUND.—In any case in which the Fund violates any provision of this subsection or section 4951, the Secretary may disqualify such Fund from the application of this subsection. In any case to which this subparagraph applies, the Fund shall be treated as having distributed all of its funds on the date such determination takes effect. "(7) TERMINATION UPON COMPLETION.—Upon substantial completion of the nuclear decommissioning of the nuclear* powerplant with respect to which a Fund relates, the taxpayer shall terminate such Fund. "(f) NUCLEAR POWERPLANT.—The term 'nuclear powerplant' includes any unit thereof." (2) CONFORMING AMENDMENT.—The table of sections for subpart C of part II of subchapter E of chapter 1 is amended by adding at the end thereof the following new item: "Sec. 468A. Special rules for nuclear decommissioning costs."

(d) 10-YEAR NET OPERATING Loss CARRYBACK PERIOD FOR DEFERRED STATUTORY OR TORT LIABILITY DEDUCTIONS.—

26 USC 172.

(1) IN GENERAL.—Paragraph (1) of section 1720b) (relating to years to which loss may be carried) is amended by adding at the end thereof the following new subparagraph: "(K) SPECIAL RULE FOR DEFERRED STATUTORY OR TORT U ABILITY LOSSES.—In the case of a taxpayer which has a

deferred statutory or tort liability loss (as defined in subsection (k)) for any taxable year beginning after December 31, 1983, the deferred statutory or tort liability loss shall be a net operating loss carryback to each of the 10 taxable years preceding the taxable year of such loss." (2) DEFERRED STATUTORY OR TORT LIABILITY LOSSES.—Section

26 USC 172.

172 is amended by redesignating subsection (k) as subsection (1) and by inserting after subsection (j) the following new subsection: "(k) DEFINITIONS AND SPECIAL RULES RELATING TO DEFERRED STATUTORY OR TORT LIABILITY LOSSES.—For purposes of this section— "(1) DEFERRED STATUTORY OR TORT LIABILITY LOSS.—The term

'deferred statutory or tort liability loss' means, for any taxable year, the lesser of—

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/655

 PUBLIC LAW 98-369—JULY 18, 1984 "(A) the net operating loss for such taxable year, reduced by any portion thereof attributable to— "(i) a foreign expropriation loss, or "(ii) a product liability loss, or "(B) the sum of the amounts allowable as a deduction under this chapter (other than any deduction described in 3r subsection (j)(1)(B)) which— "(i) is taken into account in computing the net operating loss for such taxable year, and "(ii) is for an amount incurred with respect to a liability which arises under a Federal or State law or out of any tort of the taxpayer and— "(I) in the case of a liability arising out of a Federal or State law, the act (or failure to act) '• ate 5 aiik'o. giving rise to such liability occurs at least 3 years before the beginning of such taxable year, or "(II) in the case of a liability arising out of a tort, such liability arises out of a series of actions (or failures to act) over an extended period of time a substantial portion of which occurs at least 3 years before the beginning of such taxable year. A liability shall not be taken into account under the preceding sentence unless the taxpayer used an accrual method of accounting throughout the period or periods during which the acts or failures to act giving rise to such liability occurred. "(2)
 * 4 i,,j

SPECIAL RULE FOR NUCLEAR POWERPLANTS.—Except as

98 STAT. 607

"

,^,,,^ ?u

muii ia|.D8lJf«

„,,., ^o.. „

provided in regulations prescribed by the Secretary, that portion of a deferred statutory or tort liability loss which is attributable to amounts incurred in the decommissioning of a nuclear powerplant (or any unit thereof) may, for purposes of subsection (b)(l)(K), be carried back to each of the taxable years during the period— "(A) beginning with the taxable year in which such plant (or unit thereof) was placed in service, and "(B) ending with the taxable year preceding the loss year. "(3) COORDINATION WITH SUBSECTION (b)(2).—In applying paragraph (2) of subsection (b), a deferred statutory or tort liability loss shall be treated in a manner similar to the manner in which a foreign expropriation loss is treated. "(4) No CARRYBACK TO TAXABLE YEARS BEGINNING BEFORE JANUARY 1, 1984.—No deferred statutory or tort liability loss may be carried back to a taxable year beginning before January 1, 1984, unless such loss may be carried back to such year without regard to subsection (b)(l)(K)." (3) CONFORMING AMENDMENTS.—

(A) Clause (i) of section 172(b)(1)(A) is amended by striking out "and (J)" and inserting in lieu thereof "(J), and (K)". (B) Subsections (h) and (j) of section 172 are each amended by striking out "subsection (b)" in the matter preceding paragraph (1) and inserting in lieu thereof "this section".

26 USC 172

(e) (CONFORMING AMENDMENT.—Paragraph (4) of section 461(f) (re-

26 USC 461

lating to contested liabilities) is amended by inserting "determined after application of subsection (h)" after "taxable year)". (f) INCLUSION IN INCOME OF NUCLEAR DECOMMISSIONING C!OSTS INCLUDED IN THE TAXPAYER'S RATE BASE.—

''•6.'• d&

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/656

 98 STAT. 608

PUBLIC LAW 98-369—JULY 18, 1984 (1) IN GENERAL.—Part II of subchapter B of chapter 1 (relating to items specifically included in gross income) is amended by adding at the end thereof the following new section:

26 USC 88.

"SEC. 88. CERTAIN AMOUNTS WITH RESPECT TO NUCLEAR DECOMMISSIONING COSTS.

"In the case of any taxpayer who is required to include the amount of any nuclear decommissioning costs in the taxpayer's cost of service of ratemaking purposes, there shall be includible in the gross income of such taxpayer the amount so included for any taxable year." (2) CONFORMING 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: 26 USC 461 note.

26 USC 1 et seq. Ante, p. 598. Ante, p. 598.

"Sec. 88. Certain amounts with respect to nuclear decommissioning costs." (g) EFFECTIVE D A T E S. —

(1) IN GENERAL.—Except as provided in this subsection and subsections (h) and (i), the amendments made by this section shall apply to amounts with respect to which a deduction would be allowable under chapter 1 of the Internal Revenue Code of 1954 (determined without regard to such amendments) after— (A) in the case of amounts to which section 461(h) of such Code (as added by such amendments) applies, the date of the enactment of this Act, and (B) in the case of amounts to which section 461(i) of such Code (as so added) applies, after March 31, 1984. (2) TAXPAYER MAY ELECT EARLIER APPLICATION.—

. "^ •

(A) IN GENERAL.—In the case of amounts described in paragraph (1)(A), a taxpayer may elect to have the amendments made by this section apply to amounts which— (i) are incurred before the date of the enactment of this Act (determined without regard to such amendments), and (ii) are incurred on or after the date of the enactment of this Act (determined with regard to such amendments). (B) ELECTION TREATED AS CHANGE IN THE METHOD OF AC-

•71 oau?!:

Ante, p. 598. 26 USC 461 note.

COUNTING.—For purposes of section 481 of the Internal Revenue Code of 1954, if an election is made under subparagraph (A) with respect to any amount, the application of the amendments made by this section shall be treated as a change in method of accounting— (i) initiated by the taxpayer, (ii) made with the consent of the Secretary of the Treasury, and (iii) with respect to which section 481 of such Code shall be applied by substituting a 3-year adjustment period for a 10-year adjustment period. (3) SECTION 461(h) TO APPLY IN CERTAIN CASES.—Notwithstanding paragraph (1), section 461(h) of the Internal Revenue Code of 1954 (as added by this section) shall be treated as being in effect to the extent necessary to carry out any amendments made by this section which take effect before section 461(h). (h) EXCEPTION TRACTS.—If—

FOR CERTAIN

EXISTING

ACTIVITIES AND CON-

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/657

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 609

(1) EXISTING ACCOUNTING PRACTICES.—If, on March 1, 1984, any taxpayer was regularly computing his deduction for mining reclamation activities under a current cost method of accounting (as determined by the Secretary of the Treasury or his delegate), the liability for reclamation activities— (A) for land disturbed before the date of the enactment of this Act, or (B) to which paragraph (2) applies, shall be treated as having been incurred when the land was disturbed. (2) FIXED PRICE SUPPLY CONTRACT.—

•»**

(A) IN GENERAL.—In the case of any fixed price supply contract entered into before March 1, 1984, the amendments made by subsection (b) shall not apply to any minerals extracted from such property which are sold pursuant to such contract. (B) No EXTENSION OR RENEGOTIATION.—Subparagraph (A)

'^

shall not apply— ^, (i) to any extension of any contract beyond the period SIB J'guch contract was in effect on March 1, 1984, or f (ii) to any renegotiation of, or other change in, the •inc' It terms and conditions of such contract in effect on March 1, 1984. (i) TRANSITIONAL RULE FOR ACCRUED VACATION PAY.— (1) IN GENERAL.—In the case of any taxpayer— (A) with respect to whom a deduction was allowable (other than under section 463 of the Internal Revenue Code of 1954) for vested accrued vacation pay for the last taxable year ending before the date of the enactment of this Act, and (B) who elects the application of section 463 of such Code for the first taxable year ending after the date of the enactment of this Act, then, for purposes of section 463(b) of such Code, the opening balance of the taxpayer with respect to any vested accrued vacation pay shall be determined under section 463(b)(1) of such Code. (2) VESTED ACCRUED VACATION PAY.—For purposes of this subsection, the term "vested accrued vacation pay" means any amount allowable under section 162(a) of such Code with respect to vacation pay of employees of the taxpayer (determined without regard to section 463 of such Code).

26 USC 461 note.

,-; „,;•: - i

SEC. 92. TREATMENT OF CERTAIN DEFERRED PAYMENTS FOR USE OF PROPERTY OR SERVICES.

(a) GENERAL RULE.—Subpart C of part II of subchapter E of chapter 1 (relating to taxable year for which deduction is taken) is amended by adding at the end thereof the following new section: "SEC. 467. CERTAIN PAYMENTS FOR THE USE OF PROPERTY OR SERVICES.

"(a) ACCRUAL METHOD ON PRESENT VALUE BASIS.—In the case of the lessor or lessee under any section 467 rental agreement, there shall be taken into account for purposes of this title for any taxable year the sum of— "(1) the amount of the rent which accrues during such taxable year as determined under subsection (b), and

26 USC 467.

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/658

 98 STAT. 610

PUBLIC LAW 98-369—JULY 18, 1984 "(2) interest for the year on the amounts which were taken into account under this subsection for prior taxable years and which are unpaid. "(b) ACCRUAL OF RENTAL PAYMENTS.— "(1) ALLOCATION FOLLOWS AGREEMENT.—Except as provided in

paragraph (2), the determination of the amount of the rent under any section 467 rental agreement which accrues during any taxable year shall be made— "(A) by allocating rents in accordance with the agreement, and "(B) by taking into account any rent to be paid after the close of the period in an amount determined under regulations which shall be based on present value concepts. "(2)

CONSTANT RENTAL ACCRUAL IN CASE OF CERTAIN TAX

AVOIDANCE TRANSACTIONS, ETC.—In the case of any section 467 rental agreement to which this paragraph applies, the portion of the rent which accrues during any taxable year shall be that portion of the constant rental amount with respect to such agreement which is allocable to such taxable year. "(3) AGREEMENTS TO WHICH PARAGRAPH (2)

^*^''

'

APPLIES.—Para-

graph (2) applies to any rental payment agreement if— "(A) such agreement is a disqualified leaseback or longterm agreement, or "(B) such agreement does not provide for the allocation referred to in paragraph (1)(A). "(4) DISQUALIFIED LEASEBACK OR LONG-TERM AGREEMENT.—For

purposes of this subsection, the term 'disqualified leaseback or long-term agreement' means any section 467 rental agreement if— "(A) such agreement is part of a leaseback transaction or such agreement is for a term in excess of 75 percent of the statutory recover period for the property, and "(B) a principal purpose for providing increasing rents under the agreement is the avoidance of tax imposed by this subtitle. Regulations.

"(5) EXCEPTIONS TO DISQUALIFICATION IN CERTAIN CASES.—The

Secretary shall prescribe regulations setting forth circumstances under which agreements will not be treated as disqualified leaseback or long-term agreements, including circumstances relating to— "(A) changes in amounts paid determined by reference to price indices, "(B) rents based on a fixed percentage of lessee receipts or similar amounts, "(C) reasonable rent holidays, or "(D) changes in amounts paid to unrelated 3rd parties. "(c) RECAPTURE OF PRIOR UNDERSTATED INCLUSIONS UNDER LEASEBACK OR LONG-TERM AGREEMENTS.— "(1) IN GENERAL.—If—

'

"(A) the lessor under any section 467 rental agreement disposes of any property subject to such agreement during the term of such agreement, and "(B) such agreement is a leaseback or long-term agreement to which paragraph (2) of subsection (b) did not apply, the recapture amount shall be treated as ordinary income. Such gain shall be recognized notwithstanding any other provision of this subtitle.

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/659

 PUBLIC LAW 98-369—JULY 18, 1984 "(2) RECAPTURE AMOUNT.—For purposes of paragraph (1), the term 'recapture amount' means the lesser of^ "(A) the prior understated inclusions, or "(B) the excess of the amount realized (or in the case of a disposition other than a sale, exchange, or involuntary conversion, the fair market value of the property) over the adjusted basis of such property. The amount determined under subparagraph (B) shall be reduced by the amount of any gain treated as ordinary income on the disposition under any other provision of this subtitle. "(3) PRIOR UNDERSTATED INCLUSIONS.—For purposes of this subsection, the term 'prior understated inclusion' means the excess (if any) of^ "(A) the amount which would have been taken into account by the lessor under subsection (a) for periods before the disposition if subsection (b)(2) had applied to the agreement, over "(B) the amount taken into account under subsection (a) by the lessor for periods before the disposition. "(4) LEASEBACK OR LONG-TERM AGREEMENT.—For purposes of this subsection, the term 'leaseback or long-term agreement' means any agreement described in subsection (b)(3)(A). "(5) SPECIAL RULES.—Under regulations prescribed by the Secretary— "(A) exceptions similar to the exceptions applicable under section 1245 or 1250 (whichever is appropriate) shall apply for purposes of this subsection, "(B) any transferee in a disposition excepted by reason of subparagraph (A) who has a transferred basis in the property shall be treated in the same manner as the transferor, and "(C) for purposes of sections 163(d), 170(e), 341(e)(12), i3ihi f.if 453B(d)(2), and 751(c), amounts treated as ordinary income under this section shall be treated in the same manner as amounts treated as ordinary income under section 1245 or 1250.

98 STAT. 611

M'^- - i r;mk V

"(d) SECTION 467 RENTAL AGREEMENTS.—

"(1) IN GENERAL.—Except as otherwise provided in this subsection, the term 'section 467 rental agreements' means any rental agreement for the use of tangible property under which— "(A) there is at least one amount allocable to the use of property during a calendar year which is to be paid after the close of the calendar year following the calendar year in which such use occurs, or "(B) there are increases in the amount to be paid as rent under the agreement. "(2) SECTION NOT TO APPLY TO AGREEMENTS INVOLVING PAY-

1.

MENTS OF $250,000 OR LESS.—This section shall not apply to any amount to be paid for the use of property if the sum of the following amounts does not exceed $250,000— "(A) the aggregate amount of payments received as consideration for such use of property, and "(B) the aggregate value of any other consideration to be received for such use of property. For purposes of the preceding sentence, rules similar to the rules of clauses (ii) and (iii) of section 1274(c)(2)(C) shall apply. Ante, p. 538.

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/660

 98 STAT. 612

PUBLIC LAW 98-369—JULY 18, 1984 "(e) DEFINITIONS.—For purposes of this section— "(1) CONSTANT RENTAL AMOUNT.—The term 'constant rental amount' means, with respect to any section 467 rental agreement, the amount which, if paid as of the close of each lease period under the agreement, would result in an aggregate present value equal to the present value of the aggregate payments required under the agreement. "(2) LEASEBACK TRANSACTION.—A transaction is a leaseback transaction if it involves a leaseback to any person who had an interest in such property at any time within 2 years before such leaseback (or to a related person). "(3) STATUTORY RECOVERY PERIOD.— > "(A) IN GENERAL.— "In the case of property which is: The statutory recovery period is: 3-year property 3 years 5-year property 5 years 10-year property 10 years Low-income housing 15 years 15-year public utility property 15 years 18-year real property 18 years "(B) SPECIAL RULE FOR PROPERTY WHICH IS NOT RECOVERY

Ante, p. 538.

PROPERTY.—In the case of any property which is not recovery property, subparagraph (A) shall be applied as if such property were recovery property. "(4) DISCOUNT AND INTEREST RATE.—For purposes of computing present value and interest under subsection (a)(2), the rate used shall be equal to 110 percent of the applicable Federal rate determined under section 1274(d) (compounded semiannually) which is in effect at the time the agreement is entered into with respect to debt instruments having a maturity equal to the term of the agreement. "(5) RELATED PERSON.—The term 'related person' has the meaning given to such term by section 168(d)(4)(D). "(6) CERTAIN OPTIONS OF LESSEE TO RENEW NOT TAKEN INTO

ACCOUNT.—Except as provided in regulations prescribed by the Secretary, there shall not be taken into account in computing the term of any agreement for purposes of this section any extension which is solely at the option of the lessee. "(f) COMPARABLE RULES WHERE AGREEMENT FOR DECREASING PAY-

MENTS.—Under regulations prescribed by the Secretary, rules comparable to the rules of this section shall also apply in the case of any agreement where the amount paid under the agreement for the use of property decreases during the term of the agreement. "(g) COMPARABLE RULES FOR SERVICES.—Under regulations prescribed by the Secretary, rules comparable to the rules of subsection (a)(2) shall also apply in the case of payments for services which meet requirements comparable to the requirements of subsection (d). "(h) REGULATIONS.—The Secretary shall prescribe such regulations as may be appropriate to carry out the purposes of this section, including regulations providing for the application of this section in the case of contingent payments." (b) CLERICAL AMENDMENT.—The table of sections for subpart C of part II of subchapter E of chapter 1 is amended by adding at the end thereof the following new item: 26 USC 467 note.

Sec. 467. Certain payments for use of property or service.' (c) EFFECTIVE D A T E S. —

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/661

 PUBLIC LAW 98-369—JULY 18, 1984 (1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section shall apply with respect to agreements entered into after June 8, 1984. (2) EXCEPTIONS.—The amendments made by this section shall not apply— (A) to any agreement entered into pursuant to a written agreement which was binding on June 8, 1984, and at all times thereafter, .-,., (B) subject to the provisions of paragraph (3), to any agreement to lease property if— (i) there was in effect a firm plan, evidenced by a board of directors' resolution, memorandum of agreement, or letter of intent on March 15, 1984, to enter 0; into such an agreement, and ff (ii) construction of the property was commenced (but i:i such property was not placed in service) on or before Ml March 15, 1984, and -cal a (C) to any agreement to lease property if— (i) the lessee of such property adopted a firm plan to lease the property, evidenced by a resolution of the Finance Committee of the Board of Directors of such lessee, on February 10, 1984, (ii) the sum of the present values of the rents payable , by the lessee under the lease at the inception thereof equals at least $91,223,034, assuming for purposes of this clause— (I) the annual discount rate is 12.6 percent, (II) the initial payment of rent occurs 12 months after the commencement of the lease, and (III) subsequent payments of rents occur on the anniversary date of the initial payment, and (iii) during— (I) the first 5 years of the lease, at least 9 percent of the rents payable by the lessee under the agreement are paid, and (II) the second 5 years of the lease, at least 16.25 percent of the rents payable by the lessee under the agreement are paid. ,v,r nParagraph (3)(B)(ii)(II) shall apply for purposes of clauses (ii) and (iii) of subparagraph (C), as if, as of the beginning of the last stage, the separate agreements were treated as 1 single agreement relating to all property covered by the agreements, including any property placed in service before the property to which the agreement for the last stage relates. If the lessor under the agreement described in subparagraph (C) leases the property from another person, this exception shall also apply to any agreement between the lessor irfi;:. ' and such person which is integrally related to, and entered into at the same time as, such agreement, and which calls for comparable payments of rent over the primary term of the agreement.

98 STAT. 613

-i >-^ d-

= «,

,'!;}:'•&

(3) SCHEDULE OF DEEMED RENTAL PAYMENTS.—

(A) IN GENERAL.—In any case to which paragraph (2)(B) applies, for purposes of the Internal Revenue Code of 1954, 26 USC i et seq. the lessor shall be treated as having received or accrued

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/662

 98 STAT. 614

PUBLIC LAW 98-369—JULY 18, 1984 (and the lessee shall be treated as having paid or incurred) rents equal to the greater of— (i) the amount of rents actually paid under the agreement during the taxable year, or (ii) the amount of rents determined in accordance with the schedule under subparagraph (B) for such taxable year,

"

(B) SCHEDULE.—

(i) IN GENERAL.—The schedule under this subparagraph is as follows: >

Portion of lease term: 1st Vs 2nd % 3rd 1/5

'•^.^,U\

Cumulative percentage of total rent deemed paid: 10 25 45

4Jj ^

rjQ

Last V k 100. (ii) OPERATING RULES.—For purposes of this sched-

ule— (I) the rent allocable to each taxable year within any portion of a lease term described in such schedule shall be a level pro rata amount properly allocable to such taxable year, and (II) any agreement relating to property which is to be placed in service in 2 or more stages shall be treated as 2 or more separate agreements. (C) PARAGRAPH NOT TO APPLY.—This paragraph shall not apply to any agreement if the sum of the present values of all payments under the agreement is greater than the sum of the present value of all the payments deemed to be paid or received under the schedule under subparagraph (B). For purposes of computing any present value under this subparagraph, the annual discount rate shall be equal to 12 percent, compounded semiannually. SEC. 93. AMORTIZATION OF CONSTRUCTION PERIOD INTEREST AND TAXES FOR RESIDENTIAL REAL PROPERTY HELD BY CORPORATIONS. 26 USC 189. (a) IN GENERAL.—Subsection (d) of section 189 (relating to amortization of real property construction period interest and taxes) is amended— (1) by striking out paragraph (2), and (2) by redesignating paragraph (3) as paragraph (2). 26 USC 189 note. (b) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 1984, with respect to construction beginning after March 15, 1984. 26 USC 195.

\»t Vi i 3e

SEC. 94. CAPITALIZATION OF START-UP EXPENDITURES. (a) IN GENERAL.—Section 195 (relating to start-up expenditures) is amended to read as follows: "SEC. 195. START-UP EXPENDITURES. "(a) CAPITAUZATION OF EXPENDITURES.—Except as otherwise provided in this section, no deduction shall be allowed for start-up expenditures. "(b) ELECTION TO AMORTIZE.—

3

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/663

 PUBLIC LAW 98-369—JULY 18, 1984 •3 J

98 STAT. (315

«Q) jjj GENERAL.—Start-up expenditures may, at the election of the taxpayer, be treated as deferred expenses. Such deferred expenses shall be allowed as a deduction prorated equally over such period of not less than 60 months as may be selected by the taxpayer (beginning with the month in which the active trade or business begins). "(2) DISPOSITIONS BEFORE CLOSE OF AMORTIZATION PERIOD.—In

any case in which a trade or business is completely disposed of by the taxpayer before the end of the period to which paragraph (1) applies, any deferred expenses attributable to such trade or business which were not allowed as a deduction by reason of this section may be deducted to the extent allowable under section 165. "(c) DEFINITIONS.—For purposes of this section— "(1) START-UP EXPENDITURES.—The term 'start-up expenditure' means any amount— "(A) paid or incurred in connection with— 'O "(i) investigating the creation or acquisition of an active trade or business, or "(ii) creating an active trade or business, or "(iii) any activity engaged in for profit and for the production of income before the day on which the active trade or business begins, in anticipation of such >: activity becoming an active trade or business, and "(B) which, if paid or incurred in connection with the operation of an existing active trade or business (in the same field as the trade or business referred to in subpara>"» graph (A)), would be allowable as a deduction for the taxable year in which paid or incurred. The term 'start-up expenditure' does not include any amount with respect to which a deduction is allowable under section 163(a), 164, or 174. -rj

f

to.--

..(,

. i«>.

)ri? &.

,>...^

"(2) BEGINNING OF TRADE OR BUSINESS.—

ifii-

"(A) IN GENERAL.—Except as provided in subparagraph (B), the determination of when an active trade or business begins shall be made in accordance with such regulations as the Secretary may prescribe. "(B) ACQUIRED TRADE OR BUSINESS.—An acquired active trade or business shall be treated as beginning when the taxpayer acquires it.

"(d) ELECTION.— "(1) TIME FOR MAKING ELECTION.—An

election under subsection (b) shall be made not later than the time prescribed by law for filing the return for the taxable year in which the trade or business begins (including extensions thereof). "(2) SCOPE OF ELECTION.—The period selected under subsection (b) shall be adhered to in computing taxable income for the taxable year for which the election is made and all subsequent taxable years." (b) CONFORMING AMENDMENT.—The table of sections for part VI of subchapter B of chapter 1 is amended by striking out the item relating to section 195 and inserting in lieu thereof the following: "Sec. 195. Start-up expenditures."

(c) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after June 30, 1984.

26 USC 195 note.

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/664

 98 STAT. 616

PUBLIC LAW 98-369—JULY 18, 1984 SEC. 95. LIFO CONFORMITY RULES APPLIED ON CONTROLLED GROUP BASIS.

26 USC 472.

(a) GENERAL RULE.—Section 472 (relating to last-in, flrst-out inventories) is amended by a d d i n g a t the end thereof the following new subsection: "(g) CONFORMITY RULES APPLIED ON CONTROLLED GROUP BASIS.—

"(1) IN GENERAL.—Except as otherwise provided in regulations, all members of the same group of financially related corporations shall be treated as 1 taxpayer for purposes of subsections (c) and (e)(2). "(2) GROUP OF FINANCIALLY RELATED CORPORATIONS.—For purposes of paragraph (1), the term 'group of financially related corporations' means— "(A) any affiliated group as defined in section 1504 determined by substituting '50 percent' for '80 percent' each Ante, p. 577. place it appears in section 1504(a) and without regard to section 1504(b), and r. "(B) any other group of corporations which consolidate or combine for purposes of financial statements." 26 USC 472 note. (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to taxable years beginning after the date of the enactment of this Act.

Subtitle H—Provisions Relating to Tax Straddles SEC. 101. REPEAL OF EXCEPTION FROM STRADDLE RULES FOR STOCK OPTIONS AND CERTAIN STOCK. (a) REPEAL OF EXCEPTION FOR STOCK OPTIONS.—

26 USC 1092.

(1) IN GENERAL.—Paragraph (2) of section 1092(d) (defining position) is amended to read as follows: "(2) POSITION.—The term 'position' means an interest (including a futures or forward contract or option) in personal property." (2) SECTIONS IO92 AND 263(g) NOT TO APPLY TO STRADDLES CONSISTING OF QUALIFIED COVERED CALL OPTIONS AND THE OPTIONED STOCK.—Subsection (c) of section 1092 (defining straddle)

is amended by adding at the end thereof the following new paragraph: "(4) EXCEPTION FOR CERTAIN STRADDLES CONSISTING OF QUALIFIED COVERED CALL OPTIONS AND THE OPTIONED STOCK.— "(A) IN GENERAL.—If^

.mo<i 3 M::u' %: 4

"(i) all the offsetting positions making up any straddle consist of 1 or more qualified covered call options and the stock to be purchased from the taxpayer under such options, and "(ii) such straddle is not part of a larger straddle, such straddle shall not be treated as a straddle for purposes of this section and section 263(g). "(B) QUALIFIED COVERED CALL OPTION DEFINED.—For purposes of subparagraph (A), the term 'qualified covered call option' means any option granted by the taxpayer to purchase stock held by the taxpayer (or stock acquired by the isffe taxpayer in connection with the granting of the option) but only if—

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/665

 PUBLIC LAW 98-369—JULY 18, 1984 i - :

, <

,

98 STAT. 617

"(i) such option is traded on a national securities exchange which is registered with the Securities and Exchange Commission or other market which the Secretary determines has rules adequate to carry out the purposes of this paragraph, .• c i A i "(ii) such option is granted more than 30 days before the day on which the option expires, "(iii) such option is not a deep-in-the-money option, "(iv) such option is not granted by an options dealer (within the meaning of section 1256(g)(8)) in connection Post, p. 620. with his activity of dealing in options, and "(v) gain or loss with respect to such option is not ordinary income or loss. "(C) DEEP-IN-THE-MONEY OPTION.—For purposes of subparagraph (B), the term 'deep-in-the-money option' means an option having a strike price lower than the lowest qualified bench mark. "(D) LOWEST QUALIFIED BENCH MARK.—

"(i) IN GENERAL.—Except as otherwise provided in this subparagraph, for purposes of subparagraph (C), the term 'lowest qualified bench mark' means the highest available strike price which is less than the applicable stock price.

5..

"(ii) SPECIAL RULE WHERE OPTION IS FOR PERIOD MORE

^,.^^

THAN 90 DAYS AND STRIKE PRICE EXCEEDS $50.—In the

case of an option— "(I) which is granted more than 90 days before the date on which such option expires, and* "(II) with respect to which the strike price is more than $50, the lowest qualified bench mark is the second highest available strike price which is less than the applicable stock price.

"(iii) 85 PERCENT RULE WHERE APPLICABLE STOCK PRICE $25 OR LESS.—If—

q...

"(I) the applicable stock price is $25 or less, and "(II) but for this clause, the lowest qualified bench mark would be less than 85 percent of the applicable stock price, the lowest qualified bench mark shall be treated as equal to 85 percent of the applicable stock price. "(iv) LIMITATION WHERE APPLICABLE STOCK PRICE $ 1 5 0 OR LESS.—If—

fjj^.;, T,, .^ ,.

"(I) the applicable stock price is $150 or less, and "(II) but for this clause, the lowest qualified bench mark would be less than the applicable stock price reduced by $10, the lowest qualified bench mark shall be treated as equal to the applicable stock price reduced by $10. "(E) SPECIAL YEAR-END RULE.—Subparagraph (A) shall not apply to any straddle for purposes of section 1092(a) if— "(i) the qualified covered call options referred to in such subparagraph are closed during any taxable year, "(ii) gain on disposition of the stock to be purchased from the taxpayer under such options is includible in gross income for a later taxable year, and

i-joi r j H ^

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/666

 98 STAT. 618

PUBLIC LAW 98-369—JULY 18, 1984 "(iii) such stock was not held by the taxpayer for 30 days or more after the closing of such options. For purposes of the preceding sentence, the rules of paragraphs (3) (other than subparagraph (B) thereof) and (4) of section 246(c) shall apply in determining the period for which the taxpayer holds the stock. "(F) STRIKE PRICE.—For purposes of this paragraph, the term 'strike price' means the price at which the option is exercisable.

Ante, p. 567.

'

- \

"(G) APPLICABLE STOCK PRICE.—For purposes of subpara-

graph (D), the term 'applicable stock price' means, with respect to any stock for which an option has been granted— "(i) the closing price of such stock on the most recent day on which such stock was traded before the date on which such option was granted, or "(ii) the opening price of such stock on the day on which such option was granted, but only if such price is greater than 110 percent of the price determined under clause (i). "(H) REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this paragraph. Such regulations may include modifications to the provisions of this paragraph which are appropriate to take account of changes in the practices of option exchanges or to prevent the use of options for tax avoidance purposes." (b) REPEAL OF EXCEPTION FOR STOCK.—

26 USC 1092.

(1) IN GENERAL.—Paragraph (1) of section 1092(d) (defining personal property) is amended by striking out "(other than stock)". (2) EXCEPTION WHERE STRADDLE CONSISTS OF HOLDING STOCK.—

Subsection (d) of section 1092 is amended by redesignating paragraphs (3), (4), and (5) as paragraphs (4), (5), and (6), respectively, and by inserting after paragraph (2) the following new paragraph: "(3) SPECIAL RULES FOR STOCK.—For purposes of paragraph

(D"(A) IN GENERAL.—Except as provided in subparagraph (B), the term 'personal property' does not include stock. "(B) EXCEPTIONS.—The term 'personal property' includes— "(i) any stock which is part of a straddle at least 1 of the offsetting positions of which is— "(I) an option with respect to such stock or substantially identical stock or securities, or "(II) under regulations, a position with respect to substantially similar or related property (other than stock), and "(ii) any stock of a corporation formed or availed of to take positions in personal property which offset positions taken by any shareholder. "(C) SPECIAL RULES.—

"(i) For purposes of subparagraph (B), subsection (c) and paragraph (4) shall be applied as if stock described in clause (i) or (ii) of subparagraph (B) were personal property.

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/667

 PUBLIC LAW 98-369—JULY 18, 1984

8i-4 ! T O ff

98 STAT. 619

"(ii) For purposes of determining whether subsection (e) applies to any transaction with respect to stock described in clause (ii) of subparagraph (B), all includ",{ ible corporations of an affiliated group (within the meaning of section 1504(a)) shall be treated as 1 Ante, p. 517. taxpayer."

(c) TREATMENT OF GAIN OR LOSS AND SUSPENSION OF HOLDING PERIOD WHERE TAXPAYER GRANTOR OF OPTION TO BUY STOCK.—

Section 1092 is amended by redesignating subsection (f) as subsection (g) and by inserting after subsection (e) the following new subsection:

26 USC 1092.

"(f) TREATMENT OF GAIN OR LOSS AND SUSPENSION OF HOLDING PERIOD WHERE TAXPAYER GRANTOR OF QUALIFIED COVERED CALL

OPTION.—If a taxpayer holds any stock and grants a qualified covered call option to purchase such stock with a strike price less than the applicable stock price— "(1) TREATMENT OF LOSS.—Any loss with respect to such option shall be treated as long-term capital loss if, at the time such loss is realized, gain on the sale or exchange of such stock would be treated as long-term capital gain. "(2) SUSPENSION OF HOLDING PERIOD.—Except for purposes of

section 851(b)(3), the holding period of such stock shall not include any period during which the taxpayer is the grantor of such option." (d) TREATMENT OF IDENTIFIED STRADDLES INVOLVING SECTION 1256

CONTRACTS.—Paragraph (4) of subsection (d) of section 1092 is amended to read as follows:

Ante, p. 618.

"(4) SPECIAL RULE FOR SECTION 1256 CONTRACTS.— "(A) GENERAL RULE.—In the case of a straddle

i

at least 1 (but not all) of the positions of which are section 1256 contracts, the provisions of this section shall apply to any section 1256 contract and any other position making up such straddle. "(B) SPECIAL RULE FOR IDENTIFIED STRADDLES.—For purposes of subsection (a)(2) (relating to identified straddles), subparagraph (A) and section 1256(a)(4) shall not apply to a straddle all of the offsetting positions of which consist of section 1256 contracts."

(e) EFFECTIVE DATES.—

26 USC 1092

(1) IN GENERAL.—Except as otherwise provided in this subsec- "o^e. tion, the amendments made by this section shall apply to positions established after December 31, 1983, in taxable years ending after such date. (2) SPECIAL RULE FOR OFFSETTING POSITION STOCK.—In the case of any stock of a corporation formed or availed of to take positions in personal property which offset positions taken by any shareholder, the amendments made by this section shall apply to positions established on or after May 23, 1983, in taxable years ending on or after such date. (3) SUBSECTION (C).—The amendment made by subsection (c) shall apply to positions established after June 30, 1984, in taxable years ending after such date. (4) SUBSECTION (d).—The amendment made by subsection (d) shall apply to positions established after the date of the enactment of this Act in taxable years ending after such date.

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/668

 98 STAT. 620

PUBLIC LAW 98-369—JULY 18, 1984 SEC. 102. SECTION 1256 EXTENDED TO CERTAIN OPTIONS. (a) GENERAL RULE.—

26 USC 1256. V; i.s-f

-i;

i;

.u

(1) Section 1256 (relating to regulated futures contracts marked to market) is amended— (A) by striking out "regulated futures contract" each place it appears and inserting in lieu thereof "section 1256 contract", and (B) by striking out "regulated futures contracts" each place it appears and inserting in lieu thereof "section 1256 contracts". (2) Subsection (b) of section 1256 is amended to read as follows: "(b) SECTION 1256 CONTRACT DEFINED.—For purposes of this section, the term 'section 1256 contract' means— "(1) any regulated futures contract, "(2) any foreign currency contract, "(3) any nonequity option, and "(4) any dealer equity option." (3) Subsection (g) of section 1256 is amended to read as follows: "(g) DEFINITIONS.—For purposes of this section— "(1) REGULATED FUTURES CONTRACTS DEFINED.—The term 'regulated futures contract' means a contract— "(A) with respect to which the amount required to be deposited and the amount which may be withdrawn depends on a system of marking to market, and "(B) which is traded on or subject to the rules of a qualified board or exchange. "(2) FOREIGN CURRENCY CONTRACT DEFINED.— "(A) FOREIGN CURRENCY CONTRACT.—The

term 'foreign currency contract' means a contract— "(i) which requires delivery of, or the settlement of which depends on the value of, a foreign currency which is a currency in which positions are also traded through regulated futures contracts, "(ii) which is traded in the interbank market, and "(iii) which is entered into at arm's length at a price determined by reference to the price in the interbank market. "(B) REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of subparagraph (A), including regulations excluding from the application of subparagraph (A) any contract (or type of contract) if its application thereto would be inconsistent with such purposes. "(3) NONEQUITY OPTION.—The term 'nonequity option' means any listed option which is not an equity option. "(4) DEALER EQUITY OPTION.—The term 'dealer equity option' means, with respect to an options dealer, any listed option £,. which— "(A) is an equity option, "(B) is purchased or granted by such options dealer in the normal course of his activity of dealing in options, and "(C) is listed on the qualified board or exchange on which such options dealer is registered. "(5) LISTED OPTION.—The term 'listed option' means any , option (other than a right to acquire stock from the issuer)

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/669

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 621

which is traded on (or subject to the rules of) a qualified board or exchange. "(6) EQUITY OPTION.—

"(A) IN GENERAL.—Except as provided in subparagraph (B), the term 'equity option' means any option— "(i) to buy or sell stock, or "(ii) the value of which is determined directly or indirectly by reference to any stock (or group of stocks) or stock index.

^-* ji 1^

«^g^ EXCEPTION FOR CERTAIN OPTIONS REGULATED BY COMMODITIES FUTURES TRADING COMMISSION.—The term 'equity

^'

option' does not include any option with respect to any group of stocks or stock index if— "(i) there is in effect a designation by the CommodI ities Futures Trading Commission of a contract market for a contract based on such group of stocks, or index, or "(ii) the Secretary determines that such option meets the requirements of law for such a designation. "(7) QUALIFIED BOARD OR EXCHANGE.—The term 'qualified board or exchange' means— "(A) a national securities exchange which is registered with the Securities and Exchange Commission, "(B) a domestic board of trade designated as a contract market by the Commodity Futures Trading Commission, or j^;, "(C) any other exchange, board of trade, or other market which the Secretary determines has rules adequate to carry out the purposes of this section. tjfl' g "(8) OPTIONS DEALER.— "(A) IN GENERAL.—The term 'options dealer' means any person registered with an appropriate national securities exchange as a market maker or specialist in listed options. "(B) PERSONS TRADING IN OTHER MARKETS.—In any case in which the Secretary makes a determination under subparagraph (C) of paragraph (7), the term 'options dealer' also includes any person whom the Secretary determines perit forms functions similar to the persons described in subparagraph (A). Such determinations shall be made to the extent appropriate to carry out the purposes of this section."

...,^,,,. ^ " ~^ ' ' " '

y^g Q.i^siu.

SJ).« yji..

(b) CAPITAL GAIN TREATMENT FOR TRADERS IN SECTION 1256 CON-

TRACTS.—Subsection (f) of section 1256 (relating to special rules) is amended by adding at the end thereof the following new paragraphs:

26 USC 1256.

"(3) CAPITAL GAIN TREATMENT FOR TRADERS IN SECTION 1256 CONTRACTS.—

"(A) IN GENERAL.—For purposes of this title, gain or loss from trading of section 1256 contracts shall be treated as gain or loss from the sale or exchange of a capital asset.

•'

"(B) EXCEPTION FOR CERTAIN HEDGING TRANSACTIONS.—

^

Subparagraph (A) shall not apply to any section 1256 contract to the extent such contract is held for purposes of hedging property if any loss with respect to such property in the hands of the taxpayer would be ordinary loss. "(C) TREATMENT OF UNDERLYING PROPERTY.—For purposes of determining whether gain or loss with respect to any property is ordinary income or loss, the fact that the taxpayer is actively engaged in dealing in or trading section

'''

'

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/670

 98 STAT. 622

PUBLIC LAW 98-369—JULY 18, 1984 1256 contracts related to such property shall not be taken into account. "(4) SPECIAL RULE FOR DEALER EQUITY OPTIONS OF LIMITED

PARTNERS OR LIMITED ENTREPRENEURS.—In the case of any gain or loss with respect to dealer equity options which are allocable to limited partners or limited entrepreneurs (within the meaning of subsection (e)(3))— "(A) paragraph (3) of subsection (a) shall not apply to any such gain or loss, and "(B) all such gains or losses shall be treated as short-term capital gains or losses, as the case may be." (c) APPLICATION OF SELF-EMPLOYMENT INCOME TAX TO OPTIONS AND COMMODITIES DEALERS.— (1) AMENDMENT TO THE INTERNAL REVENUE CODE OF 1954.—

26 USC 1402.

Section 1402 (relating to definitions for tax on self-employment income) is amended by adding at the end thereof the following new subsection: "(i) SPECIAL RULES FOR OPTIONS AND COMMODITIES DEALERS.—

Ante, p. 620.

Ante, p. 620.

"(1) IN GENERAL.—In determining the net earnings from selfemployment of any options dealer or commodities dealer— "(A) notwithstanding subsection (a)(3)(A), there shall not be excluded any gain or loss (in the normal course of the taxpayer's activity of dealing in or trading section 1256 contracts) from section 1256 contracts or property related to such contracts, and "(B) the deduction provided by section 1202 shall not apply. "(2) DEFINITIONS.—For purposes of this subsection— "(A) OPTIONS DEALER.—The term 'options dealer' has the meaning given such term by section 1256(g)(8). "(B) COMMODITIES DEALER.—The term 'commodities dealer' means a person who is actively engaged in trading section 1256 contracts and is registered with a domestic board of trade which is designated as a contract market by the Commodities Futures Trading Commission. "(C) SECTION 1256 CONTRACTS.—The term 'section 1256 contract' has the meaning given to such term by section 1256(b)." (2) AMENDMENT TO THE SOCIAL SECURITY ACT.—Section 211 of

42 USC 411.

26 USC 1256. 26 USC 1202. Ante, p. 620.

the Social Security Act is amended by adding at the end thereof the following new subsection: "(h)(1) In determining the net earnings from self-employment of any options dealer or commodities dealer— "(A) notwithstanding subsection (a)(3)(A), there shall not be excluded any gain or loss (in the normal course of the taxpayer's activity of dealing in or trading section 1256 contracts) from section 1256 contracts or property related to such contracts, and "(B) the deduction provided by section 1202 of the Internal Revenue Code of 1954 shall not apply. "(2) For purposes of this subsection— "(A) The term 'options dealer' has the meaning given such term by section 1256(g)(8) of such Code. "(B) The term 'commodities dealer' means a person who is actively engaged in trading section 1256 contracts and is registered with a domestic board of trade which is designated as a contract market by the Commodities Futures Trading Commission.

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/671

 PUBLIC LAW 98-369—JULY 18, 1984 "(C) The term 'section 1256 contracts' has the meaning given to such term by section 1256(b) of such Code."

98 STAT. 623 Ante, p. 620.

(d) TREATMENT UNDER SUBCHAPTER S OF OPTIONS AND COMMODITIES DEALERS.— (1) TAX IMPOSED ON CERTAIN CAPITAL GAINS NOT TO APPLY.—

Subsection (c) of section 1374 (relating to tax imposed on certain capital gains) is amended by adding at the end thereof the following new paragraph: "(4) TREATMENT OF CERTAIN GAINS OF OPTIONS AND COMMOD-

26 USC 1374. .':ji(n om fiu

ITIES DEALERS.— "(A) EXCLUSION OF CERTAIN CAPITAL GAINS.—For

purposes of this section, the net capital gain of any options dealer or \ f' commodities dealer shall be determined by not taking into ' account any gain or loss (in the normal course of the taxpayer's activity of dealing in or trading section 1256 contracts) from any section 1256 contract or property i. related to such a contract. "(B) DEFINITIONS.—For purposes of this paragraph— T' "(i) OPTIONS DEALER.—The term 'options dealer' has the meaning given to such term by section 1256(g)(8). Ante, p. 620. "(ii) COMMODITIES DEALER.—The term 'commodities dealer' means a person who is actively engaged in trading section 1256 contracts and is registered with a domestic board of trade which is designated as a contract market by the Commodities Futures Trading -; Commission. "(iii) SECTION 1256 CONTRACTS.—The term 'section e^fiR)! '. j^256 contracts' has the meaning given to such term by section 1256(b)." Ante, p. 620. (2) CERTAIN GAINS NOT TREATED AS PASSIVE INVESTMENT

INCOME.—Subparagraph (D) of section 1362(d)(3) (defining pas- 26 USC 1362. sive investment income) is amended by adding at the end thereof the following new clause: "(v) SPECIAL RULE FOR OPTIONS AND COMMODITIES

4

DEALERS.—In the case of any options or commodities dealer, passive investment income shall be determined by not taking into account any gain or loss described in section 1374(c)(4)(A)." (3) SUBCHAPTER S ELECTION.—If a commodities dealer or an

J

Supra. 26 USC 1362

note. options dealer— (A) becomes a small business corporation (as defined in section 1361(b) of the Internal Revenue Code of 1954) at any time before the close of the 75th day after the date of the enactment of this Act, and (B) makes the election under section 1362(a) of such Code before the close of such 75th day, then such dealer shall be treated as having received approval for and adopted a taxable year beginning on the first day during 1984 on which it was a small business corporation (as so defined) and ending on the date determined under section 1378 of such Code and such election shall be effective for such taxable year. (e) TECHNICAL AND CONFORMING AMENDMENTS.—

(1) Subsection (c) of section 1256 (relating to terminations, etc.) is amended— (A) by striking out "by taking or making delivery," in paragraph (1) and inserting in lieu thereof "by taking or

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/672

 98 STAT. 624

PUBLIC LAW 98-369—JULY 18, 19^4 making delivery, by exercise or being exercised, by assignment or being assigned, by lapse,", (B) by striking out "takes delivery under" in paragraph (2) and inserting in lieu thereof "takes delivery under or exercises", and (C) by striking out "TAKES DELIVERY ON" in the heading of paragraph (2) and inserting in lieu thereof "TAKES DELIVERY ON OR EXERCISES".

26 USC 1092.

Ante, p. 620. 26 USC 1212.

26 USC 1234A.

26 USC 1256.

26 USC 263.

(2) Paragraph (5) of section 1092(d) is amended to read as follows: "(5) SECTION 1256 CONTRACT.—The term 'section 1256 contract' has the meaning given such term by section 1256(b)." (3) Subsection (c) of section 1212 (relating to carryback of losses from regulated futures contracts to offset prior gains from such contracts) is amended— (A) by striking out "net commodity futures loss" each place it appears (including in any headings) and inserting in lieu thereof "net section 1256 contracts loss", (B) by striking out "regulated futures contracts" each place it appears (including in any headings) and inserting in lieu thereof "section 1256 contracts", (C) by striking out "regulated futures contract" each place it appears in paragraph (7)(A) (including the heading) and inserting in lieu thereof "section 1256 contract", and (D) by striking out "net commodity futures gain" each place it appears (including in any headings) and inserting in lieu thereof "net section 1256 contract gain". (4) Paragraph (2) of section 1234A (relating to gains or losses from certain terminations) is amended by striking out "a regulated futures contract" and inserting in lieu thereof "a section 1256 contract". (5) The section heading for section 1256 is amended by striking out "REGULATED FUTURES CONTRACTS" and inserting in lieu thereof "SECTION 1256 CONTRACTS". (6) The table of sections for part IV of subchapter P of chapter 1 is amended by striking out "Regulated futures contracts' in the item relating to section 1256 and inserting in lieu thereof "Section 1256 contracts". (7) Paragraph (2) of section 263(g) (defining interest and carrying charges) is amended to read as follows: "(2) INTEREST AND CARRYING CHARGES DEFINED.—For purposes

Ante, pp. 532, 547, 548.

of paragraph (1), the term 'interest and carrying charges' means the excess of— "(A) the sum of— "(i) interest on indebtedness incurred or continued to purchase or carry the personal property, and "(ii) all other amounts (including charges to insure, store, or transport the personal property) paid or incurred to carry the personal property, over "(B) the sum of— "(i) the amount of interest (including original issue discount) includible in gross income for the taxable year with respect to the property described in subparagraph (A), "(ii) any amount treated as ordinary income under section 1271(a)(3)(A), 1278, or 1281(a) with respect to such property for the taxable year, and

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/673

 PUBLIC LAW 98-369—JULY 18, 1984

•

"(iii) the excess of any dividends includible in gross income with respect to such property for the taxable year over the amount of any deduction allowable with respect to such dividends under section 243, 244, or 245. For purposes of subparagraph (A), the term 'interest' includes any amount paid or incurred in connection with personal property used in a short sale." (8) Subsection (g) of section 263 (relating to certain interest and carrying charges in the case of straddles) is amended by adding at the end thereof the following new paragraph:

98 STAT. 625

26 USC 263.

"(4) APPLICATION WITH OTHER PROVISIONS.— "(A) SUBSECTION (C).—In the case of any short sale, this

subsection shall be applied after subsection (h). "(B) SECTION 1277 OR 1282.—In the case of any obligation to which section 1277 or 1282 applies, this subsection shall be applied after section 1277 or 1282." (9) Section 1234A (relating to gains or losses from certain terminations) is amended by adding at the end thereof the following new sentence: "The preceding sentence shall not apply to the retirement of any debt instrument (whether or not through a trust or other participation arrangement)." (f) EFFECTIVE DATES.—

(1) IN GENERAL.—Except as otherwise provided in this subsection or subsection (g), the amendments made by this section shall apply to positions established after the date of the enactment of this Act, in taxable years ending after such date.

Ante, pp. 545, 549. 26 USC 1234A.

26 USC 1256 note.

(2) SPECIAL RULE FOR OPTIONS ON REGULATED FUTURES CON-

TRACTS.—In the case of any option with respect to a regulated futures contract (within the meaning of section 1256 of the Internal Revenue Code of 1954), the amendments made by this section shall apply to positions established after October 31, 1983, in taxable years ending after such date. (3) SPECIAL RULE FOR SELF-EMPLOYMENT TAX.—Except as provided in subsection (g)(2), the amendments made by subsection (c) shall apply to taxable years beginning after the date of the enactment of this Act. (4)

GAINS

OR LOSSES FROM

CERTAIN

TERMINATIONS.—The

amendment made by subsection (d)(9) shall apply as if included in the amendment made by section 505(a) of the Economic Recovery Tax Act of 1981, as amended by section 105(e) of the 20 USC 237 note, 238 Technical Corrections Act of 1982. (g) ELECTIONS WITH RESPECT TO PROPERTY HELD ON OR BEFORE THE DATE OF THE ENACTMENT OF THIS ACT.—At the election of the

taxpayer— (1) the amendments made by this section shall apply to all section 1256 contracts held by the taxpayer on the date of the enactment of this Act, effective for periods after such date in taxable years ending after such date, or (2) in lieu of an election under paragraph (1), the amendments made by this section shall apply to all section 1256 contracts held by the taxpayer at any time during the taxable year of the taxpayer which includes the date of the enactment of this Act. (h) ELECTIONS FOR INSTALLMENT PAYMENT OF TAX ATTRIBUTABLE TO STOCK OPTIONS.—

(1) IN GENERAL.—If the taxpayer makes an election under subsection (g)(2) and under this subsection—

26 USC 1234A. 26 USC 1256 note.

26 USC 1256 note.

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/674

 98 STAT. 626

PUBLIC LAW 98-369—JULY 18, 1984 (A) the taxpayer may pay part or all the tax for the taxable year referred to in subsection (g)(2) in 2 or more (but not exceeding 5) equal installments, and (B) the maximum amount of tax which may be paid in installments under this subsection shall be the excess of^ (i) the tax for such taxable year determined by taking into account subsection (g)(2), over (ii) the tax for such taxable year determined by taking into account subsection (g)(2) and by treating— (I) all section 1256 contracts which are stock options, and (II) any stock which was a part of a straddle including any such stock options, as having been acquired for a purchase price equal to their fair market value on the last business day of the preceding taxable year. Stock options and stock shall be taken into account under subparagraph (B)(ii) only if such options or stock were held on the last day of the preceding taxable year and only if income on such options or stock would have been ordinary income if such options or stock were sold at a gain on such last day. (2) DATE FOR PAYMENT OF INSTALLMENT.—

(A) If an election is made under this subsection, the first installment under paragraph (1) shall be paid on or before the due date for filing the return for the taxable year described in paragraph (1), and each succeeding installment shall be paid on or before the date which is 1 year after the date prescribed for payment of the preceding installment. (B) If a bankruptcy case or insolvency proceeding involving the taxpayer is commenced before the final installment is paid, the total amount of any unpaid installments shall be treated as due and payable on the day preceding the day on which such case or proceeding is commenced. (3) INTEREST IMPOSED.—For purposes of section 6601 of the Internal Revenue Code of 1954, the time for payment of any tax with respect to which an election is made under this subsection shall be determined without regard to this subsection. (4) FORM OF ELECTION.—An election under this subsection shall be made not later than the time for filing the return for the taxable year described in paragraph (1) and shall be made in the manner and form required by regulations prescribed by Secretary of the Treasury or his delegate. The election shall set forth— (A) the amount determined under paragraph (I)(B) and the number of installments elected by the taxpayer, (B) the property described in paragraph (l)(B)(ii), and the date on which such property was acquired, (C) the fair market value of the property described in paragraph (l)(B)(ii) on the last business day of the taxable year preceding the taxable year described in paragraph (1), and (D) such other information for purposes of carrying out the provisions of this subsection as may be required by such regulations. (5)

DELAY

OF

IDENTIFICATION

REQUIREMENT.—Section

1256(e)(2)(C) of the Internal Revenue Code of 1954 shall not

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/675

 PUBLIC LAW 98-369—JULY 18, 1984 apply to any stock option or stock acquired on or before the 60th day after the date of the enactment of this Act. (i) DEFINITIONS.—For purposes of subsections (g) and (h)— (1) SECTION 1256 CONTRACT.—The term "section 1256 contract" has the meaning given to such term by section 1256(b) of the Internal Revenue Code of 1954 (as amended by this section). (2) STOCK OPTION.—The term "stock option" means any option to buy or sell stock. SEC. 103. REGULATIONS UNDER SECTION 1092(b). (a) GENERAL RULE.—Subsection (b) of section 1092 (relating to character of gain or loss; wash sales) is amended to read as follows:

98 STAT. 627

26 USC 1256 "ote. Ante, p. 620. ,v.. 26 USC 1092.

"(b) REGULATIONS.—

"(1) IN GENERAL.—The Secretary shall prescribe such regulations with respect to gain or loss on positions which are a part of a straddle as may be appropriate to carry out the purposes of this section and section 263(g). To the extent consistent with such purposes, such regulations shall include rules applying the principles of subsections (a) and (d) of section 1091 and of subsections (b) and (d) of section 1233.

...

-..,-

,-

. ^ ^.

"(2) REGULATIONS RELATING TO MIXED STRADDLES.— "(A) ELECTIVE PROVISIONS IN LIEU OF SECTION 1233(d)

-'^" •

PRINCIPLES.—The regulations prescribed under paragraph (1) shall provide that— "(i) the taxpayer may offset gains and losses from positions which are part of mixed straddles— "(I) by straddle-by-straddle identification, or "(II) by the establishment (with respect to any class of activities) of a mixed straddle account for which gains and losses would be recognized (and offset) on a periodic basis, "(ii) such offsetting will occur before the application of section 1256, and section 1256(a)(3) will only apply to net gain or net loss attributable to section 1256 contracts, and "(iii) the principles of section 1233(d) shall not apply with respect to any straddle identified under clause (i)(I) or part of an account established under clause (i)(II). "(B) LIMITATION ON NET GAIN OR NET LOSS FROM MIXED

STRADDLE ACCOUNT.—In the case of any mixed straddle account referred to in subparagraph (A)(i)(II)— "(i) NOT MORE THAN 50 PERCENT OF NET GAIN MAY BE TREATED AS LONG-TERM CAPITAL GAIN.—In nO e v e n t

•=

shall more than 50 percent of the net gain from such account for any taxable year be treated as long-term capital gain, "(ii) NOT MORE THAN 40 PERCENT OF NET LOSS MAY BE TREATED AS SHORT-TERM CAPITAL LOSS.—In nO e v e n t

(. ji

shall more than 40 percent of the net loss from such account for any taxable year be treated as short-term capital loss. "(C)

AUTHORITY TO TREAT CERTAIN POSITIONS AS MIXED

STRADDLES.—The regulations prescribed under paragraph (1) may treat as a mixed straddle positions not described in section 1256(d)(4)."

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/676

 98 STAT. 628 26 USC 1092

^°^-

Ante, p. 627. 26 USC 1092

^°^^-

26 USC 1256.

PUBLIC LAW 98-369—JULY 18, 1984 (b) REQUIREMENT THAT REGULATIONS B E ISSUED WITHIN 6 MONTHS

AFTER THE DATE OF ENACTMENT.—The Secretary of the Treasury or

his delegate shall prescribe initial regulations under section 1092(b) of the Internal Revenue Code of 1954 (including regulations relating to mixed straddles) not later than the date 6 months after the date of the enactment of this Act. (c) EFFECTIVE DATE OF REGULATIONS WITH RESPECT TO MIXED

STRADDLES.—The regulations described in subsection (b) with respect to the application of section 1233 of the Internal Revenue Code of 1954 to mixed straddles shall not apply to mixed straddles all of the positions of which were established before January 1, 1984. SEC. 104. LIMITATION ON LOSSES FROM HEDGING TRANSACTIONS. (a) GENERAL RULE.—Subsection (e) of section 1256 (relating to mark to market not to apply to hedging transactions) is amended by adding at the end thereof the following new paragraph: "(5) LIMITATION ON LOSSES FROM HEDGING TRANSACTIONS.— "(A) IN GENERAL.—

"(i) LIMITATION.—Any hedging loss for a taxable year which is allocable to any limited partner or limited entrepreneur (within the meaning of paragraph (3)) shall be allowed only to the extent of the taxable income of such limited partner or entrepreneur for such taxable year attributable to the trade or business in which the hedging transactions were entered into. For purposes of the preceding sentence, taxable income shall be determined by not taking into account items attributable to hedging transactions. "(ii) CARRYOVER OF DISALLOWED LOSS.—Any hedging loss disallowed under clause (i) shall be treated as a deduction attributable to a hedging transaction allowable in the first succeeding taxable year. "(B) EXCEPTION WHERE ECONOMIC LOSS.—Subparagraph

(A)(i) shall not apply to any hedging loss to the extent that such loss exceeds the aggregate unrecognized gains from hedging transactions as of the close of the taxable year attributable to the trade or business in which the hedging transactions were entered into. "(C) EXCEPTION FOR CERTAIN HEDGING TRANSACTIONS.—In

26 USC 1256 note.

the case of any hedging transaction relating to property other than stock or securities, this paragraph shall apply only in the case of a taxpayer described in section 465(a)(1). "(D) HEDGING LOSS.—The term 'hedging loss' means the excess of— "(i) the deductions allowable under this chapter for the taxable year attributable to hedging transactions (determined without regard to subparagraph (A)(i)), over "(ii) income received or accrued by the taxpayer during such taxable year from such transactions. "(E) UNRECOGNIZED GAIN.—The term 'unrecognized gain' has the meaning given to such term by section 1092(a)(3)." (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to taxable years beginning after December 31, 1984.

�


text: Author:Bela Hubbard

title: Author:Bela Hubbard