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Page:United States Statutes at Large Volume 98 Part 1.djvu/710

 98 STAT. 662

PUBLIC LAW 98-369—JULY 18, 1984 PART III—TAXATION OF CERTAIN TRANSFERS OF PROPERTY OUTSIDE THE UNITED STATES SEC. 131. TAXATION OF CERTAIN TRANSFERS OF PROPERTY OUTSIDE THE UNITED STATES.

26 USC 367.

(a) IN GENERAL.—Subsection (a) of section 367 (relating to transfers of property from the United States) is amended to read as follows: "(a) TRANSFERS OF PROPERTY FROM THE UNITED STATES.— "(1) GENERAL RULE.—If, in connection with any exchange

described in section 332, 351, 354, 355, 356, or 361, a United States person transfers property to a foreign corporation, such foreign corporation shall not, for purposes of determining the extent to which gain shall be recognized on such transfer, be considered to be a corporation. "(2) EXCEPTION FOR CERTAIN STOCK OR SECURITIES.—Except to

the extent provided in regulations, paragraph (1) shall not apply to the transfer of stock or securities of a foreign corporation which is a party to the exchange or a party to the reorganization. "(3) EXCEPTION FOR TRANSFERS OF CERTAIN PROPERTY USED IN THE ACTIVE CONDUCT OF A TRADE OR BUSINESS.—

"(A) IN GENERAL.—Except as provided in regulations prescribed by the Secretary, paragraph (1) shall not apply to any property transferred to a foreign corporation for use by such foreign corporation in the active conduct of a trade or business outside of the United States. "(B) PARAGRAPH NOT TO APPLY TO CERTAIN PROPERTY.—

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Except as provided in regulations prescribed by the Secretary, subparagraph (A) shall not apply to any— "(i) property described in paragraph (1) or (3) of section 1221 (relating to inventory and copyrights, etc.), "(ii) installment obligations, accounts receivable, or similar property, "(iii) foreign currency or other property denominated in foreign currency, "(iv) intangible property (within the meaning of section 936(h)(3)(B)), or "(v) property with respect to which the transferor is a lessor at the time of the transfer, except that this clause shall not apply if the transferee was the lessee. "(C) TRANSFER OF FOREIGN BRANCH WITH PREVIOUSLY DEDUCTED LOSSES.—Except as provided in regulations pre-

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scribed by the Secretary, subparagraph (A) shall not apply to gain realized on the transfer of the assets of a foreign branch of a United States person to a foreign corporation in an exchange described in paragraph (1) to the extent that— "(i) the sum of losses— "(I) which were incurred by the foreign branch before the transfer, and "(II) with respect to which a deduction was allowed to the taxpayer, exceeds "(ii) the sum of— "(I) any taxable income of such branch for a taxable year after the taxable year in which the

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Page:United States Statutes at Large Volume 98 Part 1.djvu/711

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 663

loss was incurred and through the close of the taxable year of the transfer, and "(11) the amount which is recognized under section 904(f)(3) on account of the transfer. Any gain recognized by reason of the preceding sentence shall be treated for purposes of this chapter as income from sources outside the United States having the same character as such losses had. "(4) SPECIAL RULE FOR TRANSFER OF PARTNERSHIP INTERESTS.—

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Except as provided in regulations prescribed by the Secretary, a transfer by a United States person of an interest in a partnership to a foreign corporation in an exchange described in paragraph (1) shall, for purposes of this subsection, be treated as a transfer to such corporation of such person's pro rata share of the assets of the partnership. "(5) SECRETARY MAY EXEMPT CERTAIN TRANSACTIONS FROM AP-

pucATiON OF THIS SUBSECTION.—Paragraph (1) shall not apply to the transfer of any property which the Secretary, in order to carry out the purposes of this subsection, designates by regulation." (b) SPECIAL RULES FOR TRANSFERS OF INTANGIBLES.—Subsection (d)

of section 367 (relating to special rule for transfer of intangibles by possession corporations) is amended to read as follows:

26 USC 367.

"(d) SPECIAL RULES RELATING TO TRANSFERS OF INTANGIBLES.—

"(1) IN GENERAL.—Except as provided in regulations prescribed by the Secretary, if a United States person transfers any intangible property (within the meaning of section 936(h)(3)(B)) to a foreign corporation in an exchange described in section 351 or 361— "(A) subsection (a) shall not apply to the transfer of such property, and "(B) the provisions of this subsection shall apply to such transfer. "(2) TRANSFER OF INTANGIBLES TREATED AS TRANSFER PURSUANT TO SALE OF CONTINGENT PAYMENTS.—

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"(A) IN GENERAL.—If paragraph (1) applies to any transfer, the United States person transferring such property shall be treated as— "(i) having sold such property in exchange for payments which are contingent upon the productivity, use, or disposition of such property, and "(ii) receiving amounts which reasonably reflect the amounts which would have been received— "(I) annually in the form of such payments over the useful life of such property, or "(II) in the case of a disposition following such transfer (whether direct or indirect), at the time of the disposition. "(B) EFFECT ON EARNINGS AND PROFITS.—For purposes of

.his chapter, the earnings and profits of a foreign corporation to which the intangible property was transferred shall be reduced by the amount required to be included in the income of the transferor of the intangible property under subparagraph (A)(ii). "(C) AMOUNTS RECEIVED TREATED AS UNITED STATES SOURCE ORDINARY INCOME.—For purposes of this chapter, any

amount included in gross income by reason of this subsec-

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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/712

 98 STAT. 664

PUBLIC LAW 98-369—JULY 18, 1984 siii iu

26 USC 367.

tion shall be treated as ordinary income from sources within the United States." (c) TREATMENT OF LIQUIDATIONS UNDER SECTION 336.—Section 367 is amended by redesignating subsection (e) as subsection (f) and by inserting after subsection (d) the following new subsection: "(e) TREATMENT OF LIQUIDATIONS UNDER SECTION 336.—In the case of any distribution described in section 336 by a domestic corporation which is made to a person who is not a United States person, to the extent provided in regulations, gain shall be recognized under principles similar to the principles of this section." (d) SECRETARY MUST B E NOTIFIED OF TRANSACTIONS DESCRIBED IN SECTION 367.— (1) NOTIFICATION REQUIREMENT.—Subpart A of part III of

'

subchapter A of chapter 61 is amended by adding after section 6038A the following new section: 26 USC 6038B. "SEC. 6038B. NOTICE OF CERTAIN TRANSFERS TO FOREIGN PERSONS. "(a) IN GENERAL.—Each United States person who— "(1) transfers property to a foreign corporation in an exchange described in section 332, 351, 354, 355, 356, or 361, or "(2) makes a distribution described in section 336 to a person ?f > a: & r ^j^Q jg j^Q^ a United States person, shall furnish to the Secretary, at such time and in such manner as the Secretary shall by regulations prescribe, such information with respect to such exchange or distribution as the Secretary may require in such regulations. "(b) PENALTY FOR FAILURE TO FURNISH INFORMATION.—

"(1) IN GENERAL.—If any United States person fails to furnish the information described in subsection (a) at the time and in the manner required by regulations, such person shall pay a penalty equal to 25 percent of the amount of the gain realized on the exchange. "(2) REASONABLE CAUSE EXCEPTION.—Paragraph (1) shall not apply to any failure if the United States person shows such failure is due to reasonable cause and not to willful neglect." (2) EXTENSION OF PERIOD FOR ASSESSMENT AND COLLECTION

Post, p. 817. 26 USC 6501.

WHERE SECRETARY NOT NOTIFIED.—Subsection (c) of section 6501 (relating to exceptions to limitations on assessment and collection) is amended by adding at the end thereof the following new paragraph: ^5,

Ante, pp. 662, 663.

"(8) FAILURE TO NOTIFY SECRETARY UNDER SECTION 6038B.—In

^^' the case of any tax imposed on any exchange by reason of subsection (a) or (d) of section 367, the time for assessment of such tax shall not expire before the date which is 3 years after the date on which the Secretary is notified of such exchange under section 6038B(a)." (3) CONFORMING AMENDMENT.—The table of sections for subpart A of part III of subchapter A of chapter 61 is amended by adding after the item relating to section 6038A the following new item: "Sec. 6038B. Notice of certain transfers to foreign persons." (e) REPEAL OF DECLARATORY JUDGMENT PROVISIONS INVOLVING TRANSFERS OF PROPERTY FROM THE UNITED STATES.—

26 USC 7477.

(1) IN GENERAL.—Section 7477 is hereby repealed. (2) CONFORMING AMENDMENTS.—

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Page:United States Statutes at Large Volume 98 Part 1.djvu/713

 PUBLIC LAW 98-369—JULY 18, 1984

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(A) Section 7482(b)(1) (relating to venue for review of Tax Court decisions) is amended by striking out subparagraph (D) and by redesignating subparagraphs (E) and (F) as subparagraphs (D) and (E), respectively. (B) The table of sections for part IV of subchapter C of chapter 76 is amended by striking out the item relating to section 7477.

98 STAT. 665 26 USC 7482.

- (f) TRANSFERS TO AVOID INCOME TAX.—

f

26 USC 1492.

(2) CONFORMING AMENDMENT.—Subsection (b) of section 1494

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(1) IN GENERAL.—Section 1492 (relating to nontaxable transfers) is amended— (A) by striking out paragraphs (2) and (3) and by inserting in lieu thereof— "(2) To a transfer— "(A) described in section 367, or "(B) not described in section 367 but with respect to which the taxpayer elects (before the transfer) the application of principles similar to the principles of section 367, or", and (B) by redesignating paragraph (4) as paragraph (3).

26 USC 1494.

(relating to abatement or refund) is amended to read as follows: "(b) ABATEMENT OR REFUND.—Under regulations prescribed by the Secretary, the tax may be abated, remitted, or refunded if the taxpayer, after the transfer, elects the application of principles similar to the principles of section 367." (g) EFFECTIVE DATES.— 26 USC 367 note'. (1) IN GENERAL.—The amendments made by this section shall apply to transfers or exchanges after December 31, 1984, in taxable years ending after such date. i*

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(2) SPECIAL RULE FOR CERTAIN TRANSFERS OF INTANGIBLES.—

(A) IN GENERAL.—If, after June 6, 1984, and before January 1, 1985, a United States person transfers any intangible property (within the meaning of section 936(h)(3)(B) of the Internal Revenue Code of 1954) to a foreign corporation or in a transfer described in section 1491, such transfer shall be treated for purposes of sections 367(a), 1492(2), and Ante, p. 662. 1494(b) of such Code as pursuant to a plan having as 1 of its -Supra. principal purposes the avoidance of Federal income tax. (B) WAIVER.—Subject to such terms and conditions as the -: J c Secretary of the Treasury or his delegate may prescribe, the Secretary may waive the application of subparagraph (A) with respect to any transfer. (3) RuuNG REQUEST BEFORE MARCH 1, 1984.—The amendments made by this section (and the provisions of paragraph (2) of this subsection) shall not apply to any transfer or exchange of property described in a request filed before March 1, 1984, under section 367(a), 1492(2), or 1494(b) of the Internal Revenue Code of 1954 (as in effect before such amendments). PART IV—MISCELLANEOUS FOREIGN CORPORATE PROVISIONS

W.;^:U Si;

SEC. 132. AMENDMENTS RELATED TO FOREIGN PERSONAL HOLDING COMPANIES. (a) ATTRIBUTION FROM FAMILY MEMBERS AND PARTNERSHIPS.—

Section 554 (relating to stock ownership) is amended by adding at the end thereof the following new subsection:

26 USC 554.

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Page:United States Statutes at Large Volume 98 Part 1.djvu/714

 98 STAT. 666, -

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PUBLIC LAW 98-369—JULY 18, 1984 "(c) SPECIAL RULES FOR APPLICATION OF SUBSECTION (a)(2).—For

purposes of the stock ownership requirement provided in section 552(a)(2)— "(1) stock owned by a nonresident alien individual (other than a foreign trust or foreign estate) shall not be considered by reason of so much of subsection (a)(2) as relates to attribution through family membership as owned by a citizen or by a resident alien individual who is not the spouse of the nonresi1 4 >s J:fi, dent individual and who does not otherwise own stock in such corporation (determined after the application of subsection (a), other than attribution through family membership), and "(2) stock of a corporation owned by any foreign person shall not be considered by reason of so much of subsection (a)(2) as relates to attribution through partners as owned by a citizen or resident of the United States who does not otherwise own stock in such corporation (determined after application of subsection (a) and paragraph (1), other than attribution through partners)." 26 USC 551.

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(b) INCLUSION IN INCOME OF UNITED STATES PERSONS HOLDING INTEREST THROUGH FOREIGN ENTITY.—Section 551 (relating to for-

eign personal holding company income taxed to United States shareholders) is amended by redesignating subsection (f) as subsection (g) and by inserting after subsection (e) the following new subsection: "(f) STOCK HELD THROUGH FOREIGN ENTITY.—For purposes of this section, stock of a foreign personal holding company owned (directly or through the application of this subsection) by— "(1) a partnership, estate, or trust which is not a United States shareholder, or "(2) a foreign corporation which is not a foreign personal holding company, shall be considered as being owned proportionately by its partners, beneficiaries, or shareholders. In any case to which the preceding sentence applies, the Secretary may by regulations provide for such adjustments in the application of this part as may be necessary to carry out the purposes of the preceding sentence." (c) COORDINATION OF SUBPART F WITH FOREIGN PERSONAL HOLDING COMPANY PROVISIONS.—

26 USC 951.

(1) IN GENERAL.—Subsection (d) of section 951 (relating to coordination with foreign personal holding company provisions) is amended to read as follows: "(d) COORDINATION WITH FOREIGN PERSONAL HOLDING COMPANY

PROVISIONS.—If, but for this subsection, an amount would be included in the gross income of a United States shareholder for any taxable year both under subsection (a)(l)(A)(i) and under section 551(b) (relating to foreign personal holding company income included in gross income of United States shareholder), such amount shall be included in the gross income of such shareholder only under subsection (a)(1)(A)." 26 USC 552.

(2) CERTAIN DIVIDENDS AND INTEREST NOT TAKEN INTO ACCOUNT FOR PERSONAL HOLDING COMPANY DETERMINATION.—Section 5 5 2

(defining foreign personal holding company) is amended by adding at the end thereof the following new subsection: "(c)

CERTAIN DIVIDENDS AND INTEREST NOT TAKEN INTO AC-

COUNT.—For purposes of subsection (a)(1) and section 553(a)(1), gross income and foreign personal holding company income shall not K' fc ^ ii*i include any dividends and interest which— "(1) are described in subparagraph (A) of section 954(c)(4), and

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Page:United States Statutes at Large Volume 98 Part 1.djvu/715

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 667

"(2) are received from a related person which is not a foreign personal holding company (determined without regard to this subsection)." (d) EFFECTIVE DATES.— 26 USC 551 note. (1) SUBSECTIONS (a) AND (b).—

(A) IN GENERAL.—Except as provided in subparagraph (B), the amendments made by subsections (a) and (b) shall apply to taxable years of foreign corporations beginning after December 31, 1983.

^

(B) 1-YEAR EXTENSION FOR CERTAIN TRUSTS CREATED BEFORE JUNE 30, 1953.—

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(ii)

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(i) IN GENERAL.—The amendment made by subsection (b) shall apply to taxable years of a foreign corporation beginning after December 31, 1984, with respect to stock of such corporation which is held (directly or indirectly, within the meaning of section 554 of the Internal Revenue Code of 1954) by a trust created before June 30, 1953, if— (I) none of the beneficiaries of such trust was a citizen or resident of the United States at the time of its creation or within 5 years thereafter, and (II) such trust does not, after July 1, 1983, acquire (directly or indirectly) stock of any foreign personal holding company other than a company described in clause (ii). DESCRIPTION OF COMPANY.—A company is

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scribed in this clause if— (I) substantially all of the assets of such company are stock or assets previously held by such trust, or (II) such company ceases to be a foreign personal holding company before January 1, 1985.

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(2) SUBSECTION (C).—

(A) The amendment made by paragraph (1) of subsection 26 USC 951 note, (c) shall apply to taxable years of United States shareholders beginning after the date of the enactment of this Act. (B) The amendment made by paragraph (2) of subsection 26 USC 552 note, (c) shall apply to taxable years of foreign corporations beginning after March 15, 1984. SEC. 133. AMENDMENTS RELATED TO SECTION 1248. (a) SECTION 1248 To APPLY TO CERTAIN INDIRECT TRANSFERS OF STOCK IN A FOREIGN CORPORATION.—Section 1248 (relating to gain

26 USC 1248.

from certain sales or exchanges of stock in foreign corporations) is amended by adding at the end thereof the following new subsection: "(i) TREATMENT OF CERTAIN INDIRECT TRANSFERS.—

"(1) IN GENERAL.—If any shareholder of a 10-percent corporate shareholder of a foreign corporation exchanges stock of the 10-percent corporate shareholder for stock of the foreign corporation, for purposes of this section, the stock of the foreign corporation received in such exchange shall be treated as if it had been— "(A) issued to the 10-percent corporate shareholder, and "(B) then distributed by the 10-percent corporate shareholder to such shareholder in redemption of his stock. ''(2) 10-PERCENT CORPORATE SHAREHOLDER DEFINED.—For pur-

''

poses of this subsection, the term '10-percent corporate shareholder' means any domestic corporation which, as of the day

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text:
Author:William Huggins

Works

 * Spectrum analysis in its application to the heavenly bodies (1870)
 * An Atlas of Representative Stellar Spectra from λ4870 to λ3300, together with a discussion of the evolution order of the stars, and the interpretation of their spectra; preceded by a short history of the observatory with Margaret Lindsay Huggins (1899)
 * The Royal Society, or Science in the state and in the schools (1906)
 * The Scientific Papers of Sir William Huggins with Margaret Lindsay Huggins (1909)

Editor

 * Spectrum Analysis in Its Application to Terrestrial Substances, and the Physical Constitution of the Heavenly Bodies by Heinrich Schellen. Translated by Jane Lassell and Caroline Lassell. (1872)

title: Author:William Huggins


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/716

 98 STAT. 668

PUBLIC LAW 98-369—JULY 18, 1984 before the exchange referred to in paragraph (1), satisfies the stock ownership requirements of subsection (a)(2) with respect to the foreign corporation." (b) EUMINATION OF DoUBLE TAXATION OF EARNINGS AND PROFITS OF CERTAIN FOREIGN CORPORATIONS.—

26 USC 959.

(1) Section 959 (relating to exclusion from gross income of previously taxed earnings and profits) is amended by adding at the end thereof the following new subsection: "(e) COORDINATION WITH AMOUNTS PREVIOUSLY TAXED UNDER SECTION 1248.—For purposes of this section and section 960(b), any

Ante, p. 667.

Supra.

26 USC 1248.

26 USC 1248 note. 26 USC 959 note.

amount included in the gross income of any person as a dividend by reason of subsection (a) or (f) of section 1248 shall be treated as an amount included in the gross income of such person under section 951(a)(1)(A)." (2) Section 1248 is amended by adding at the end thereof the following new subsection: "(j) CROSS REFERENCE.— "For provision excluding amounts previously taxed under this section from gross income when subsequently distributed, see section 959(e)." (c) CLARIFICATION OF SECTION 1248(c)(2)(D).—Subparagraph (D) of

section 1248(c)(2) (relating to earnings and profits of subsidiaries of foreign corporations) is amended by striking out "section 958(a)(2)" and inserting in lieu thereof "section 958(a)". (d) EFFECTIVE DATES.— (1) SUBSECTION (a).—The

amendment made by subsection (a) • shall apply to exchanges after the date of the enactment of this Act in taxable years ending after such date. (2) SUBSECTIONS (b) AND (c).—Except as provided in paragraph (3), the amendments made by subsections (b) and (c) shall apply with respect to transactions to which subsection (a) or (f) of section 1248 of the Internal Revenue Code of 1954 applies occurring after the date of the enactment of this Act.

26 USC 959 note.

(3) ELECTION OF EARUER DATE FOR CERTAIN TRANSACTIONS.—

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(A) IN GENERAL.—If the appropriate election is made under subparagraph (B), the amendments made by subsection (b) shall apply with respect to transactions to which s.r?

subsection (a) or (f) of section 1248 of such Code applies

occurring after October 9, 1975. (B) ELECTION.—

Hi&l •MU 8£

T >. .

(i) Subparagraph (A) shall apply with respect to transactions to which subsection (a) of section 1248 of such Code applies if the foreign corporation described in such subsection (or its successor in interest) so elects. (ii) Subparagraph (A) shall apply with respect to transactions to which subsection (f) of section 1248 of such Code applies if the domestic corporation described in section 1248(f)(1) of such Code (or its successor) so elects. (iii) Any election under clause (i) or (ii) shall be made not later than 180 days after the date of the enactment of this Act and shall be made in such manner as the Secretary of the Treasury or his delegate shall prescribe.

SEC. 134. DEFINITION OF FOREIGN INVESTMENT COMPANY.

26 USC 1246.

(a) GENERAL RULE.—Paragraph (2) of section 1246(b) (defining foreign investment company) is amended to read as follows:

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Page:United States Statutes at Large Volume 98 Part 1.djvu/717

 PUBLIC LAW 98-369—JULY 18, 1984

?

98 STAT. 669

"(2) engaged (or holding itself out as being engaged) primarily in the business of investing, reinvesting, or trading in— "(A) securities (as defined in section 2(a)(36) of the Investment Company Act of 1940, as amended), 15 USC 80a-2. "(B) commodities, or "(C) any interest (including a futures or forward contract or option) in property described in subparagraph (A) or (B), at a time when 50 percent or more of the total combined voting power of all classes of stock entitled to vote, or the total value of all classes of stock, was held directly (or indirectly through applying paragraphs (2) and (3) of section 958(a) and paragraph (4) of section 318(a)) by United States persons (as defined in section 7701(a)(30))." (b) EFFECTIVE DATES.—

26 USC 1246

(1) IN GENERAL.—Except as provided in paragraph (2), the note. amendment made by subsection (a) shall apply to sales and exchanges (and distributions) on or after September 29, 1983, in .;> taxable years ending on or after such date. (2) STOCK HELD ON SEPTEMBER 29, 1983.—In the case of a sale or exchange (or distribution) not later than the date which is 1 year after the date of the enactment of this Act, the amendment made by subsection (a) shall not apply with respect to stock held by the taxpayer continuously from September 29, 1983, to the date of such sale or exchange (or distribution). SEC. 135. APPLICATION OF COLLAPSIBLE CORPORATION RULES TO FOREIGN CORPORATIONS. (a) IN GENERAL.—Subsection (f) of section 341 (relating to collapsi- 26 USC 341. ble corporations) is amended by adding at the end thereof the following new paragraph:  ^y "(8) SPECIAL RULE FOR FOREIGN CORPORATIONS.—Except to the

extent provided in regulations prescribed by the Secretary— "(A) any consent given by a foreign corporation under paragraph (1) shall not be effective, and "(B) paragraph (3) shall not apply if the transferee is a foreign corporation." (b) EFFECTIVE DATE.—The amendment made by subsection (a) 26 USC 341 note, shall take effect on the date of the enactment of this Act. SEC. 136. STAPLED STOCK; STAPLED ENTITIES. (a) GENERAL RULE.—Part IX of subchapter B of chapter 1 is amended by inserting after section 269A the following new section: "SEC. 269B. STAPLED ENTITIES. "(a) GENERAL RULE.—Except as otherwise provided by regulations, for purposes of this title— "(1) if a domestic corporation and a foreign corporation are stapled entities, the foreign corporation shall be treated as a Bi- domestic corporation. "(2) in applying section 1563, stock in a second corporation which constitutes a stapled interest with respect to stock of a first corporation shall be treated as owned by such first corporation, and "(3) in applying subchapter M for purposes of determining whether any stapled entity is a regulated investment company or a real estate investment trust, all entities which are stapled entities with respect to each other shall be treated as 1 entity.

26 USC 269B.

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Page:United States Statutes at Large Volume 98 Part 1.djvu/718

 98 STAT. 670

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PUBLIC LAW 98-369—JULY 18, 1984 "(b) SECRETARY TO PRESCRIBE REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary to prevent avoidance or evasion of Federal income tax through the use of stapled entities. Such regulations may include (but shall not be limited to) regulations providing the extent to which 1 of such entities shall be treated as owning the other entity (to the extent of the stapled interest). "(c) DEFINITIONS.—For purposes of this section— "(1) ENTITY.—The term 'entity' means any corporation, partnership, trust, association, estate, or other form of carrying on a business or activity. "(2) STAPLED ENTITIES.—The term 'stapled entities' means any group of 2 or more entities if more than 50 percent in value of the beneficial ownership in each of such entities consists of stapled interests. "(3) STAPLED INTERESTS.—Two or more interests are stapled interests if, by reason of form of ownership, restrictions on transfer, or other terms or conditions, in connection with the transfer of 1 of such interests the other such interests are also transferred or required to be transferred. "(d)

SPECIAL RULE FOR TREATIES.—Nothing in

section 894

or

7852(d) or in any other provision of law shall be construed as permitting an exemption, by reason of any treaty obligation of the United States heretofore or hereafter entered into, from the provisions of this section." (b) CLERICAL AMENDMENT.—The table of sections for part IX of subchapter B of chapter 1 is amended by inserting after the item relating to section 269A the following new item": '^" " 26 USC 269B

"Sec. 269B. Stapled entities."

"•,.

(c) EFFECTIVE D A T E S. —

(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section shall take effect on the date of the enactment of this Act. (2) INTERESTS STAPLED AS OF JUNE 30, 1983.—Except as other,i wise provided in this subsection, in the case of any interests which on June 30, 1983, were stapled interests (as defined in Ante, p. 669. fi ^ B] section 269B(c)(3) of the Internal Revenue Code of 1954 (as added by this section)), the amendments made by this section shall take effect on January 1, 1985 (January 1, 1987, in the case of stapled interests in a foreign corporation). (3) CERTAIN STAPLED ENTITIES WHICH INCLUDE REAL ESTATE INVESTMENT TRUST.—Paragraph (3) of section 269B(a) of such

26 USC 856.

Code shall not apply in determining the application of the provisions of part II of subchapter M of chapter 1 of such Code to any real estate investment trust which is part of a group of stapled entities if— (A) all members of such group were stapled entities as of June 30, 1983, and (B) as of June 30, 1983, such group included one or more real estate investment trusts. (4) CERTAIN STAPLED ENTITIES WHICH INCLUDE PUERTO RICAN CORPORATIONS.—

(A) Paragraph (1) of section 269B(a) of such Code shall not apply to a domestic corporation and a qualified Puerto Rican corporation which, on June 30, 1983, were stapled entities.

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Page:United States Statutes at Large Volume 98 Part 1.djvu/719

 PUBLIC LAW 98-369-JULY 18, 1984

98 STAT. 671

(B) For purposes of subparagraph (A), the term "qualified Puerto Rican corporation" means any corporation organized in Puerto Rico— (i) which is described in section 957(c) of such Code or ': would be so described if any dividends it received from any other corporation described in such section 957(c) were treated as gross income of the type described in ^., ^uiT'> such section 957(c), and (ii) does not, at any time during the taxable year, own (within the meaning of section 958 of such Code but before applying paragraph (2) of section 269B(a) of such Ante, p. 669. Code) any stock of any corporation which is not described in such section 957(c).

,

(5) TREATY RULE NOT TO APPLY TO STAPLED ENTITIES ENTITLED

TO TREATY BENEFITS AS OF JUNE 30, 1983.—In the case of any entity which was a stapled entity as of June 30, 1983, subsection (d) of section 269B of such Code shall not apply to any treaty benefit to which such entity was entitled as of June 30, 1983.

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(6) ELECTIONS SUBSIDIARIES.—

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STAPLED

FOREIGN

ENTITIES

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(A) IN GENERAL.—In the case of any foreign corporation ^^^H:^P QH •;i£ and domestic corporation which as of June 30, 1983, were stapled entities, such domestic corporation may elect (in lieu of applying paragraph (1) of section 269B(a) of such Code) to be treated as owning all interests in the foreign corporation which constitute stapled interests with respect to stock of the domestic corporation. (B) ELECTION.—Any election under subparagraph (A) shall be made not later than 180 days after the date of the enactment of this Act and shall be made in such manner as '' '-^ -^ the Secretary of the Treasury or his delegate shall prescribe. (C) ELECTION IRREVOCABLE.—Any election under subparagraph (A), once made, may be revoked only with the consent of the Secretary of the Treasury or his delegate. (7) OTHER STAPLED ENTITIES WHICH INCLUDE REAL ESTATE INVESTMENT TRUST.—
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— t:

7

(A) IN GENERAL.—Paragraph (3) of section 269B(a) of such Code shall not apply in determining the application of the . provisions of part II of subchapter M of chapter 1 of such 26 USC 856. Code to any qualified real estate investment trust which is a part of a group of stapled entities— (i) which was created pursuant to a written board of ..,, directors resolution adopted on April 5, 1984, and (ii) all members of such group were stapled entities as of June 16, 1985. (B) QUALIFIED REAL ESTATE INVESTMENT TRUST.—The term "qualified real estate investment trust" means any real estate trust— YC, (i) at least 75 percent of the gross income of which is derived from interest on obligations secured by mortgages on real property (as defined in section 856 of such Code), (ii) with respect to which the interest on the obligations described in clause (i) made or acquired by such trust (other than to persons who are independent contractors, as defined in section 856(d)(3) of such Code) is

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Page:United States Statutes at Large Volume 98 Part 1.djvu/720

 98 STAT. 672

PUBLIC LAW 98-369—JULY 18, 1984

t-> " •

at an arm's length rate or a rate not more than 1 percentage point greater than the associated borrowing cost of the trust, and (iii) with respect to which any real property held by the trust is not used in the trade or business of any other member of the group of stapled entities.

SEC. 137. SERVICES RELATING TO INSURANCE POLICIES ARE TREATED AS PERFORMED IN COUNTRY OF RISK. 26 USC 954. (a) IN GENERAL.—Subsection (e) of section 954 (defining foreign base company services income) is amended by adding at the end thereof the following new sentence: "For purposes of paragraph (2), any services performed with respect to any policy of insurance or reinsurance with respect to which the primary insured is a related Ante, p. 644. person (within the meaning of section 864(d)(4)) shall be treated as having been performed in the country within which the insured hazards, risks, losses, or liabilities occur, and except as provided in regulations prescribed by the Secretary, rules similar to the rules of Post, p. 755. section 953(b) shall be applied in determining the income from such services." 26 USC 954 note. (b) EFFECTIVE DATE.—The amendments made by subsection (a) shall apply to taxable years of controlled foreign corporations beginning after the date of the enactment of this Act.

PART V—TREATMENT OF ALIEN INDIVIDUALS Ante, p. 518. 26 USC 7701.

SEC. 138. DEFINITION OF RESIDENT ALIEN AND NONRESIDENT ALIEN. (a) GENERAL RuLE.—Section 7701 (relating to definitions) is amended by redesignating subsections (b), (c), and (d) as subsections (c), (d), and (e), respectively, and by inserting after subsection (a) the following new subsection: "(b)

DEFINITION OF RESIDENT ALIEN AND NONRESIDENT ALIEN.—

"(1) IN GENERAL.—For purposes of this title (other title B)— "(A) RESIDENT ALIEN.—An alien individual treated as a resident of the United States with any calendar year if (and only if) such individual requirements of clause (i) or (ii): JJ3J,

"(i)

LAWFULLY

ADMITTED

FOR

than subshall be respect to meets the

PERMANENT

RESI-

DENCE.—Such individual is a lawful permanent resident of the United States at any time during such calendar year. "(ii) SUBSTANTIAL PRESENCE TEST.—Such individual meets the substantial presence test of paragraph (3). "(B) NONRESIDENT ALIEN.—An individual is a nonresident alien if such individual is neither a citizen of the United States nor a resident of the United States (within the meaning of subparagraph (A)). "(2) SPECIAL RULES FOR FIRST AND LAST YEAR OF RESIDENCY.— "(A) F I R S T YEAR O F RESIDENCY.—

n

"(i) IN GENERAL.—If an alien individual is a resident of the United States under paragraph (1)(A) with respect to any calendar year, but was not a resident of the United States at any time during the preceding calendar year, such alien individual shall be treated as a resident of the United States only for the portion of

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 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 673

such calendar year which begins on the residency starting date. "(ii) R E S I D E N C Y S T A R T I N G D A T E FOR I N D IV I D U A L S L A W -

FULLY ADMITTED FOR PERMANENT RESIDENCE.—In the

f'

case of an individual who is a lawfully permanent resident of the United States at any time during the calendar year, but does not meet the substantial presence test of paragraph (3), the residency starting date shall be the first day in such calendar year on which he was present in the United States while a lawful permanent resident of the United States. "(iii) RESIDENCY STARTING DATE FOR INDIVIDUALS MEETING SUBSTANTIAL PRESENCE TEST.—In the case of an individual who meets the substantial presence test of paragraph (3) with respect to any calendar year, the residency starting date shall be the first day during such calendar year on which the individual is present in the United States.

0' I r aoi-K

rbjja i»j -isiitba

"(B) LAST YEAR OF RESIDENCY.—An alien individual shall

i( b.J

not be treated as a resident of the United States during a portion of any calendar year if— "(i) such portion is after the last day in such calendar r: year on which the individual was present in the United States (or, in the case of an individual described in paragraph (l)(A)(i), the last day on which he was so ffo0e i f described), "(ii) during such portion the individual has a closer \y.,-,i,^\s connection to a foreign country than to the United r States, and . "(iii) the individual is not a resident of the United States at any time during the next calendar year. .,j,,,.,, ^ 5 "(C) CERTAIN NOMINAL PRESENCE DISREGARDED.— "(i) IN GENERAL.—For purposes of subparagraphs (A)(iii) and (B), an individual shall not be treated as IBiiv present in the United States during any period for which the individual establishes that he has a closer connection to a foreign country than to the United States. mXV- .Af.

"(ii) NOT MORE THAN lO DAYS DISREGARDED.—Clause

(i) shall not apply to more than 10 days on which the individual is present in the United States.

'(3) SUBSTANTIAL PRESENCE TEST.—

"(A) IN GENERAL.—Except as otherwise provided in this paragraph, an individual meets the substantial presence test of this paragraph with respect to any calendar year (hereinafter in this subsection referred to as the 'current year') if— iF."iOrc. "(i) such individual was present in the United States on at least 31 days during the calendar year, and "(ii) the sum of the number of days on which such individual was present in the United States during the current year and the 2 preceding calendar years (when multiplied by the applicable multiplier determined under the following table) equals or exceeds 183 days* "In the case of days in: Current year 1st preceding year 2nd preceding year

The applicable multiplier is: 1 Vs Ve

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Page:United States Statutes at Large Volume 98 Part 1.djvu/722

 98 STAT. 674

PUBLIC LAW 98-369—JULY 18, 1984 ..4

J, '; .,

"(B)

EXCEPTION WHERE INDIVIDUAL IS PRESENT IN THE

UNITED STATES DURING LESS THAN ONE-HALF OF CURRENT YEAR AND CLOSER CONNECTION TO FOREIGN COUNTRY IS ESTABLISHED.—An individual shall not be treated as meeting the substantial presence test of this paragraph with respect to any current year if— "(i) such individual is present in the United States on fewer than 183 days during the current year, and "(ii) it is established that for the current year such individual has a tax home (as defined in section 911(d)(3) without regard to the second sentence thereof) in a foreign country and has a closer connection to such foreign country than to the United States. "(C) SUBPARAGRAPH (B) NOT TO APPLY IN CERTAIN CASES.—

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^ ^

. ^''' ^ ^

^

^

y, '. '^ '

Subparagraph (B) shall not apply to any individual with respect to any current year if at any time during such year— "(i) such individual had an application for adjustment of status pending, or "(ii) such individual took other steps to apply for status as a lawful permanent resident of the United States. "(D) EXCEPTION FOR EXEMPT INDIVIDUALS OR FOR CERTAIN MEDICAL CONDITIONS.—An individual shall not be treated as

being present in the United States on any day if— "(i) such individual is an exempt individual for such day, or "(ii) such individual was unable to leave the United States on such day because of a medical condition which arose while such individual was present in the United States. "(4) EXEMPT INDIVIDUAL DEFINED.—For purposes of this subsection— "(A) IN GENERAL.—An individual is an exempt individual for any day if, for such day, such individual is— "(i) a foreign government-related individual, "(ii) a teacher or trainee, or "(iii) a student. "(B)

FOREIGN

GOVERNMENT-RELATED INDIVIDUAL.—The

term 'foreign government-related individual' means any individual temporarily present in the United States by reason of— "(i) diplomatic status, or a visa which the Secretary (after consultation with the Secretary of State) determines represents full-time diplomatic or consular status for purposes of this subsection, "(ii) being a full-time employee of an international organization, or "(iii) being a member of the immediate family of an individual described in clause (i) or (ii). "(C) TEACHER OR TRAINEE.—The term 'teacher or trainee' means any individual— "(i) who is temporarily present in the United States under subparagraph (J) of section 101(15) of the Immi-

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Page:United States Statutes at Large Volume 98 Part 1.djvu/723

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 675

gration and Nationality Act (other than as a student), 8 USC 1101. and "(ii) who substantially complies with the requirements for being so present. "(D) STUDENT.—The term 'student' means any individual— "(i) who is temporarily present in the United States— "(I) under subparagraph (F) of section 101(15) of the Immigration and Nationality Act, or 8 USC llOl. ^'' "(II) as a student under subparagraph (J) of such section 101(15), and "(ii) who substantially complies with the requirements for being so present. "(E) SPECIAL RULES FOR TEACHERS, TRAINEES, AND STUDENTS.— "(i) LIMITATION ON TEACHERS AND TRAINEES.—An in-

dividual shall not be treated as an exempt individual by reason of clause (ii) of subparagraph (A) for the current year if, for any 2 calendar years during the preceding 6 calendar years, such person was an exempt person under clause (ii) or (iii) of subparagraph (A). "(ii)

LIMITATION ON STUDENTS.—For any

calendar

year after the 5th calendar year for which an individual was an exempt individual under clause (ii) or (iii) of subparagraph (A), such individual shall not be treated as an exempt individual by reason of clause (iii) of "^'^ • subparagraph (A), unless such individual establishes to the satisfaction of the Secretary that such individual does not intend to permanently reside in the United States and that such individual meets the requirements ' of subparagraph (D)(ii). "(5) LAWFUL PERMANENT RESIDENT.—For purposes of this subsection, an individual is a lawful permanent resident of the United States at any time if— "(A) such individual has the status of having been lawfully accorded the privilege of residing permanently in the United States as an immigrant in accordance with the immigration laws, and "(B) such status has not been revoked (and has not been administratively or judicially determined to have been abandoned). "(6) PRESENCE IN THE UNITED STATES.—For purposes of this subsection— "(A) IN GENERAL.—Except as provided in subparagraph (B) or (C), an individual shall be treated as present in the United States on any day if such individual is physically present in the United States at any time during such day. "(B) COMMUTERS FROM CANADA OR MEXICO.—If an individual regularly commutes to employment (or self-employment) in the United States from a place of residence in Canada or Mexico, such individual shall not be treated as present in the United States on any day during which he so commutes. "(C) TRANSIT BETWEEN 2 FOREIGN POINTS.—If an individual, who is in transit between 2 points outside the United

..

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j': '

^^^^.._ '^ ^ * *

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Page:United States Statutes at Large Volume 98 Part 1.djvu/724

 98 STAT. 676

I

PUBLIC LAW 98-369—JULY 18, 1984 States, is physically present in the United States for less than 24 hours, such individual shall not be treated as present in the United States on any day during such transit. "(7) ANNUAL STATEMENTS.—The Secretary may prescribe regulations under which an individual who (but for subparagraph (B) or (D) of paragraph (3)) would meet the substantial presence test of paragraph (3) is required to submit an annual statement setting forth the basis on which such individual claims the benefits of subparagraph (B) or (D) of paragraph (3), as the case maybe.

,, ''

"(8) TAXABLE YEAR.—

P^,

"(A) IN GENERAL.—For purposes of this title, an alien individual who has not established a taxable year for any prior period shall be treated as having a taxable year which is the calendar year. "(B) FISCAL YEAR TAXPAYER.—If—

,

"(i) an individual is treated under paragraph (1) as a resident of the United States for any calendar year, and "(ii) after the application of subparagraph (A), such individual has a taxable year other than a calendar year, he shall be treated as a resident of the United States with respect to any portion of a taxable year which is within such calendar year. "(9) COORDINATION WITH SECTION 877.—If—

"(A) an alien individual was treated as a resident of the United States during any period which includes at least 3 consecutive calendar years (hereinafter referred to as the 'initial residency period'), and "(B) such individual ceases to be treated as a resident of the United States but subsequently becomes a resident of the United States before the close of the 3rd calendar year beginning after the close of the initial residency period, such individual shall be taxable for the period after the close of the initial residency period and before the day on which he subsequently became a resident of the United States in the manner provided in section 877(b). The preceding sentence shall apply only if the tax imposed pursuant to section 877(b) exceeds the tax which, without regard to this paragraph, is imposed pursuant to section 871. "(10) REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection." 26 USC 7701

note.

(b) EFFECTIVE DATES.—

(1) IN GENERAL.—The amendment made by subsection (a) shall apply to taxable years beginning after December 31, 1984. (2) TRANSITIONAL RULE FOR APPLYING SUBSTANTIAL PRESENCE TEST.—

Ante, p. 672.

(A) If an alien individual was not a resident of the United States as of the close of calendar year 1984, the determination of whether such individual meets the substantial presence test of section 7701(b)(3) of the Internal Revenue Code of 1954 (as added by this section) shall be made by only taking into account presence after 1984.

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Page:United States Statutes at Large Volume 98 Part 1.djvu/725

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 677

(B) If an alien individual was a resident of the United States as of the close of calendar year 1984, but was not a resident of the United States as of the close of calendar year 1983, the determination of whether such individual meets such substantial presence test shall be made by only taking into account presence in the United States after 1983. (3) TRANSITIONAL RULE FOR APPLYING LAWFUL RESIDENCE

^

TEST.—In the case of any individual who— "(A) was a lawful permanent resident of the United States (within the meaning of section 7701(b)(5) of the Internal Revenue Code of 1954, as added by this section) throughout calendar year 1984, or (B) was present in the United States at any time during 1984 while such individual was a lawful permanent resident of the United States (within the meaning of such section 7701(b)(5)), for purposes of section 7701(b)(2)(A) of such Code (as so added), such individual shall be treated as a resident of the United States during 1984.

Ante, p. 672.

SEC. 139. TREATMENT OF COMMUNITY INCOME. (a) GENERAL RULE.—Subsection (a) of section 879 (relating to tax

26 USC 879.

treatment of certain community income in the case of a resident or citizen of the United States who is married to a nonresident alien individual) is amended by striking out so much of such subsection as precedes paragraph (1) thereof and inserting in lieu thereof the following: "(a) GENERAL RULE.—In the case of a married couple 1 or botli of whom are nonresident alien individuals and who have community income for the taxable year, such community income shall be treated as follows:". (b) CLERICAL AMENDMENTS.—

(1) The heading of section 879 is amended to read as follows: "SEC. 879. TAX TREATMENT OF CERTAIN COMMUNITY INCOME IN THE CASE OF NONRESIDENT ALIEN INDIVIDUALS."

(2) The table of sections for subpart A of part II of subchapter N of chapter 1 is amended by striking out the item relating to section 879 and inserting in lieu thereof the following: "Sec. 879. Tax treatment of certain community income in the case of nonresident alien individuals." (c) EFFECTIVE DATE.—The amendments made by this section shall

26 USC 879 note.

apply to taxable years beginning after December 31, 1984.

Subtitle K—Reporting, Penalty, and Other Provisions PART I—PROVISIONS RELATING TO TAX SHELTERS SEC. 141. REGISTRATION OF TAX SHELTERS. (a) IN GENERAL.—Subchapter B of chapter 61 (relating to miscellaneous provisions involving information and returns) is amended by redesignating section 6111 as section 6112 and by inserting after 26 USC 6112. section 6110 the following new section: Post, p. 681.

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Page:United States Statutes at Large Volume 98 Part 1.djvu/726

 98 STAT. 678 26 USC 6111.

PUBLIC LAW 98-369—JULY 18, 1984 "SEC. 6111. REGISTRATION OF TAX SHELTERS. "(a) REGISTRATION.—

"(1) IN GENERAL.—Any tax shelter organizer shall register the tax shelter with the Secretary (in such form and in such manner as the Secretary may prescribe) not later than the day on which the first offering for sale of interests in such tax shelter occurs. "(2) INFORMATION INCLUDED IN REGISTRATION.—Any registra-

, "

"^

tion under paragraph (1) shall include— "(A) information identifying and describing the tax shelter, "(B) information describing the tax benefits of the tax

shelter represented (or to be represented) to investors, and "(C) such other information as the Secretary may prescribe. "(b) FURNISHING OF TAX SHELTER IDENTIFICATION NUMBER; INCLUSION ON RETURN.— "(1) SELLERS, ETC.—Any person who sells (or otherwise trans-

,,

?

fers) an interest in a tax shelter shall (at such times and in such manner as the Secretary shall prescribe) furnish to each investor who purchases (or otherwise acquires) an interest in such tax shelter from such person the identification number assigned by the Secretary to such tax shelter. "(2) INCLUSION OF NUMBER ON RETURN.—Any person claiming any deduction, credit, or other tax benefit by reason of a tax shelter shall include (in such manner as the Secretary may prescribe) on the return of tax on which such deduction, credit, or other benefit is claimed the identification number assigned by the Secretary to such tax shelter. "(c) TAX SHELTER.—For purposes of this section— "(1) IN GENERAL.—The term 'tax shelter' means any investment— "(A) with respect to which any person could reasonably •"' infer from the representations made, or to be made, in connection with the offering for sale of interests in the investment that the tax shelter ratio for any investor as of oj the close of any of the first 5 years ending after the date on which such investment is offered for sale may be greater than 2 to 1, and ''""'•' "(B) which is— ,., "(i) required to be registered under a Federal or State law regulating securities, "(ii) sold pursuant to an exemption from registration requiring the filing of a notice with a Federal or State 1 agency regulating the offering or sale of securities, or "(iii) a substantial investment. "(2) TAX SHELTER RATIO DEFINED.—For purposes of this subsection, the term 'tax shelter ratio' means, with respect to any year, the ratio which— "(A) the aggregate amount of the deductions and 200 percent of the credits which are represented to be potentially allowable to any investor under subtitle A for all periods up to (and including) the close of such year, bears to 105 "(B) the investment base as of the close of such year. "(3) INVESTMENT BASE.—

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 PUBLIC LAW 98-369—JULY 18, 1984

ar

J5fK ,; '.

,. ^i ' * '

98 STAT. 679

"(A) IN GENERAL.—Except as provided in this paragraph, the term 'investment base' means, with respect to any year, the amount of money and the adjusted basis of other property (reduced by any hability to which such other property jg subject) contributed by the investor as of the close of such year. "(B) CERTAIN BORROWED AMOUNTS EXCLUDED.—For purposes of subparagraph (A), there shall not be taken into account any amount borrowed from any person— "(i) who participated in the organization, sale, or management of the investment, or "(ii) who is a related person (as defined in section 168(e)(4)) to any person described in clause (i), unless such amount is unconditionally required to be repaid by the investor before the close of the year for which the determination is being made.

'

"(C) CERTAIN OTHER AMOUNTS INCLUDED OR EXCLUDED.— "(i) AMOUNTS HELD IN CASH EQUIVALENTS, ETC.—No

« •

amount shall be taken into account under subparagraph (A) which is to be held in cash equivalent or marketable securities. "(ii)

AMOUNTS INCLUDED OR EXCLUDED BY SECRE-

TARY.—The Secretary may by regulation— "(I) exclude from the investment base any ' " = ^ » amount described in subparagraph (A), or "(II) include in the investment base any amount not described in subparagraph (A), if the Secretary determines that such exclusion or inclusion is necessary to carry out the purposes of this section. "(4) SUBSTANTIAL INVESTMENT.—An investment is a substantial investment if— "(A) the aggregate amount which may be offered for sale exceeds $250,000, and "(B) there are expected to be 5 or more investors. "(d) OTHER DEFINITIONS.—For purposes of this section— "(1) TAX SHELTER ORGANIZER.—The term 'tax shelter organizer' means— "(A) the person principally responsible for organizing the, tax shelter, "(B) if the requirements of subsection (a) are not met by a person described in subpargraph (A) at the time prescribed . ^.. therefor, any other person who participated in the organization of the tax shelter, and "(C) if the requirements of subsection (a) are not met by a person described in subparagraph (A) or (B) at the time in" prescribed therefor, any person participating in the sale or management of the investment at a time when the tax shelter was not registered under subsection (a). "(2) YEAR.—The term 'year' means— "(A) the taxable year of the tax shelter, or "(B) if the tax shelter has no taxable year, the calendar year. "(e) REGULATIONS.—The Secretary may prescribe regulations which provide—

'

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Page:United States Statutes at Large Volume 98 Part 1.djvu/728

 98 STAT. 680

PUBLIC LAW 98-369—JULY 18, 1984 "(1) rules for the aggregation of similar investments offered by the same person or persons for purposes of applying subsection (c)(4), "(2) that only 1 person shall be required to meet the requirements of subsection (a) in cases in which 2 or more persons would otherwise be required to meet such requirements, "(3) exemptions from the requirements of this section, and "(4) such rules as may be necessary or appropriate to carry out the purposes of this section in the case of foreign tax shelters." (b) PENALTIES.—Subchapter B of chapter 68 (relating to assessable penalties) is amended by adding at the end thereof the following new section:

26 USC 6707.

"SEC. 6707. FAILURE TO FURNISH INFORMATION REGARDING TAX SHELTERS. "(a) FAILURE TO REGISTER TAX SHELTER.— "(1) IMPOSITION OF PENALTY.—If a person who is required to

Ante, p. 677.

register a tax shelter under section 6111(a)— "(A) fails to register such tax shelter on or before the date described in section 6111(a)(1), or "(B) files false or incomplete information with the Secretary with respect to such registration, such person shall pay a penalty with respect to such registration in the amount determined under paragraph (2). No penalty shall be imposed under the preceding sentence with respect to any failure which is due to reasonable cause. "(2) AMOUNT OF PENALTY.—The penalty imposed under paragraph (1) with respect to any tax shelter shall be an amount equal to the greater of— "(A) $500, or "(B) the lesser of (i) 1 percent of the aggregate amount invested in such tax shelter, or (ii) $10,000. The $10,000 limitation in subparagraph (B) shall not apply where there is an intentional disregard of the requirements of section 6111(a). "(b) FAILURE TO FURNISH TAX SHELTER IDENTIFICATION NUMBER.— "(1) SELLERS, ETC.—Any person who fails to furnish the identi-

fication number of a tax shelter which such person is required to furnish under section 6111(b)(1) shall pay a penalty of $100 for each such failure. "(2) FAILURE TO INCLUDE NUMBER ON RETURN.—Any person who fails to include an identification number on a return on which such number is required to be included under section 6111(b)(2) shall pay a penalty of $50 for each such failure, unless such failure is due to reasonable cause." (c) CONFORMING AMENDMENTS.—

(1) The table of sections for subchapter B of chapter 61 is amended by striking out the item relating to section 6111 and inserting in lieu thereof the following new items: "Sec. 6111. Registration of tax shelters. "Sec. 6112. Cross references."

(2) The table of sections for subchapter B of chapter 68 is amended by adding at the end thereof the following new item: "Sec. 6707. Failure to furnish information regarding tax shelters." 26 USC 6111

note.

(d) EFFECTIVE D A T E. —

„

j

1^

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 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 681

(1) IN GENERAL.—The amendments made by this section shall apply to any tax shelter (within the meaning of section 6111 of the Internal Revenue Code of 1954, as added by this section) any Ante, p. 677. interest in which is first sold to any investor after August 31, 1984. (2) SUBSTANTIAL INVESTMENT TEST.—For purposes of determin-

ing whether any investment is a tax shelter by reason of section 6111(c)(l)(B)(iii) of such Code (as added by this section), only offers for sale after August 31, 1984, shall be taken into account.

^to

(3) FURNISHING OF SHELTER IDENTIFICATION NUMBER FOR INTERESTS SOLD BEFORE SEPTEMBER 1, 1984.—With respect to interests

sold before September 1, 1984, any liability to act under paragraph (1) of section 6111(b) of such Code (as added by this section) which would (but for this sentence) arise before such date shall be deemed to arise on December 31, 1984. SEC. 142. ORGANIZERS AND SELLERS OF POTENTIALLY ABUSIVE TAX SHELTERS MUST KEEP LISTS OF INVESTORS. (a) IN GENERAL.—Subchapter B of chapter 61 (relating to miscellaneous provisions involving information and returns) is amended by redesignating section 6112 as section 6113 and by inserting after section 6111 the following new section:

Ante, p. 677. ^^ USC 6113.

"SEC. 6112. ORGANIZERS AND SELLERS OF POTENTIALLY ABUSIVE TAX 26 USC 6112. SHELTERS MUST KEEP LISTS OF INVESTORS. "(a) IN GENERAL.—Any person who— "(1) organizes any potentially abusive tax shelter, or ^ • r;- Or' i "(2) sells any interest in such a shelter, ^ shall maintain (in such manner as the Secretary may by regulations prescribe) a list identifying each person who was sold an interest in such shelter and containing such other information as the Secretary may by regulations require. "(b) POTENTIALLY ABUSIVE TAX SHELTER.—For purposes of this section, the term 'potentially abusive tax shelter' means— "(1) any tax shelter (as defined in section 6111) with respect to Ante, p. 677. which registration is required under section 6111, and "(2) any entity, investment plan or arrangement, or other plan or arrangement which is of a type which the Secretary ,a5>? D8i> determines by regulations as having a potential for tax avoidance or evasion. "(c) SPECIAL RULES.— "(1) AVAILABILITY FOR INSPECTION; RETENTION OF INFORMATION

ON LIST.—Any person who is required to maintain a list under subsection (a)— "(A) shall make such list available to the Secretary for inspection upon request by the Secretary, and "(B) except as otherwise provided under regulations prescribed by the Secretary, shall retain any information which is required to be included on such list for 7 years.

,.,.

i

"(2) LISTS WHICH WOULD BE REQUIRED TO BE MAINTAINED BY 2

OR MORE PERSONS.—The Secretary shall prescribe regulations Regulations. which provide that, in cases in which 2 or more persons are required under subsection (a) to maintain the same list (or portion thereof), only 1 person shall be required to maintain such list (or portion)."

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Page:United States Statutes at Large Volume 98 Part 1.djvu/730

 98 STAT. 682

PUBLIC LAW 98-369—JULY 18, 1984 (b) PENALTY FOR FAILURE TO MAINTAIN LIST.—Subchapter B of

chapter 68 (relating to assessable penalties) is amended by adding at the end thereof the following new section:

"': 26 USC 6708. Post, p. 912.

"SEC. 6708. FAILURE TO MAINTAIN LISTS OF INVESTORS IN POTENTIALLY ABUSIVE TAX SHELTERS.

"(a) IN GENERAL.—Any person who fails to meet any requirement imposed by section 6112 shall pay a penalty of $50 for each person with respect to whom there is such a failure, unless it is shown that such failure is due to reasonable cause and not due to willful neglect. The maximum penalty imposed under this subsection for any calendar year shall not exceed $50,000. "(b) PENALTY IN ADDITION TO OTHER PENALTIES.—The penalty imposed by this section shall be in addition to any other penalty provided by law."

Ante, p. 681.

(c) CONFORMING AMENDMENTS.—

(1) The table of sections for subchapter B of chapter 61 is amended by striking out the item relating to section 6112 and inserting in lieu thereof the following new items: "Sec. 6112. Organizers and sellers of potentially abusive tax shelters must keep lists of investors. "Sec. 6113. Cross reference."

(2) The table of sections for subchapter B of chapter 68 is «: XA* amended by adding at the end thereof the following new item:

.. SJ

"Sec. 6708. Failure to maintain lists of investors in potentially abusive tax shelters." (d) EFFECTIVE DATE.—The amendments made by this section shall

26 USC 6112 note.

apply to any interest which is first sold to any investor after August 31, 1984. SEC. 143. INCREASE IN PENALTY FOR PROMOTING ABUSIVE TAX SHELTERS; INJUNCTION AGAINST AIDING OR ABETTING UNDERSTATEMENT OF TAX LIABILITY. (a) INCREASE IN PROMOTER PENALTY.—Subsection (a) of section

26 USC 6700.

6700 (relating to promotion of abusive tax shelters) is amended by striking out "10 percent" and inserting in lieu thereof "20 percent'. (b) INJUNCTION AGAINST AIDING OR ABETTING UNDERSTATEMENTS OF TAX LIABILITY.—

26 USC 7408.

26 USC 6700 note. _

.

26 USC 6621.

n

(1) Subsections (a) and O> of section 7408 (relating to action to t) enjoin promoters of abusive tax shelters, etc.) are each amended by inserting "or section 6701 (relating to penalties for aiding and abetting understatement of tax liability)" after "etc.)". (2) Subsection (a) of section 7408 is amended by inserting "or section 6701" before the period at the end of the second sentence. (3) Subsection (b) of section 7408 is amended by inserting before the period "or section 6701". (c) EFFECTIVE DATE.—The amendments made by this section shall take effect on the day after the date of the enactment of this Act. SEC. 144. INCREASED RATE OF INTEREST ON SUBSTANTIAL UNDERPAYMENTS ATTRIBUTABLE TO CERTAIN TAX MOTIVATED TRANSACTIONS. (a) GENERAL RULE.—Section 6621 (relating to determination of rate of interest) is amended by adding at the end thereof the following new subsection:

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98 STAT. 683

"(d) INTEREST ON SUBSTANTIAL UNDERPAYMENTS ATTRIBUTABLE TO TAX MOTIVATED TRANSACTIONS.—

"(1) IN GENERAL.—In the case of interest payable under section 6601 with respect to any substantial underpayment attributable to tax motivated transactions, the annual rate of interest established under this section shall be 120 percent of the adjusted rate established under subsection (b). "(2) SUBSTANTIAL UNDERPAYMENT ATTRIBUTABLE TO TAX MOTI-

"

VATED TRANSACTIONS.—For purposes of this subsection, the term 'substantial underpayment attributable to tax motivated transactions' means any underpayment of taxes imposed by subtitle A for any taxable year which is attributable to 1 or more tax V motivated transactions if the amount of the underpayment for such year so attributable exceeds $1,000. .^ "(3) TAX MOTIVATED TRANSACTIONS.— •'ili "(A) IN GENERAL.—For purposes of this subsection, the term 'tax motivated transaction' means— "(i) any valuation overstatement (within the meaning of section 6659(c)), Post, p. 693. '"'• "• ' ' ^"(ii) any loss disallowed by reason of section 465(a) •" ' and any credit disallowed under section 46(c)(8), Post, pp. 805,810. "(iii) any straddle (as defined in section 1092(c) without regard to subsections (d) and (e) of section 1092), and "(iv) any use of an accounting method specified in -;;;.^\: ". regulations prescribed by the Secretary as a use which may result in a substantial distortion of income for any period. "(B) REGULATORY AUTHORITY.—The Secretary may by regulations specify other types of transactions which will be treated as tax motivated for purposes of this subsection and may by regulations provide that specified transactions being treated as tax motivated will no longer be so treated. X^w In prescribing regulations under the preceding sentence, the Secretary shall take into account— -^' • "(i) the ratio of tax benefits to cash invested, "(ii) the methods of promoting the use of this type of v_fis ktransaction, and "(iii) other relevant considerations. ' "(C) EFFECTIVE DATE FOR REGULATIONS.—Any regulations prescribed under subparagraph (A)(iv) or (B) shall apply SffI < v only to interest accruing after a date (specified in such regulations) which is after the date on which such regula'•'• tions are prescribed. "(4) JURISDICTION OF TAX COURT.—In the case of any proceeding in the Tax Court for a redetermination of a deficiency, the Tax Court shall also have jurisdiction to determine the portion (if any) of such deficiency which is a substantial underpayment attributable to tax motivated transactions." Ob) CROSS REFERENCE.—Section 6214 (relating to determinations by

Tax Court) is amended by adding at the end thereof the following new subsection: "(e) CROSS REFERENCE.—

26 USC 6214.

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Page:United States Statutes at Large Volume 98 Part 1.djvu/732

 98 STAT. 684

PUBLIC LAW 98-369—JULY 18, 1984 (Yf

"For provision giving Tax Court jurisdiction to determine whether any portion of deficiency is a substantial underpayment attributable to tax motivated transactions, see section 6621(d)(4)." ^^^ EFFECTIVE DATE.—The amendments made by this section shall

Ante, p. 682.

notY^^ ^^^^

apply with respect to interest accruing after December 31, 1984. PART II—INFORMATION REPORTING PROVISIONS SEC. 145. RETURNS RELATING TO MORTGAGE INTEREST RECEIVED IN TRADE OR BUSINESS FROM INDIVIDUALS.

(a) IN GENERAL.—Subpart B of part III of subchapter A of chapter 61 (relating to information concerning transactions with other persons) is amended by adding at the end thereof the following new section: 26 USC 6050H.

'I M"

01.

"

"SEC. 6050H. RETURNS RELATING TO MORTGAGE INTEREST RECEIVED IN TRADE OR BUSINESS FROM INDIVIDUALS. "(a) MORTGAGE INTEREST OF $600 OR MORE.—Any person—

"(1) who is engaged in a trade or business, and "(2) who, in the course of such trade or business, receives from any individual interest aggregating $600 or more for any calendar year on any mortgage, shall make the return described in subsection (b) with respect to each individual from whom such interest was received at such time as the Secretary may by regulations prescribe. "(b) FORM AND MANNER OF RETURNS.—A return is described in

this subsection if such return— "(1) is in such form as the Secretary may prescribe, "(2) contains— "(A) the name and address of the individual from whom the interest described in subsection (a)(2) was received, "(B) the amount of such interest received for the calendar year, and "(C) such other information as the Secretary may prescribe. "(c) APPLICATION TO GOVERNMENTAL UNITS.—For purposes of subsection (a)— "(1) TREATED AS PERSONS.—The term 'person' includes any governmental unit (and any agency or instrumentality thereof). "(2) SPECIAL RULES.—In the case of a governmental unit or any agency or instrumentality thereof^ "(A) subsection (a) shall be applied without regard to the trade or business requirement contained therein, and "(B) any return required under subsection (a) shall be made by the officer or employee appropriately designated for the purpose of making such return. "(d) STATEMENTS TO B E FURNISHED TO INDIVIDUALS WITH RESPECT TO WHOM INFORMATION IS FURNISHED.—Every person making a

M;) I ' S>

return under subsection (a) shall furnish to each individual whose name is set forth in such return a written statement showing— "(1) the name and address of the person making such return, and "(2) the aggregate amount of interest described in subsection (a)(2) received by the person making such return from the individual to whom the statement is furnished.

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Page:United States Statutes at Large Volume 98 Part 1.djvu/733

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 685

The written statement required under the preceding sentence shall be furnished on or before January 31 of the year following the calendar year for which the return under subsection (a) was made. "(e) MORTGAGE DEFINED.—For purposes of this section, except as provided in regulations prescribed by the Secretary, the term 'mortgage' means any obligation secured by real property. "(f) RETURNS WHICH WOULD B E REQUIRED TO B E MADE BY 2 OR MORE PERSONS.—Except to the extent provided in regulations pre-

scribed by the Secretary, in the case of interest received by any person on behalf of another person, only the person first receiving such interest shall be required to make the return under subsection (a)." (b) PENALTIES—

(1) Subparagraph (B) of section 6652(a)(1) (relating to failure to 26 USC 6652. ^ file certain information returns, etc.) is amended— (A) by striking out "or" at the end of clause (iii), (B) by inserting "or" at the end of clause (iv), and aoilc (C) by inserting after clause (iv) the following new clause: '(v) section 6050H(a) (relating to mortgage interest received in trade or business from individuals),". (2) Clause (iii) of section 6652(a)(3)(A) (relating to penalty in 97 Stat. 381. case of intentional disregard) is amended by inserting "or section 6050H" after "section 6041A(b)". (3) Paragraph (1) of section 6678(a) (relating to failure to 26 USC 6678. furnish certain statements) is amended— (A) by striking out "or 6052(b)" and inserting in lieu thereof "6052(b), or 6050H(d)", and (B) by striking out "or 6052(a)" and inserting in lieu thereof "6052(a), or 6050H(a)". (c) CONFORMING AMENDMENT.—The table of sections for subpart B of part III of subchapter A of chapter 61 is amended by adding at the end thereof the following new item: "Sec. 6050K. Returns relating to mortgage interest received in trade or business from individuals." (d) EFFECTIVE D A T E S. —

26 USC 6050H

(1) IN GENERAL.—Except as provided in paragraph (2), the note. amendments made by this section shall apply to amounts received after December 31, 1984. (2) SPECIAL RULE FOR OBLIGATIONS IN EXISTENCE ON DECEMBER

31, 1984.—In the case of any obligation in existence on December 31, 1984, no penalty shall be imposed under section 6652 of the Internal Revenue Code of 1954 by reason of the amendments made by this section on any failure to supply a taxpayer identification number with respect to amounts received before January 1, 1986.

.-^,, ^v.vl^

SEC. 146. RETURNS RELATING TO CASH RECEIVED IN TRADE OR BUSINESS.

(a) IN GENERAL.—Subpart B of part III of subchapter A of chapter 61 (relating to information concerning transactions with other persons) is amended by adding at the end thereof the following new section: "SEC. 60501. RETURNS RELATING TO CASH RECEIVED IN TRADE OR BUSINESS. "(a) CASH RECEIPTS OF MORE THAN $10,000.—Any person—

"(1) who is engaged in a trade or business, and

^, ^

26 USC 60501.

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Page:United States Statutes at Large Volume 98 Part 1.djvu/734

 98 STAT. 686

PUBLIC LAW 98-369—JULY 18, 1984 "(2) who, in the course of such trade or business, receives more than $10,000 in cash in 1 transaction (or 2 or more related transactions), shall make the return described in subsection (b) with respect to such transaction (or related transactions) at such time as the Secretary may by regulations prescribe. "(b) FORM AND MANNER OF RETURNS.—A return is described in

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this subsection if such return— "(1) is in such form as the Secretary may prescribe, "(2) contains— "(A) the name, address, and TIN of the person from whom the cash was received, "(B) the amount of cash received, i "(C!) the date and nature of the transaction, and "(D) such other information as the Secretary may prescribe. "(c) EXCEPTIONS.— "(1) CASH RECEIVED BY FINANCIAL INSTITUTIONS.—Subsection

,j^,

(a) shall not apply to— "(A) cash received in a transaction reported under title 31, United States Code, if the Secretary determines that reporting under this section would duplicate the reporting to the Treasury under title 31, United States Code, or "(B) cash received by any financial institution (as defined in subparagraphs (A), (B), (C), (D), (E), (F), (G), (J), (K), (R), and (S) of section 5312(a)(2) of title 31, United States Code).

,

.SV3(J •>«-"

"(2) TRANSACTIONS OCCURRING OUTSIDE THE UNITED STATES.—

Except to the extent provided in regulations prescribed by the Secretary, subsection (a) shall not apply to any transaction if the entire transaction occurs outside the United States. "(d) CASH INCLUDES FOREIGN CURRENCY.—For purposes of this section, the term 'cash' includes foreign currency. "(e) STATEMENTS TO B E FURNISHED TO PERSONS WITH RESPECT TO WHOM INFORMATION IS FURNISHED.—Every person making a return

under subsection (a) shall furnish to each person whose name is set forth in such return a written statement showing— "(1) the name and address of the person making such return, and "(2) the aggregate amount of cash described in subsection (a) received by the person making such return. The written statement required under the preceding sentence shall be furnished to the person on or before January 31 of the year following the calendar year for which the return under subsection (a) was made." (b) PENALTIES—

Ante, p. 685.

Ante, p. 685. Ante, p. 685.

(1) Subparagraph (B) of section 6652(a)(1) (relating to failure t:o file certain information returns, etc.) is amended— (A) by striking out "or" at the end of clause (iv), (B) by inserting "or" at the end of clause (v), and (C) by inserting after clause (v) the following new clause: "(vi) section 60501(a) (relating to cash received in trade or business),". (2) Clause (iii) of section 6652(a)(3)(A) (relating to penalty in .-i case of intentional disregard) is amended by striking out "or section 6050H" and inserting in lieu thereof ", 6050H or 60501". (3) Paragraph (1) of section 6678(a) (relating to failure to furnish certain statements) is amended—

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Page:United States Statutes at Large Volume 98 Part 1.djvu/735

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 687

(A) by striking out "or 6050H(d)" and inserting in lieu thereof "6050H(d), or 60501(e)", and (B) by striking out "or 6050H(a)" and inserting in lieu thereof "6050H(a), or 60501(a)". (c) CONFORMING AMENDMENT.—The table of sections for subpart B of part III of subchapter A of chapter 61 is amended by adding at the end thereof the following new item: "Sec. 60501. Returns relating to cash received in trade or business."

(d) EFFECTIVE DATE.—The amendments made by this section shall apply to amounts received after December 31, 1984.

26 USC 6050i note.

SEC. 147. PROVISIONS RELATING TO INDIVIDUAL RETIREMENT ACCOUNTS. (a) CLARIFICATION THAT REGULATIONS MAY REQUIRE REPORTS TO IDENTIFY YEARS TO WHICH CONTRIBUTIONS RELATE.—Subsection (i) of

section 408 (relating to individual retirement accounts) is amended by inserting "(and the years to which they relate)" after "contributions".

26 USC 408.

(b) INCREASE IN PENALTY FOR FAILURE TO FILE REPORTS.—Subsec-

tion (a) of section 6693 (relating to failure to provide reports on individual retirement accounts and annuities) is amended by striking out "$10" and inserting in lieu thereof "$50". (c) CONTRIBUTIONS REQUIRED TO B E MADE ON OR BEFORE UNEXTENDED RETURN F I U N G DATE.—Subparagraph (A) of section 219(f)(3)

(relating to time when contributions deemed made) is amended by striking out "including" and inserting in lieu thereof "not including". (d) EFFECTIVE DATES.— (1) IN GENERAL.—Except as provided in paragraph (2), the amendments made by this section shall apply to contributions made after December 31, 1984. (2) SUBSECTION (b).—The amendment made by subsection (b) shall apply to failures occurring after the date of the enactment of this Act.

26 USC 6693.

26 USC 219.

26 USC 219 not(3.

SEC. 148. RETURNS RELATING TO FORECLOSURES AND ABANDONMENTS OF SECURITY.

(a) IN GENERAL.—Subpart B of part III of subchapter A of chapter 61 (relating to information concerning transactions with other persons) is amended by adding at the end thereof the following new section: "SEC. 6050J. RETURNS RELATING TO FORECLOSURES AND ABANDONMENTS OF SECURITY.

"(a) IN GENERAL.—Any person who, in connection with a trade or business conducted by such person, lends money secured by property and who— "(1) in full or partial satisfaction of any indebtedness, acquires an interest in any property which is security for such indebtedness, or "(2) has reason to know that the property in which such person has a security interest has been abandoned, shall make a return described in subsection (c) with respect to each of such acquisitions or abandonments, at such time as the Secretary may by regulations prescribe. "(b) EXCEPTION.—Subsection (a) shall not apply to any loan to an individual secured by an interest in tangible personal property

26 USC 6050J.

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ni.

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Page:United States Statutes at Large Volume 98 Part 1.djvu/736

 98 STAT. 688

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PUBLIC LAW 98-369—JULY 18, 1984 which is not held for investment and which is not used in a trade or business. "(c) FORM AND MANNER OF RETURN.—The return required under subsection (a) with respect to any acquisition or abandonment of property— "(1) shall be in such form as the Secretary may prescribe, "(2) shall contain— "(A) the name and address of each person who is a i borrower with respect to the indebtedness which is secured, "(B) a general description of the nature of such property and such indebtedness, "(C) in the case of a return required under subsection (a)(1)"(i) the amount of such indebtedness at the time of such acquisition, and "(ii) the amount of indebtedness satisfied in such acquisition, "(D) in the case of a return required under subsection (a)(2), the amount of such indebtedness at the time of such abandonment, and "(E) such other information as the Secretary may prescribe. "(d) APPLICATIONS TO GOVERNMENTAL UNITS.—For purposes of this section— "(1) TREATED AS PERSONS.—The term 'person' includes any governmental unit (and any agency or instrumentality thereof). "(2) SPECIAL RULES.—In the case of a governmental unit or any agency or instrumentality thereof— "(A) subsection (a) shall be applied without regard to the trade or business requirement contained therein, and "(B) any return under this section shall be made by the officer or employee appropriately designated for the purpose of making such return. "(e) STATEMENTS TO B E FURNISHED TO PERSONS WITH RESPECT TO WHOM INFORMATION IS REQUIRED TO B E FURNISHED.—Every person

required to make a return under subsection (a) shall furnish to each person whose name is required to be set forth in such return a written statement showing the name and address of the person required to make such return. The written statement required under the preceding sentence shall be furnished to the person on or before January 31 of the year following the calendar year for which the return under subsection (a) was made. "(0 TREATMENT OF OTHER DISPOSITIONS.—To the extent provided by regulations prescribed by the Secretary, any transfer of the property which secures the indebtedness to a person other than the lender shall be treated as an abandonment of such property." (b) PENALTIES.—

Ante, p. 686.

Ante, p. 686.

(1) Subparagraph (B) of section 6652(a)(1) (relating to failure to file certain information returns, etc.) is amended— (A) by striking out "or" at the end of clause (v), (B) by adding "or" at the end of clause (vi), and (C) by inserting after clause (vi) the following new clause: "(vii) section 6050J(a) (relating to foreclosures and abandonments of security),". (2) Clause (iii) of section 6652(a)(3)(A) (relating to penalty in case of intentional disregard) is amended by striking out "or 60501" and inserting in lieu thereof ", 60501, or 6050J".

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Page:United States Statutes at Large Volume 98 Part 1.djvu/737

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 689

(3) Paragraph (1) of section 6678(a) (relating to failure Ante, p. 686. to furnish certain statements) is amended— (A) by striking out "or 60501(e)" and inserting in lieu thereof "60501(e), or 6050J(e)", and (B) by striking out "or 60501(a)" and inserting in lieu thereof "60501(a), or 6050J(a)". (c) CONFORMING AMENDMENT.—The table of sections for subpart B of part III of subchapter A of chapter 61 is amended by adding at the end thereof the following new item: "' •' "Sec.

6050J. Returns relating to foreclosures and abandonments of security." EFFECTIVE DATE.—The amendments made by this section shall

(d) 26 USC 6050J apply with respect to acquisitions of property and abandonments of note. property after December 31, 1984. SEC. 149. RETURNS RELATING TO EXCHANGES OF PARTNERSHIP INTERESTS WHERE UNREALIZED RECEIVABLES, ETC., INVOLVED. (a) IN GENERAL.—Subpart B of part III of subchapter A of chapter 61 (relating to information and returns) is amended by adding at the end thereof the following new section. "SEC. 6050K. RETURNS RELATING TO EXCHANGES OF CERTAIN PARTNER- 26 USC 6050K. SHIP INTERESTS. "(a) IN GENERAL.—Except as provided in regulations prescribed by the Secretary, if there is an exchange described in section 751(a) of any interest in a partnership during any calendar year, such partnership shall make a return for such calendar year stating— "(1) the name and address of the transferee and transferor in ^ -^ ' " such exchange, and "(2) such other information as the Secretary may by regulations prescribe. Such return shall be made at such time and in such manner as the Secretary may require by regulations. "(b) STATEMENT TO B E FURNISHED TO TRANSFEROR AND TRANS-

FEREE.—Every partnership making a return under subsection (a) shall furnish to each person whose name is set forth in such return a written statement showing— "(1) the name and address of the partnership making the return, and "(2) the information shown on the return with respect to such person. The statement required under the preceding sentence shall be furnished to the person on or before January 31 following the calendar year for which the return under subsection (a) was made. "(c) REQUIREMENT THAT TRANSFEROR NOTIFY PARTNERSHIP.—

"(1) IN GENERAL.—In the case of any exchange described in subsection (a), the transferor of the partnership interest shall promptly notify the partnership of such exchange. "(2)

PARTNERSHIP NOT REQUIRED TO MAKE RETURN UNTIL

NOTICE.—A partnership shall not be required to make a return under this subsection with respect to any exchange until the partnership is notified of such exchange." (b) PENALTIES.—

(1) Subparagraph (B) of section 6652(a)(1) (relating to failure to Ante, p. 688. file certain information returns, etc.) is amended by striking out "or" at the end of clause (vi), by adding "or" at the end of clause (vii), and by inserting after clause (vii) the following new clause:

31-194 0 - 86 - 24: QL. 3 Part 1

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Page:United States Statutes at Large Volume 98 Part 1.djvu/738

 98 STAT. 690

PUBLIC LAW 98-369—JULY 18, 1984 'fy

Ante, p. 689.

97 Stat. 381.

"(viii) section 6050K (relating to exchanges of certain partnership interests),". (2) Paragraph (1) of section 6678(a) (relating to failure to furnish certain statements) is amended— (A) by striking out "or 6050J(e)" and inserting in lieu thereof "6050J(e), or 6050K(b)", and (B) by striking out "or 6050J(a)" and inserting in lieu thereof "6050J(a), or 6050K(a)". (3) Section 6678 (relating to failure to furnish certain statements) is amended by adding at the end thereof the following new subsection:

"(c) FAILURE TO NOTIFY PARTNERSHIP OF EXCHANGE OF PARTNERSHIP INTEREST.—In the case of any person who fails to furnish the Ante, p. 689.

26 USC 6050K note.

notice required by section 6050K(c)(l) on the date prescribed therefor, unless it is shown that such failure is due to reasonable cause and not to willful neglect, such person shall pay a penalty of $50 for each such failure." (c) CONFORMING AMENDMENT.—The table of sections for subpart B of part III of subchapter A of chapter 61 is amended by adding at the end thereof the following new item: "Sec. 6050K. Returns relating to exchanges of certain partnership interests." (d) EFFECTIVE DATE.—The amendments made by this section shall

apply with respect to exchanges after December 31, 1984. SEC. 150. STATEMENTS REQUIRED IN CASE OF CERTAIN SUBSTITUTE PAYMENTS.

26 USC 6045.

(a) IN GENERAL.—Section 6045 (relating to returns of brokers) is amended by adding at the end thereof the following new subsection: "(d) STATEMENTS REQUIRED IN CASE OF CERTAIN SUBSTITUTE PAY-

26 USC 6045 note.

MENTS.—If any broker— "(1) transfers securities of a customer for use in a short sale or similar transaction, and "(2) receives (on behalf of the customer) a payment in lieu of— "(A) a dividend, "(B) tax-exempt interest, or "(C) such other items as the Secretary may prescribe by regulations, during the period such short sale or similar transaction is open, the broker shall furnish such customer a written statement (at such time and in the manner as the Secretary shall prescribe by regulations) identifying such payment as being in lieu of the dividend, taxexempt interest, or such other item. The Secretary may prescribe regulations which require the broker to make a return which includes the information contained in such written statement." (b) EFFECTIVE DATE.—The amendment made by this section shall apply to payments received after December 31, 1984. SEC. 151. REPORTING OF STATE AND LOCAL REFUNDS NOT REQUIRED WITH RESPECT TO NON-ITEMIZERS.

26 USC 6050E.

26 USC 1 et seq.

(a) IN GENERAL.—Subsection (b) of section 6050E (relating to State and local income tax refunds) is amended by adding at the end thereof the following: "No statement shall be required under this subsection with respect to any individual if it is determined (in the manner provided by regulations) that such individual did not claim itemized deductions under chapter 1 for the taxable year giving rise to the refund, credit, or offset."

 * J76^

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Page:United States Statutes at Large Volume 98 Part 1.djvu/739

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 691

(b) EFFECTIVE DATE.—The amendment made by subsection (a) 26 USC 6050E shall apply to payments of refunds, and credits and offsets made, note. after December 31, 1982. SEC. 152. FURNISHING OF TIN UNDER BACKUP WITHHOLDING.

(a) IN GENERAL.—Section 3406(e)(1) (relating to backup withhold- 97 Stat. 371. ing) is amended by inserting at the end thereof the following new 26 USC 3406. sentence: "The Secretary may require that a TIN required to be furnished under subsection (a)(1)(A) be provided under penalties of perjury only with respect to interest, dividends, patronage dividends, and amounts subject to broker reporting." (b) EFFECTIVE DATE.—The amendment made by this section shall 26 USC 3406 note. take effect on the date of the enactment of this Act. PART III—OTHER COMPLIANCE PROVISIONS SEC. 155. SUBSTANTIATION OF CHARITABLE CONTRIBUTIONS; MODIFICATIONS OF INCORRECT VALUATION PENALTY.

26 USC 170 note.

(a) SUBSTANTIATION OF CONTRIBUTIONS OF PROPERTY.—

(1) IN GENERAL.—Not later than December 31, 1984, the Secre- Regulations. tary shall prescribe regulations under section 170(a)(1) of the Corporations. Internal Revenue Code of 1954, which require any individual, closely held corporation, or personal service corporation claiming a deduction under section 170 of such Code for a contribution described in paragraph (2)— (A) to obtain a qualified appraisal for the property contributed, ix^ (B) to attach an appraisal summary to the return on which such deduction is first claimed for such contribution, and (C) to include on such return such additional information (including the cost basis and acquisition date of the contributed property) as the Secretary may prescribe in such regulations. Such regulations shall require the taxpayer to retain any qualified appraisal. (2) CONTRIBUTIONS TO WHICH PARAGRAPH (i) APPLIES.—For

purposes of paragraph (1), a contribution is described in this paragraph— (A) if such contribution is of property (other than publicly traded securities), and (B) if the claimed value of such property (plus the claimed value of all similar items of property donated to 1 or more donees) exceeds $5,000. In the case of any property which is nonpublicly traded stock, subparagraph (B) shall be applied by substituting "$10,000" for "$5,000". (3) APPRAISAL SUMMARY.—For purposes of this subsection, the appraisal summary shall be in such form and include such information as the Secretary prescribes by regulations. Such summary shall be signed by the qualified appraiser preparing the qualified appraisal and shall contain the TIN of such appraiser. Such summary shall be acknowledged by the donee of the property appraised in such manner as the Secretary prescribes in such regulations.

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Page:United States Statutes at Large Volume 98 Part 1.djvu/740

 98 STAT. 692

PUBLIC LAW 98-369—JULY 18, 1984 (4) QUALIFIED APPRAISAL,—The term "qualified appraisal" means an appraisal prepared by a qualified appraiser which includes— (A) a description of the property appraised, (B) the fair market value of such property on the date of contribution and the specific basis for the valuation, (C) a statement that such appraisal was prepared for income tax purposes, (D) the qualifications of the qualified appraiser, (E) the signature and TIN of such appaiser, and (F) such additional information as the Secretary prescribes in such regulations. (5) QUALIFIED APPRAISER.—

(A) IN GENERAL.—For purposes of this subsection, the term "qualified appraiser" means an appraiser qualified to make appraisals of the type of property donated, who is • ^

^ >i - ••

not—

(i) the taxpayer, (ii) a party to the transaction in which the taxpayer acquired the property, (iii) the donee, (iv) any person employed by any of the foregoing persons or related to any of the foregoing persons under section 267(b) of the Internal Revenue Code of 1954, or (v) to the extent provided in such regulations, any person whose relationship to the taxpayer would cause a reasonable person to question the independence of such appraiser. (B) APPRAISAL FEES.—For purposes of this subsection, an appraisal shall not be treated as a qualified appraisal if all or part of the fee paid for such appraisal is based on a percentage of the appraised value of the property. The preceding sentence shall not apply to fees based on a sliding scale that are paid to a generally recognized association regulating appraisers. (6) OTHER DEFINITIONS.—For purposes of this subsection— (A) CLOSELY HELD CORPORATION.—The term "closely held corporation" means any corporation (other than an S corporation) with respect to which the stock ownership requirement of paragraph (2) of section 542(a) of such Code is met. (B) PERSONAL SERVICE CORPORATION.—The term "personal service corporation" means any corporation (other than an S corporation) which is a service organization (within the meaning of section 414(m)(3) of such Code). (C) PUBLICLY TRADED SECURITIES.—The term "publicly traded securities" means securities for which (as of the date of the contribution) market quotations are readily available on an established securities market. (D) NoNPUBLiCLY TRADED STOCK.—The term "nonpublicly traded stock" means any stock of a corporation which is not a publicly traded security. (E) THE SECRETARY.—The term "Secretary" means the Secretary of the Treasury or his delegate. (b) INFORMATION REPORT REQUIRED ON DISPOSITION BY DONEE.—

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Page:United States Statutes at Large Volume 98 Part 1.djvu/741

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 693

(1) IN GENERAL.—Subpart B of part III of subchapter A of chapter 61 (relating to information and returns) is amended by adding at the end thereof the following new section: "SEC. 6050L. RETURNS RELATING TO CERTAIN DISPOSITIONS OF DONATED PROPERTY.

26 USC 6050L.

"(a) GENERAL RULE.—If the donee of any charitable deduction property sells, exchanges, or otherwise disposes of such property within 2 years after its receipt, the donee shall make a return (in accordance with forms and regulations prescribed by the Secretary) showing— "(1) the name, address, and TIN of the donor, "(2) a description of the property, "(3) the date of the contribution, "(4) the amount received on the disposition, and "(5) the date of such disposition. "(b) CHARITABLE DEDUCTION PROPERTY.—For purposes of this section, the term 'charitable deduction property' means any property (other than publicly traded securities) contributed in a contribution for which a deduction was claimed under section 170 if the claimed value of such property (plus the claimed value of all similar items of property donated by the donor to 1 or more donees) exceeds $5,000, "(c) STATEMENT TO B E FURNISHED TO DONORS.—Every person making a return under subsection (a) shall furnish a copy of such return to the donor at such time and in such manner as the Secretary may by regulations prescribe. "(d) DEFINITION OF PUBLICLY TRADED SECURITIES.—The term 'publicly traded securities' means securities for which (as of the date of the contribution) market quotations are readily available on an established securities market."

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(2) PENALTIES.—

(A) Subparagraph (B) of section 6652(a)(1) (relating to 26 USC 6652. failure to file certain information returns, etc.) is amended— (i) by striking out "or" at the end of clause (vii), (ii) by adding "or" at the end of clause (viii), and (iii) by inserting after clause (viii) the following new -qe clause: 1 "(ix) section 6050L (relating to returns relating to Supra. certain dispositions of donated property),". .«!«.-•' (B) Paragraph (1) of section 6678(a) (relating to failure to 26 USC 6678. furnish certain statements) is amended— (i) by striking out "or 6050K(b)" and inserting in lieu iy ,., thereof "6050K(b), or 6050L(c)", and (ii) by striking out "or 6050K(a)" and inserting in lieu thereof "6050K(a), or 6050L(a)". (3) CLERICAL AMENDMENT.—The table of sections of subpart B ^w '' of part III of subchapter A of chapter 61 is amended by adding at the end thereof the following new item: "Sec. 6050L. Returns relating to certain dispositions of donated property." (c) MODIFICATIONS OF INCORRECT VALUATION PENALTY.— (1) MODIFICATIONS OF SECTION 6659.— (A) EUMINATION OF REQUIREMENT THAT PROPERTY BE AC-

QUIRED WITHIN THE LAST 5 YEARS.—Subsection (c) of section 6659 is amended to read as follows:

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26 USC 6659.

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text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/742

 98 STAT. 694

PUBLIC LAW 98-369—JULY 18, 1984 "(c) VALUATION OVERSTATEMENT DEFINED.—For purposes of this section, there is a valuation overstatement if the value of any property, or the adjusted basis of any property, claimed on any return is 150 percent or more of the amount determined to be the correct amount of such valuation or adjusted basis (as the case may be)." (B) SPECIAL RULES FOR OVERSTATEMENT OF CHARITABLE

26 USC 6659.

DEDUCTION.—Section 6659 is amended by redesignating subsection (f) as subsection (g) and by inserting after subsection (e) the following new subsection: "(f) SPECIAL RULES FOR OVERSTATEMENT OF CHARITABLE DEDUCTION.— "(1) AMOUNT OF APPLICABLE PERCENTAGE.—In the case of any

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underpayment attributable to a valuation overstatement with respect to charitable deduction property, the applicable percentage for purposes of subsection (a) shall be 30 percent. "(2) LIMITATION ON AUTHORITY TO WAIVE.—In the case of any underpayment attributable to a valuation overstatement with respect to charitable deduction property, the Secretary may not waive any portion of the addition to tax provided by this section unless the Secretary determines that— "(A) the claimed value of the property was based on a qualified appraisal made by a qualified appraiser, and "(B) in addition to obtaining such appraisal, the taxpayer made a good faith investigation of the value of the contributed property. "(3) DEFINITIONS.—For purposes of this subsection— "(A) CHARITABLE DEDUCTION PROPERTY.—The term 'charitable deduction property' means any property contributed by the taxpayer in a contribution for which a deduction was claimed under section 170. For purposes of paragraph (2), such term shall not include any securities for which (as of the date of the contribution) market quotations are readily available on an established securities market. "(B) QUALIFIED APPRAISER.—The term 'qualified appraiser' means any appraiser meeting the requirements of the regulations prescribed under section 170(a)(1). "(C) QUALIFIED APPRAISAL.—The term 'qualified appraisal' means any appraisal meeting the requirements of the regulations prescribed under section 170(a)(1)." (2) EXTENSION OF INCORRECT VALUATION PENALTY TO ESTATE AND GIFT TAX.—

26 USC 6660. 26 USC 2001.

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(A) Subchapter A of chapter 68 (relating to additions to the tax and additional amounts) is amended by inserting after section 6659 the following new section: "SEC. 6660. ADDITION TO TAX IN THE CASE OF VALUATION UNDERSTATEMENT FOR PURPOSES OF THE ESTATE OR GIFT TAXES. "(a) ADDITION TO THE TAX.—In the case of any underpayment of a tax imposed by subtitle B (relating to estate and gift taxes) which is attributable to a valuation understatement, there shall be added to the tax an amount equal to the applicable percentage of the underpayment so attributed. "(b) APPLICABLE PERCENTAGE.—For purposes of subsection (a), the applicable percentage shall be determined under the following table:

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