Page:United States Statutes at Large Volume 100 Part 3.djvu/1017

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2825

(d) AMENDMENTS RELATED TO SECTION 127 OF THE ACT.— (1) DEFINITION OF PORTFOLIO INTEREST.—

(A) Paragraph (2) of section 871(h) (defining portfolio interest) is amended by striking out "which is described in" in the matter preceding subparagraph (A) and inserting in Heu thereof "which would be subject to tax under subsection (a) but for this subsection and which is described in". (B) Paragraph (2) of section 881(c) (defining portfolio interest) is amended by striking out "which is described in" in the matter preceding subparagraph (A) and inserting in lieu thereof "which would be subject to tax under subsection (a) but for this subsection and which is described in". (2) ATTRIBUTION OF SHAREHOLDER STOCK TO CORPORATION.—

Subparagraph (C) of section 871(h)(3) (relating to portfolio interest not to include interest received by 10-percent shareholders) is amended by striking out "and" at the end of clause (i), by redesignating clause (ii) as clause (iii), and by inserting after clause (i) the following new clause: "(ii) section 318(a)(3)(C) shall be applied— "(I) without regard to the 50-percent limitation therein; and "(II) in any case where such section would not apply but for subclause (I), by considering a corporation as owning the stock (other than stock in such corporation) which is owned by or for any shareholder of such corporation in that proportion which the value of the stock which such shareholder owns in such corporation bears to the value of all stock in such corporation, and". (3) CLERICAL AMENDMENTS.—

(A) Paragraph (1) of section 871(a) is amended by striking out "provided in subsection (i)" in the matter preceding subparagraph (A), and inserting in lieu thereof "provided in subsection (h)". (B) Clause (ii) of section 871(h)(2)(B) is amended by striking out "has received" and inserting in lieu thereof "receives". (C) Clause (ii) of section 881(c)(2)(B) is amended by striking out "has received" and inserting in lieu thereof "receives". (D) Paragraph (9) of section 1441(c) is amended by striking out "871(h)(2)" and inserting in lieu thereof "section 871(h)". (E) Subsection (a) of section 1442 is amended— (i) by striking out "sections 871(h)(2)" and inserting in lieu thereof "sections 871(h)", (ii) by striking out "sections 881(c)(2)" and inserting in lieu thereof "sections 881(c)", and (iii) by striking out "section 1449(c)(9)" and inserting in lieu thereof "section 1441(c)(9)". (e) AMENDMENTS RELATED TO SECTION 128 OF THE ACT.— (1) DEDUCTION FOR ORIGINAL ISSUE DISCOUNT.—

(A) Subparagraph (A) of section 163(e)(3) (relating to special rule for original issue discount on obligation held by related foreign person) is amended by adding at the end thereof the following new sentence: "The preceding sentence shall not apply to the extent that the original issue

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