Page:United States Statutes at Large Volume 100 Part 3.djvu/425

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2233

to the date of entry, immediately upon the diversion to liquid motor fuel use of any ethyl alcohol or ethyl alcohol mixture certified upon entry as having been imported for non-liquid motor fuel use." (g) EFFECTIVE PERIOD.—

(1) The provisions of, and the amendments made by, this section (other than subsection (e)) shall apply to articles entered— (A) after December 31, 1986, and (B) before the expiration of the effective period of item 901.50 of the Appendix to the Tariff Schedules of the United States. (2) The provisions of subsection (e) shall take effect on the date of the enactment of this Act.

TITLE V—TAX SHELTER LIMITATIONS; INTEREST LIMITATIONS Subtitle A—Limitations On Tax Shelters SEC. 501. LIMITATIONS ON LOSSES AND CREDITS FROM PASSIVE ACTIVITIES.

(a) GENERAL RULE.—Subpart C of part II of subchapter E of chapter 1 (relating to taxable year for which deductions taken) is amended by adding at the end thereof the following new section: "SEC. 469. PASSIVE ACTIVITY LOSSES AND CREDITS LIMITED. "(a) DISALLOWANCE.—

"(1) IN GENERAL.—If for any taxable year the taxpayer is described in paragraph (2), neither— "(A) the passive activity loss, nor "(B) the passive activity credit, for the taxable year shall be allowed. "(2) PERSONS DESCRIBED.—The following are described in this paragraph: "(A) any individual, estate, or trust, "(B) any closely held C corporation, and "(C) any personal service corporation.

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"(b) DISALLOWED LOSS OR CREDIT CARRIED TO NEXT YEAR.—Except

as otherwise provided in this section, any loss or credit from an activity which is disallowed under subsection (a) shall be treated as a deduction or credit allocable to such activity in the next taxable year. "(c) PASSIVE ACTIVITY DEFINED.—For purposes of this section— "(1) IN GENERAL.—The term 'passive activity' means any activity— "(A) which involves the conduct of any trade or business, and "(B) in which the taxpayer does not materially participate. -n.

'«(2) PASSIVE ACTIVITY INCLUDES ANY RENTAL ACTIVITY.—The

term 'passive activity' includes any rental activity. "(3) WORKING INTERESTS IN OIL AND GAS PROPERTY.—

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"(A) IN GENERAL.—The term 'passive activity' shall not include any working interest in any oil or gas property which the taxpayer holds directly or through an entity

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