Page:United States Statutes at Large Volume 100 Part 3.djvu/432

 100 STAT. 2240
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PUBLIC LAW 99-514—OCT. 22, 1986 "(9) ELECTION TO INCREASE BASIS OF PROPERTY BY AMOUNT OF

DISALLOWED CREDIT.—For purposes of determining gain or loss from a disposition of any property to which subsection (g)(1) applies, the transferor may elect to increase the basis of such property immediately before the transfer by an amount equal to the portion of any unused credit allowable under this chapter which reduced the basis of such property for the taxable year in which such credit arose. If the taxpayer elects the application of this paragraph, such portion of the passive activity credit of such taxpayer shall not be allowed for any taxable year, "(k) REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out provisions of this section, including regulations— "(1) which specify what constitutes an activity, material participation, or active participation for purposes of this section, "(2) which provide that certain items of gross income will not be taken into account in determining income or loss from any activity (and the treatment of expenses allocable to such income), "(3) requiring net income or gain from a limited partnership or other passive activity to be treated as not from a passive activity, "(4) which provide for the determination of the allocation of interest expense for purposes of this section, and "(5) which deal with changes in marital status and changes between joint returns and separate returns. "(1) PHASE-IN OF DISALLOWANCE OF LOSSES AND CREDITS FOR INTERESTS HELD BEFORE DATE OF ENACTMENT.—

"(1) IN GENERAL.—In the case of any passive activity loss or credit for any taxable year beginning in calendar years 1987 through 1990 which— "(A) is attributable to a pre-enactment interest, but \"(B) is not attributable to a carryforward to such taxable year of any loss or credit which was disallowed under this section for a preceding taxable year, there shall be disallowed under subsection (a) only the applicable percentage of the amount which (but for this subsection) would have been disallowed under subsection (a) for such taxable year. "(2) APPLICABLE PERCENTAGE.—For purposes of this subsection, the applicable percentage shall be determined in accordance with the following table: '^^ i

"In the case of taxable years beginning in:

1987 \\m 1989 1990

The applicable percentage is:

35 60 80 90.

"(3) PORTION OF LOSS OR CREDIT ATTRIBUTABLE TO PRE-ENACTMENT INTERESTS.—For purposes of this subsection—

f,,

"(A) IN GENERAL.—The portion of the passive activity loss for any taxable year which is attributable to pre-enactment interests shall be equal to the lesser of— "(i) the passive activity loss for such taxable year, or "(ii) the passive activity loss for such taxable year determined by taking into account only pre-enactment interests.

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