Page:United States Statutes at Large Volume 100 Part 3.djvu/443

 PUBLIC LAW 99-514-OCT. 22, 1986

100 STAT. 2251

(iv) by amending subparagraph (B) of paragraph (3) to read as follows: "(B)(i) The term 'aggregate dividends received' includes only dividends received from domestic corporations. "(ii) For purposes of clause (i), the term 'dividend' shall not include any distribution from— "(I) a corporation which, for the taxable year of the • '.. • corporation in which the distribution is made, or for k the next preceding taxable year of the corporation, is a corporation exempt from tax under section 501 (relat' ing to certain charitable, etc., organizations) or section 521 (relating to farmers' cooperative associations), or "(II) a real estate investment trust which, for the taxable year of the trust in which the dividend is paid, qualifies under part II of subchapter M (section 856 and .; following). ' "(iii) In determining the amount of any dividend for purposes of this subparagraph, a dividend received from a regulated investment company shall be subject to the limitations prescribed in this section." ^ (7) Subsection (c) of section 857 is amended by striking out "section 116 (relating to an exclusion for dividends received by ^ individuals), and". (8) The taljle of sections for part III of subchapter B of chapter 1 is amended by striking out the item relating to section 116. (c) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 1986. SEC. 613. NONDEDIICTIBILITY OF STOCK REDEMPTION EXPENSES.

(a) IN GENERAL.—Section 162 (relating to trade or business expenses) is amended by redesignating subsection (1) as subsection (m) and inserting after subsection (k) the following new subsection:

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"(1) STOCK REDEMPTION EXPENSES.—

"(1) IN GENERAL.—Except as provided in paragraph (2), no deduction otherwise allowable shall be allowed under this chapter for any amount paid or incurred by a corporation in connection with the redemption of its stock. "(2) EXCEPTIONS.—Paragraph (1) shall not apply to— "(A) CERTAIN SPECII-'IC DEDUCTIONS.—Any—

"(i) deduction allowable under section 163 (relating to interest), or "(ii) deduction for dividends paid (within the meaning of section 561).

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"(B)

STOCK OF CERTAIN REGULATED INVESTMENT COMPA-

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NiES.—Any amount paid or incurred in connection with the redemption of any stock in a regulated investment company which issues only stock which is redeemable upon the demand of the shareholder." (b) EFFECTIVE DATE.—The amendments made by subsection (a) shall apply to any amount paid or incurred after February 28, 1986, in taxable years ending after such date. SEC. 614. REDUCTION IN STOCK BASIS FOR NONTAXED PORTION OF

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E X T R A O R D I N A R Y DIVIDENDS. /

(a) 2-YEAR HOLDING REQUIREMENT.—

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