Page:United States Statutes at Large Volume 100 Part 3.djvu/484

 100 STAT. 2292

PUBLIC LAW 99-514—OCT. 22, 1986

(iii) by adding at the end thereof the following new •"• ^ subparagraph: "(E) active business computer software royalties (as defined in subsection (d))." (b) SPECIAL RULES FOR BROKER-DEALERS.—In the case of a brokerdealer which is part of an affiliated group which files a consolidated Federal income tax return, the common parent of which was incorporated in Nevada on January 27, 1972, the personal holding company income (within the meaning of section 543 of the Internal Revenue Code of 1986) of such broker-dealer, shall not include any interest received after the date of the enactment of this Act with respect to— (1) any securities or money market instruments held as inventory, ,f (2) margin accounts, or (3) any financing for a customer secured by securities or money market instruments. (c) SPECIAL RULE FOR ROYALTIES RECEIVED BY QUALIFIED TAXPAYER.—

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(1) IN GENERAL.—Any qualified royalty received or accrued in taxable years beginning after December 31, 1981, by a qualified taxpayer shall be treated in the same manner as a royalty with respect to software is treated under the amendments made by this section. (2) QUALIFIED TAXPAYER.—For purposes of this subsection, a qualified taxpayer is any taxpayer incorporated on September 7, 1978, which is engaged in the trade or business of manufacturing dolls and accessories. (3) QUALIFIED ROYALTY.—For purposes of this subsection, the term "qualified royalty" means any royalty arising from an agreement entered into in 1982 which permits the licensee to manufacture and sell dolls and accessories.

(d) SPECIAL RULE FOR TREATMENT OF ACTIVE BUSINESS COMPUTER ROYALTIES FOR S CORPORATION PURPOSES.—In the case of a taxpayer

which was incorporated on May 3, 1977, in California and which elected to be taxed as an S corporation for its taxable year ending on December 31, 1985, any active business computer royalties (within the meaning of section 543(d) of the Internal Revenue Code of 1986 as added by this Act) which are received by the taxpayer in taxable years beginning after December 31, 1984, shall not be treated as passive investment income (within the meaning of section 1362(d)(3)(D)) for purposes of subchapter S of chapter 1 of such Code. (e) EFFECTIVE DATE.—The amendments made by subsection (a) shall apply to royalties received before, on, and after December 31, 1986. SEC. 646. CERTAIN ENTITIES NOT TREATED AS CORPORATIONS.

(a) GENERAL RULE.—For purposes of the Internal Revenue Code of 1986, if the entity described in subsection (b) makes an election under subsection (c), such entity shall be treated as a trust to which subpart E of part 1 of subchapter J of chapter 1 of such Code applies. (b) ENTITY.—An entity is described in this subsection if— (1) such entity was created in 1906 as a common law trust and . i • is governed by the trust laws of the State of Minnesota, (2) such entity receives royalties from iron ore leases, and (3) income interests in such entity are publicly traded on a v national stock exchange. ^

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