Page:United States Statutes at Large Volume 100 Part 3.djvu/485

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2293

(c) ELECTION.—

(1) IN GENERAL.—An election under this subsection to have the provisions of this section apply— (A) shall be made by the board of trustees of the entity, and (B) shall not be valid unless accompanied by an agreement described in paragraph (2). (2) AGREEMENT.—The agreement described in this paragraph is a written agreement signed by the board of trustees of the entity which provides that the entity will not— (A) sell any trust property, (B) purchase any additional trust properties, or (C) receive any income other than— (i) income from long-term mineral leases, or (ii) interest or other income attributable to ordinary and necessary reserves of the entity. (3) PERIOD FOR WHICH ELECTION IS IN EFFECT.—An election

under this subsection shall be in effect during the period— (A) beginning on the first day of the first taxable year beginning after the date of the enactment of this Act and following the taxable year in which the election is made, and (B) ending as of the close of the taxable year preceding the taxable year in which the entity ceases to be described in subsection (b) or violates any term of the agreement under paragraph (2). (4) MANNER OF ELECTION.—Any election under this subsection shall be made in such manner as the Secretary of the Treasury or his delegate may prescribe. (d) SPECIAL RULES FOR TAXATION OF TRUST.— (1) ELECTION TREATED AS A LIQUIDATION.—If an election is

made under subsection (c) with respect to any entity— (A) such entity shall be treated as having been liquidated into a trust immediately before the period described in subsection (c)(3) in a liquidation to which section 333 of the Internal Revenue Code of 1954 (as in effect before the amendments made by this Act) applies, and (B) any person holding an interest in the property held by such entity as of such time shall be treated as a qualified electing shareholder for purposes of section 333 of such Code (as so in effect). (2) TERMINATION OF ELECTION.—If an entity ceases to be de-

scribed in subsection (b) or violates any term of the agreement described in subsection (c)(2), then the tax imposed on such entity for the taxable year in which such cessation or violation occurs shall be increased by the sum of— (A) the amount of taxes which would have been imposed on such entity during any taxable year with respect to which an election under subsection (c) was in effect if such election had not been in effect, plus (B) interest determined for the period— (i) beginning on the due date for any such taxable year, and (ii) ending on the due date for the taxable year in which such cessation or violation occurs, by using the rates and method applicable under section 6621 for underpayments of tax for such period.

71-194 0 - 89 - 17: CSL. 3 Part3

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