Page:United States Statutes at Large Volume 100 Part 3.djvu/557

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2365

Subparagraph (C) shall apply to a shareholder of an S corporation only if such corporation was an S corporation for a taxable year beginning in 1986.

Subtitle B—Treatment of Installment Obligations SEC. 811. ALLOCATION OF INDEBTEDNESS AS PAYMENT ON INSTALLMENT OBLIGATION.

(a) IN GENERAL.—Subpart B of part II of subchapter E of chapter 1 (relating to taxable year for which item of gross income included) is amended by inserting after section 453B the following new section: "SEC. 453C. CERTAIN INDEBTEDNESS TREATED INSTALLMENT OBLIGATIONS.

AS

PAYMENT

ON

"(a) GENERAL RULE.—For purposes of sections 453 and 453A, if a taxpayer has allocable installment indebtedness for any taxable year, such indebtedness— "(1) shall be allocated on a pro rata basis to any applicable installment obligation of the taxpayer which— "(A) arises in such taxable year, and "(B) is outstanding as of the close of such taxable year, and "(2) shall be treated as a payment received on such obligation as of the close of such taxable year. "(b) ALLOCABLE INSTALLMENT INDEBTEDNESS.—For purposes of this section— "(1) IN GENERAL.—The term 'allocable installment indebtedness' means, with respect to any taxable year, the excess (if any) of— "(A) the installment percentage of the taxpayer's average quarterly indebtedness for such taxable year, over "(B) the aggregate amount treated as allocable installment indebtedness with respect to applicable installment obligations which— "(i) are outstanding as of the close of such taxable year, but "(ii) did not arise during such taxable year. "(2) INSTALLMENT PERCENTAGE.—The term 'installment percentage' means the percentage (not in excess of 100 percent) determined by dividing— "(A) the face amount of all applicable installment obligations of the taxpayer outstanding as of the close of the taxable year, by "(B) the sum of— "(i) the aggregate adjusted bases of all assets not described in clause (ii) held as of the close of the taxable year, and "(ii) the face amount of all installment obligations outstanding as of such time. For purposes of subparagraph (B)(i), a taxpayer may elect to compute the aggregate adjusted bases of all assets using the deduction for depreciation which is used in computing earnings and orofits under section 312(k).

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