Page:United States Statutes at Large Volume 100 Part 3.djvu/590

 100 STAT. 2398

PUBLIC LAW 99-514—OCT. 22, 1986 unpaid losses outstanding at the end of the preceding taxable year. "(B) REDUCTION OF DEDUCTION.—The amount which would (but for this subparagraph) be taken into account under subparagraph (A) shall be reduced by an amount equal to 15 percent of the sum of— "(i) tax-exempt interest received or accrued during such taxable year, and "(ii) the aggregate amount of deductions provided by sections 243, 244, and 245 for— "(I) dividends (other than 100 percent dividends) received during the taxable year, and "(II) 100 percent dividends received during the taxable year to the extent attributable to prorated amounts. In the case of a 100 percent dividend paid by an insurance company, the portion attributable to prorated amounts shall be determined under subparagraph (E)(ii). "(C) EXCEPTION FOR INVESTMENTS MADE BEFORE AUGUST 8, 1986.—

"(i) IN GENERAL.—Except as provided in clause (ii), subparagraph (B) shall not apply to any dividend or interest received or accrued on any stock or obligation acquired before August 8, 1986. "(ii) SPECIAL RULE FOR lOO PERCENT DIVIDENDS.—For

purposes of clause (i), the portion of any 100 percent dividend which is attributable to prorated amounts shall be treated as received with respect to stock acquired on the later of— "(I) the date the payor acquired the stock or obligation to which the prorated amounts are attributable, or "(II) the 1st day on which the payor and payee were members of the same affiliated group (as defined in section 243(b)(5)). "(D) DEFINITIONS.—For purposes of this paragraph— "(i) PRORATED AMOUNTS.—The term 'prorated amounts' means tax-exempt interest and dividends with respect to which a deduction is allowable under section 243, 244, or 245 (other than 100 percent dividends), "(ii) 100 PERCENT DIVIDEND.—

"(I) IN GENERAL.—The term '100 percent dividend' means any dividend if the percentage used for purposes of determining the deduction allowable under section 243, 244, or 2450t>) is 100 percent. "(II)

CERTAIN DIVIDENDS RECEIVED BY FOREIGN

CORPORATIONS.—A dividend received by a foreign corporation from a domestic corporation which would be a 100 percent dividend if section 15O40t>X3) did not apply for purposes of applying section 243(b)(5) shall be treated as a 100 percent dividend. "(E) SPECIAL RULES FOR DIVIDENDS SUBJECT TO PRORATION AT SUBSIDIARY LEVEL.—

"(i) IN GENERAL.—In the case of any 100 percent dividend paid to an insurance company to which this

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