Page:United States Statutes at Large Volume 100 Part 3.djvu/736

 100 STAT. 2544

PUBLIC LAW 99-514—OCT. 22, 1986

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(A) IJJ QEjEjj^L.—The amendments m a d e by this section shall not apply to any dividend paid before January 1, 1991, by a qualified corporation with respect to stock which was o u t s t and i n g on May 31, 1985. (B) Q U A L I F I E D CORPORATION.—For purposes of s u b p a r a -

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g r a p h (A), the term 'qualified corporation' means any business systems corporation which— (i) w a s incorporated in Delaware in February, 1979, (ii) is h e a d q u a r t e r e d in G a r d e n City, N e w York, and (iii) the p a r e n t corporation of which is a resident of Sweden.

SEC. 1215. RULES FOR ALLOCATING INTEREST. ETC., TO FOREIGN SOURCE INCOME. (a) GENERAL RULE.—Section 864 (relating to definitions) is amended by adding a t the e n d thereof the following new subsection: "(e) RULES FOR ALLOCATING INTEREST, E T C. — For purposes of t h i s

subchapter (except a s provided in regulations)— "(1) T R E A T M ENT OF AFFILIATED G R O U P S. — The tax a b l e income

of each m e m b e r of a n affiliated g r o u p from sources outside the United States shall b e determined by allocating and apportioning interest expense of each m e m b e r a s if all m e m b e r s of such group w e r e a single corporation. "(2) GROSS INCOME METHOD MAY NOT BE USED FOR INTEREST.—

All allocations and a p p o r t i o n m e n t s of interest expense shall be m a d e on the basis of assets r a the r than gross income. "(3) TAX-EXEMPT ASSETS N O T TAKEN INTO ACCOUNT.—For pur-

poses of allocating and a p p o r t i o n i n g any deductible expense, any tax-exempt asset (and any income from such a n asset) shall not be t a k e n into account. A similar r u l e shall apply in the case of any dividend (other than a qualifying dividend a s defined in section 243(b)) for which a deduction is allowable under section 243 or 245(a) and any stock the dividends on which would be so deductible and would not be qualifying dividends (as so defined). "(4) BASIS O F STOCK I N CERTAIN CORPORATIONS ADJUSTED FOR

EARNINGS AND PROFITS CHANGES.—For purposes of allocating and apportioning expenses on the basis of assets, the adjusted basis of any asset which is stocl^ in a corporation which is not included in the affiliated g r o u p and in which m e m b e r s of the affiliated g r o u p own 10 percent or more of the total combined voting power of all classes of stock entitled to vote in such corporation shall be— "(A) increased by the a m o u n t of the e a r n i n g s and profits of such corporation a t t r i b u t a b l e to such stock and accumulated during the period the tax p a y e r held such stock, or "(B) reduced (but not below zero) by any deficit in earnings and profits of such corporation a t t r i b u t a b l e to such stock for such period. "(5) AFFILIATED G R O U P. — For purposes of t h i s

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subsection—

"(A) IN GENERAL.—Except a s provided in subparagraph (B), the term 'affiliated group' has the m e a n i n g given such term by section 1504 (determined without regard to paragraph (4) of section 1504(b)). "(B) T R E A T M ENT OF CERTAIN FINANCIAL INSTITUTIONS.—

For purposes of subparagraph (A), any corporation described in subparagraph (C) shall be t r e a t e d a s a n includible corporation for purposes of section 1504 only for purposes of

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