Page:United States Statutes at Large Volume 100 Part 3.djvu/741

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2549

SEC. 1216. 1-YEAR MODIFICATION IN REGULATIONS PROVIDING FOR ALLOCATION OF RESEARCH AND EXPERIMENTAL EXPENDITURES.

(a) GENERAL RULE.—For purposes of section 861(b), section 8620)), and section 863(b) of the Internal Revenue Code of 1954, notwithstanding section 864(e) of such Code— (1) 50 percent of all amounts allowable as a deduction for qualified research and experimental expenditures shall be apportioned to income from sources within the United States and deducted from such income in determining the amount of taxable income from sources within the United States, and (2) the remaining portion of such amounts shall be apportioned on the basis of gross sales or gross income. The preceding sentence shall not apply to any expenditures described in section 1.861-8(e)(3)(i)(B) of the Income Tax Regulations. (b) QuAUFiED RESEARCH A N D EXPERIMENTAL EXPENDITURES.—For

purposes of this section— (1) IN GENERAL.—The term "qualified research and experimental expenditures" means amounts— (A) which are research and experimental expenditures within the meaning of section 174 of such Code, and (B) which are attributable to activities conducted in the United States. (2) TREATMENT OF DEPRECIATION, ETC.—Rules similar to the rules of section 174(c) of such Code shall apply. (c) EFFECTIVE DATE.—This section shall apply to taxable years beginning after August 1, 1986, and on or before August 1, 1987.

Subtitle C—Taxation of Income Earned Through Foreign Corporations SEC. 1221. INCOME SUBJECT TO CURRENT TAXATION. (a) DEFINITION INCOME.—

OF

FOREIGN

PERSONAL

HOLDING

COMPANY

(1) IN GENERAL.—Subsection (c) of section 954 (defining foreign personal holding company income) is amended to read as follows: "(c) FOREIGN PERSONAL HOLDING COMPANY INCOME.—

"(1) IN GENERAL.—For purposes of subsection (a)(1), the term 'foreign personal holding company income' means the portion of the gross income which consists of: "(A) DIVIDENDS, ETC.—Dividends, interest, royalties, rents, and annuities. "(B) CERTAIN PROPERTY TRANSACTIONS.—The excess of gains over losses from the sale or exchange of property— "(i) which gives rise to income described in subparagraph (A) (after application of paragraph (2)(A)), or "(ii) which does not give rise to any income. This subparagraph shall not apply to gain from the sale or exchange of any property which, in the hands of the taxpayer, is property described in section 1221(1) or to gain from the sale or exchange of any property by a regular dealer in such property. "(C) COMMODITIES TRANSACTIONS.—The excess of gains over losses from transactions (including futures, forward.

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