Page:United States Statutes at Large Volume 100 Part 3.djvu/742

 100 STAT. 2550

PUBLIC LAW 99-514—OCT. 22, 1986

and similar transactions) in any commodities. This subpara• ii graph shall not apply to gains or losses which— "(i) arise out of bona fide hedging transactions ^1 reasonably necessary to the conduct of any business by .j^ a producer, processor, merchant, or handler of a commodity in the manner in which such business is ^^'.,; customarily and usually conducted by others, "(ii) are active business gains or losses from the sale of commodities, but only if substantially all of the controlled foreign corporation's business is as an active producer, processor, merchant, or handler of commodities, or "(iii) are foreign currency gains or losses (as defined in section 9880))) attributable to any section 988 transactions. "(D) FOREIGN CURRENCY GAINS.—The excess of foreign currency gains over foreign currency losses (as defined in ,,., section 988(b)) attributable to any section 988 transactions. This subparagraph shall not apply in the case of any trans^,^.. action directly related to the business needs of the controlled foreign corporation. ^^<j

^,

"(E)

INCOME

EQUIVALENT TO INTEREST.—Any

income

equivalent to interest, including income from commitment fees (or similar amounts) for loans actually made. "(2) EXCEPTION FOR CERTAIN AMOUNTS.— "(A) R E N T S AND ROYALTIES DERIVED IN ACTIVE BUSINESS.—

- Pi

?;/-,

Foreign personal holding company income shall not include rents and royalties which are derived in the active conduct of a trade or business and which are received from a person other than a related person (within the meaning of subsection (d)(3)). "(B) CERTAIN EXPORT FINANCING.—Foreign personal holding company income shall not include any interest which is derived in the conduct of a banking business and which is export financing interest (as defined in section 904(d)(2)(G)). "(3) CERTAIN INCOME RECEIVED FROM RELATED PERSONS.—

"(A) IN GENERAL.—Except as provided in subparagraph (B), the term 'foreign personal holding company income' does not include— "(i) dividends and interest received from a related .. person which (I) is created or organized under the laws t of the same foreign country under the laws of which the controlled foreign corporation is created or orga5j.;ifj;; nized, and (II) has a substantial part of its assets used in its trade or business located in such same foreign ., country, and "(ii) rents and royalties received from a related 3. J person for the use of, or the privilege of using, property j^ within the country under the laws of which the controlled foreign corporation is created or organized. "(B) EXCEPTION NOT TO APPLY TO ITEMS WHICH REDUCE SUBPART F INCOME.—Subparagraph (A) shall not apply in

the case of any interest, rent, or royalty to the extent such interest, rent, or royalty reduces the payor's subpart F income." (2) CONFORMING AMENDMENT.—Subparagraph (A) of section

864(d)(5) (relating to certain provisions not to apply) is amended

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