Page:United States Statutes at Large Volume 100 Part 3.djvu/759

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2567

pany for which it was a passive foreign investment company (or, if later, January 1, 1987), and "(C) the tax imposed by this chapter for the current year shall be increased by the deferred tax amount (determined under subsection (c)). "(2) DISPOSITIONS.—If the taxpayer disposes of stock in a passive foreign investment company, then the rules of paragraph (1) shall apply to any gain recognized on such disposition in the same manner as if such gain were an excess distribution. ,j., "(3) DEFINITIONS.—For purposes of this section— "(A) HOLDING PERIOD.—The taxpayer's holding period shall be determined under section 1223; except that, in the case of an excess distribution, such holding period shall be treated as ending on the date of such distribution. "(B) CURRENT YEAR.—The term 'current year' means the taxable year in which the excess distribution or disposition occurs. "(4) COORDINATION WITH SECTION 904.—Subparagraph (B) of paragraph (1) shall not apply for purposes of section 904. "(5) SECTION 902 NOT TO APPLY.—Section 902 shall not apply to any dividend paid by a passive foreign investment company unless such company is a qualified electing fund. "(b) EXCESS DISTRIBUTION.—

"(1) IN GENERAL.—For purposes of this section, the term 'excess distribution' means any distribution in respect of stock received during any taxable year to the extent such distribution does not exceed its ratable portion of the total excess distribution (if any) for such taxable year. "(2) TOTAL EXCESS DISTRIBUTION.—For purposes of this subsection— "(A) IN GENERAL.—The term 'total excess distribution' means the excess (if any) of— "(i) the amount of the distributions in respect of the stock received by the taxpayer during the taxable year, over "(ii) 125 percent of the average amount received in respect of such stock by the taxpayer during the 3 preceding taxable years (or, if shorter, the portion of J!}e !«^ the taxpayer's holding period before the taxable year). "(B) No EXCESS FOR IST YEAR.—The total excess distributions with respect to any stock shall be zero for the taxable year in which the taxpayer's holding period in such stock begins. • "(3) ADJUSTMENTS.—Under regulations prescribed by the Secretary— "(A) determinations under this subsection shall be made on a share-by-share basis, except that shares with the same holding period may be aggregated, "(B) proper adjustments shall be made for stock splits and "(C) if the taxpayer does not hold the stock during the Biilii-: entire taxable year, distributions received during such year shall be annualized, "(D) if the taxpayer's holding period includes periods during which the stock was held by another person, distributions received by such other person shall be taken into account as if received by the taxpayer, and
 * V,, stock dividends,

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