Page:United States Statutes at Large Volume 100 Part 3.djvu/762

 100 STAT. 2570

PUBLIC LAW 99-514—OCT. 22, 1986

amount distributed by a passive foreign investment company is paid out of earnings and profits of the company which were included under subsection (a) in the income of any United States person, such amount shall be treated as a distribution which is not a dividend. "(d) BASIS ADJUSTMENTS.—The basis of the taxpayer's stock in a passive foreign investment company shall be— "(1) increased by any amount which is included in the income > < of the taxpayer under subsection (a) with respect to such stock, and • "(2) decreased by any amount distributed with respect to such stock which is not includible in the income of the taxpayer by reason of subsection (c). A similar rule shall apply also in the case of any property if by reason of holding such property the taxpayer is treated under section 1297(a) as owning stock in a qualified electing fund. "(e) ORDINARY EARNINGS.—For purposes of this section— "(1) ORDINARY EARNINGS.—The term 'ordinary earnings' f^ means the excess of the earnings and profits of the qualified ^•' electing fund for the taxable year over its net capital gain for such taxable year. ^,

"(2) LIMITATION ON NET CAPITAL GAIN.—A qualified electing

fund's net capital gain for any taxable year shall not exceed its earnings and profits for such taxable year. "(f) FOREIGN TAX CREDIT ALLOWED I N THE CASE OF 10-PERCENT CORPORATE SHAREHOLDER.—For purposes of section 960—

"(1) any amount included in the gross income under subsection (a) shall be treated as if it were included under section 951(a), and "(2) any amount excluded from gross income under subsection (c) shall be treated in the same manner as amounts excluded from gross income under section 959.

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"SEC. 1294. ELECTION TO EXTEND TIME FOR PAYMENT OF TAX ON UNDISTRIBUTED EARNINGS. "(a) EXTENSION ALLOWED BY ELECTION.—

"(1) IN GENERAL.—At the election of the taxpayer, the time for p.? payment of any undistributed PFIC earnings tax liability of the taxpayer for the taxable year shall be extended to the extent i and subject to the limitations provided in this section. jv

"(2) ELECTION NOT PERMITTED WHERE AMOUNTS OTHERWISE INCLUDIBLE UNDER SECTION 551 O 951.—The taxpayer may not R

undistributed PFIC earnings tax liability attributable to a quali0 fied electing fund for the taxable year if— "(A) any amount is includible in the gross income of the t' taxpayer under section 551 with respect to such fund for riji; such taxable year, or "(B) any amount is includible in the gross income of the •->'' taxpayer under section 951 with respect to such fund for such taxable year. "0)) DEFINITIONS.—For purposes of this section— "(1) UNDISTRIBUTED PFIC EARNINGS TAX LIABILITY.—The term ' 'undistributed PFIC earnings tax liability' means, in the case of ' any taxpayer, the excess of— • "(A) the tax imposed by this chapter for the taxable year, over
 * make an election under paragraph (1) with respect to the

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