Page:United States Statutes at Large Volume 100 Part 3.djvu/765

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2573

"(d) SECTION 1247 CORPORATIONS.—For purposes of this part, the term 'passive foreign investment company' does not include any foreign investment company to which section 1247 applies. "SEC. 1297. SPECIAL RULES.

"(a) ATTRIBUTION OF OWNERSHIP.—For purposes of this part— "(1) ATTRIBUTION TO UNITED STATES PERSONS.—This subsec-

tion—

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"(A) shall apply to the extent that the effect is to treat stock of a passive foreign investment company as owned by a United States person, and "(B) except to the extent provided in regulations, shall not apply to treat stock owned (or treated as owned under this subsection) by a United States person as owned by any other person. "(2) CORPORATIONS.—

"(A) IN GENERAL.—If 50 percent or more in value of the stock of a corporation is owned, directly or indirectly, by or for any person, such person shall be considered as owning the stock owned directly or indirectly by or for such corporation in that proportion which the value of the stock which such person so owns bears to the value of all stock in the corporation. "(B) 50-PERCENT LIMITATION NOT TO APPLY TO PFIC.—For

purposes of determining whether a shareholder of a passive foreign investment company is treated as owning stock owned directly or indirectly by or for such company, subparagraph (A) shall be applied without regard to the 50percent limitation contained therein. "(3) PARTNERSHIPS, ETC.—Stock owned, directly or indirectly, by or for a partnership, estate, or trust shall be considered as being owned proportionately by its partners or beneficiaries. "(4) SUCCESSIVE APPLICATION.—Stock considered to be owned by a person by reason of the application of paragraph (2) or (3) shall, for purposes of applying such paragraphs, be considered as actually owned by such person. "(b) OTHER SPECIAL RULES.—For purposes of this part— "(1) TIME FOR DETERMINATION.—Stock held by a taxpayer shall be treated as stock in a passive foreign investment company if, at any time during the holding period of the taxpayer with respect to such stock, such corporation (or any predecessor) was a passive foreign investment corporation which was not a qualified electing fund. The preceding sentence shall not apply if the taxpayer elects to recognize gain (as of the last day of the last taxable year for which the company was a passive foreign investment company) under rules similar to the rules of section 1291(d)(2). "(2) CERTAIN CORPORATIONS NOT TREATED AS PFIC'S DURING

START-UP YEAR.—A Corporation shall not be treated as a passive foreign investment company for the first taxable year such corporation has gross income (hereinafter in this paragraph referred to as the 'start-up year') if^ "(A) no predecessor of such corporation was a passive foreign investment company, "(B) it is established to the satisfaction of the Secretary that such corporation will not be a passive foreign invest-

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