Page:United States Statutes at Large Volume 102 Part 4.djvu/419

 PUBLIC LAW 100-647—NOV. 10, 1988

102 STAT. 3389

(11) Subsection (j) of section 469 of the 1986 Code is amended by adding at the end thereof the following new paragraph: "(12) SPECIAL RULE FOR DISTRIBUTIONS BY ESTATES OR TRUSTS.—

If any interest in a passive activity is distributed by an estate or trust— "(A) the basis of such interest immediately before such distribution shall be increased by the amount of any passive activity losses allocable to such interest, and "(B) such losses shall not be allowable as a deduction for any taxable year." (12) Subsection (m) of section 469 of the 1986 Code, as redesignated by section 10211 of the Revenue Act of 1987, is amended by striking all that precedes subparagraph (B) of paragraph (3) thereof and inserting in lieu thereof the following: "(m) PHASE-IN OF DISALLOWANCE OF LOSSES AND CREDITS FOR INTEREST HELD BEFORE DATE OF ENACTMENT.—

"(1) IN GENERAL.—In the case of any passive activity loss or passive activity credit for any taxable year beginning in calendar years 1987 through 1990, subsection (a) shall not apply to the applicable percentage of that portion of such loss (or such credit) which is attributable to pre-enactment interests. "(2) APPLICABLE PERCENTAGE.—For purposes of this subsection, the applicable percentage shall be determined in accordance with the following table: "In the case of taxable years beginning in: 1987 1988 1989 1990

The applicable percentage is: 65 40 20 10.

"(3) PORTION OF LOSS OR CREDIT ATTRIBUTABLE TO PRE-ENACTMENT INTERESTS.—For purposes of this subsection—

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"(A) IN GENERAL.—The portion of the passive activity loss (or passive activity credit) for any taxable year which is attributable to preenactment interests is the lesser of— "(i) the amount of the passive activity loss (or passive activity credit) which is disallowed for the tgixable year under subsection (a) (without regard to this subsection), or "(ii) the amount of the passive activity loss (or passive activity credit) which would be disallowed for the taxable year (without regard to this subsection and without regard to any amount allocable to an activity for the taxable year under subsection (b)) taking into account only pre-enactment interests."

(b) AMENDMENTS RELATED TO SECTION 502 OF THE REFORM ACT.—

(1) Subparagraph (A) of section 502(d)(l) of the Reform Act 26 USC 469 note, (defining qualified investor) is amended to read as follows: "(A) if— "(i) in the case of a project placed in service on or before August 16, 1986, such person held an interest in such project on August 16, 1986, and such person made his initial investment after December 31, 1983, or "(ii) in the case of a project placed in service after August 16, 1986, such person made his initial investment after December 31, 1983, and such person held an interest in such project on December 31, 1986, and".

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