Page:United States Statutes at Large Volume 102 Part 4.djvu/436

 102 STAT. 3406

PUBLIC LAW 100-647—NOV. 10, 1988

year for which the corporation was an S corporation pursuant to its most recent election under section 1362. "(e) REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section including regulations providing for the appropriate treatment of siicc6ssoir con30i*&tioiis (B) Subparagraph (B) of section 1375(b)(l) of the 1986 Code is amended to read as follows: "(B) LIMITATION.—The amount of the excess net passive income for any taxable year shall not exceed the amount of the corporation's taxable income for such taxable year as determined under section 63(a)— "(i) without regard to the deductions allowed by part VIII of subchapter B (other than the deduction allowed by section 248, relating to organization expenditures), and "(ii) without regard to the deduction under section 172." (C) Subsection (b) of section 1375 of the 1986 Code is amended by adding at the end thereof the following new paragraph: "(4) COORDINATION WITH SECTION

1374.—Notwithstanding

paragraph (3), the amount of passive investment income shall be determined by not taking into account any recognized builtin gain or loss of the S corporation for any taxable year in the recognition period. Terms used in the preceding sentence shall have the same respective meanings as when used in section 1374." (D) Subsection (c) of section 1375 of the 1986 Code is amended to read as follows: "(c) CREDITS NOT ALLOWABLE.—No credit shall be allowed under part IV of subchapter A of this chapter (other than section 34) against the tax imposed by subsection (a)." (E) Paragraph (2) of section 1366(f) of the 1986 Code is amended by striking out "as defined in section 1374(d)(2)" and inserting in lieu thereof "within the meaning of section 1374". (6) Paragraph (3) of section 1362(d) of the 1986 Code is amended— (A) by striking out clause (v) of subparagraph (D), and (B) by adding a t the end thereof the following new subparagraph: "(E) SPECIAL RULE FOR OPTIONS AND COMMODITY DEALINGS.—

"(i) IN GENERAL.—In the case of any options dealer or commodities de£der, passive investment income shall be determined by not taking into account any gain or loss (in the normal course of the taxpayers activity of dealing in or trading section 1256 contracts) from any section 1256 contract or property related to such a contract. "(ii) DEFINITIONS.—For purposes of this subparagraph— "(I) OPTIONS DEALER.—The term 'options dealer' has the meaning given such term by section 1256(g)(8). "(II) CoMMODmES DEALER.—The term 'commodities dealer' means a person who is actively engaged in trading section 1256 contracts and is

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