Page:United States Statutes at Large Volume 102 Part 4.djvu/460

 102 STAT. 3430

PUBLIC LAW 100-647—NOV. 10, 1988 "(II) the denominator of which is the aggregate amount of such dividends, "(iii) TREATMENT OF TAXES IMPOSED ON 936 CORPORATION.—For purposes of this subparagraph, taxes paid by any corporation eligible for the credit provided by section 936 to a possession of the United States shall be treated as a withholding tax paid with respect to any dividend paid by such corporation to the extent such taxes would be treated as paid by the corporation receiving the dividend under rules similar to the rules of section 902 (and the amount of any such dividend shall be increased by the amount so treated)." (B) Qause (iii) of section 56(g)(4)(C) of the 1986 Code is amended by striking out "clause (iiXD" and inserting in lieu (12) Clause (iii) of section 56(g)(4)(B) of the 1986 Code is amended by adding at the end thereof the following new sentence: "The preceding sentence shall not apply to any annuity contract held under a plan described in section 403(a). (13) Paragraph (1) of section 56(c) of the 1986 Code is amended— (A) by striking out "ADJUSTED EARNINGS AND PROFITS" in the paragraph heading and inserting in lieu thereof "ADJUSTED CURRENT EARNINGS", and (B) by striking out "ADJUSTED EARNINGS AND PROFITS"

in the heading of subparagraph (B) and inserting in lieu thereof "ADJUSTED CURRENT EARNINGS". (14XA) Subsection (b) of section 56 of the 1986 (Dode is amended by adding a t the end thereof the following new paragraph: "(3) TREATMENT OF INCENTIVE STOCK OPTIONS.—Section 421

26 USC 56 note.

shall not apply to the transfer of stock acquired pursuant to the exercise of an incentive stock option (as defined in section 422A). The adjusted basis of any stock so acquired shall be determined on the basis of the treatment prescribed by the preceding sentence." (B) Paragraph (3) of section 57(a) of the 1986 Code is hereby repealed. (C) The amendments made by this paragraph shall apply with respect to options exercised after December 31, 1987. (15) Clause (i) of section 56(a)(l)(A) of the 1986 Code is amended by striking out "REAL" in the heading and inserting in lieu thereof "PERSONAL". (16) The heading of paragraph (1) of section 56(b) of the 1986 Code is amended by striking out "ITEMIZED". (17) Subparagraph (A) of section 56(g)(4) of the 1986 Code is amended by adding at the end thereof the following new clauses: "(vi) ELECTION TO HAVE CUMULATIVE LIMITATION.—

"(I) IN GENERAL.—In the case of any property placed in service during a taxable year to which an election under this clause applies, in lieu of applying clause (i), the depreciation deduction for such property for any taxable year shall be the lesser of the accumulated 168(g) depreciation or the accumulated book depreciation; reduced by the aggregate amount of the depreciation deductions

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