Page:United States Statutes at Large Volume 102 Part 4.djvu/527

 PUBLIC LAW 100-647—NOV. 10, 1988

102 STAT. 3497

(c) AMENDMENT RELATED TO SECTION 1203 OF THE REFORM ACT.—

Paragraph (5) of section 904(f) of the 1986 Code is amended by adding at the end thereof the following new subparagraph: "(F) DISPOSITIONS.—If any separate limitation loss for any taxable year is allocated against any separate limitation income for such taxable year, except to the extent provided in regulations, rules similar to the rules of paragraph (3) shall apply to any disposition of property if gain from such disposition would be in the income category with respect to which there was such separate limitation loss." (d) AMENDMENTS RELATED TO SECTION 1211 OF THE REFORM ACT.—

(1) Subsection (d) of section 865 of the 1986 Code is amended by adding at the end thereof the following new pargigraph: "(4) COORDINATION WITH SUBSECTION (C).— "(A) GAIN NOT IN EXCESS OF DEPRECIATION ADJUSTMENTS

souRCED UNDER SUBSECTION graph (1), any gain from the sourced under subsection (c) not exceed the depreciation such intangible.

(c).—Notwithstanding parasale of an intangible shall be to the extent such gain does adjustments with respect to

"(B) SUBSECTION (C)(2) NOT TO APPLY TO INTANGIBLES.—

Paragraph (2) of subsection (c) shall not apply to any gain from the sale of an intangible." (2) Subparagraph (A) of section 865(e)(l) of the 1986 Code is amended by striking out "(d), or (f)" and inserting in lieu thereof "(d)(l)(B) or (3), or (f)". (3)(A) Clause (ii) of section 865(g)(l)(A) of the 1986 Code is amended by striking out "partnership,". (B) Subsection (h) of section 865 of the 1986 Code is amended by adding at the end thereof the following new paragraph: "(5) TREATMENT OF PARTNERSHIPS.—In the case of a partnership, except as provided in regulations, this section shall be applied at the partner level." (4) Subsection (f) of section 865 of the 1986 Code is amended to read as follows: "(f) STOCK OF AFFILIATES.—If—

"(1) a United States resident sells stock in an affiliate which is a foreign corporation, "(2) such sale occurs in a foreign country in which such afHliate is engaged in the active conduct of a trade or business, and "(3) more than 50 percent of the gross income of such affiliate for the 3-year period ending with the close of such af^iate's taxable year immediately preceding the year in which the sale occurred was derived from the active conduct of a trade or business in such foreign country, any gain from such sale shall be sourced outside the United States. For purposes of paragraphs (2) and (3), the United States resident may elect to treat an affiliate and all other corporations which are wholly owned (directly or indirectly) by the affiliate as one corporation." (5) Effective with respect to taxable years beginning after December 31, 1987, subparagraph (B) of section 865(e)(2) of the 1986 Code is amended to read as follows: "(B) EXCEPTION.—Subparagraph (A) shall not apply to ^ ^^. any sale of inventory property which is sold for use, disposition, or consumption outside the United States if an office

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