Page:United States Statutes at Large Volume 102 Part 4.djvu/531

 PUBLIC LAW 100-647—NOV. 10, 1988

102 STAT. 3501

(2) Subparagraph (B) of section 1214(d)(2) of the Reform Act is amended by striking out "section 904(d)(2)(G)" and inserting in lieu thereof "section 904(d)(2)(H)". (3) Subparagraph (B) of section 861(c)(l) of the 1986 Code is amended— (A) by striking out "subchapter)" in clause (i) and inserting in lieu thereof "subchapter) or, in the case of a corporation, is attributable to income so derived by a subsidiary of such corporation", (B) by striking out "or chain of subsidiaries of such corporation" in clause (ii), and (C) by adding at the end thereof the following new sentence: "For purposes of this subparagraph, the term 'subsidiary' means any corporation in which the corporation referred to in this subparagraph owns (directly or indirectly) stock meeting the requirements of section 1504(a)(2) (determined by substituting '50 percent' for '80 percent' each place it appears)." (4) Paragraph (1) of section 210501)) of the 1986 Code is amended by striking out "section 861(c), if any interest thereon would be treated by reason of section 861(a)(l)(A) as income from sources without the United States" and inserting in lieu thereof "section 871(i)(3), if any interest thereon would not be subject to tax by reason of section 871(i)(l)". (5) Paragraph (2) of section 864(c) of the 1986 Code is amended by striking out the last sentence. (6) Paragraph (3) of section 907(c) of the 1986 Ckxie is amended: (A) by striking out subparagraph (B) and redesignating subparagraphs (C) and (D) as subparagraphs (B) and (C), respectively, and (B) by striking out "and dividends described in subparagraph (B)". (7) Subsection (a) of section 1442 of the 1986 Code is amended— (A) by striking out "and the references in" and inserting in lieu thereof "the references in", and (B) by inserting before the period at the end thereof the following: ", and the reference in section 1441(c)(10) to section 871(i)(2) shall be treated as referring to section 881(d)". (h) AMENDMENTS RELATED TO SECTION 1215

OF THE REFORM ACT.—

(1) Paragraph (4) of section 864(e) of the 1986 Code is amended to read as follows: "(4) BASIS OF STOCK IN NONAFFILIATED IO-PERCENT OWNED COR-

PORATIONS ADJUSTED FOR EARNINGS AND PROFITS CHANGES.—

"(A) IN GENERAL.—For purposes of allocating and apportioning expenses on the basis of assets, the adjusted basis of any stock in a nonaffiliated 10-percent owned corporation shall be— "(i) increased by the amount of the earnings and profits of such corporation attributable to such stock and accumulated during the period the taxpayer held such stock, or "(ii) reduced (but not below zero) by any deficit in earnings and profits of such corporation attributable to such stock for such period.

�