Page:United States Statutes at Large Volume 102 Part 4.djvu/548

 102 STAT. 3518

PUBLIC LAW 100-647—NOV. 10, 1988 and inserting in lieu thereof "for purposes of applying this section to an excess distribution". (15) Subsection (b) of section 1293 of the 1986 Code is amended by adding at the end thereof the following new sentence: "To the extent provided in regulations, if the fund establishes to the satisfaction of the Secretary that it uses a shorter period than the taxable year to determine shareholders' interests in the earnings of such fund, pro rata shares may be determined by using such shorter period." (16) Subparagraph (B) of section 1296(b)(2) of the 1986 Code is amended by striking out "by a corporation which" and inserting in lieu thereof "by a corporation which is predominantly engaged in an insurance business and which". (17) Paragraph (5) of section 1297(b) of the 1986 Code is amended to read as follows: "(5) APPLICATION OF PART WHERE HELD BY OTHER ENTITY.—

"(A) IN GENERAL.—Under regulations, in any case in which a United States person is treated as owning stock in a passive foreign investment company by reason of subsection (a)"(i) any disposition by the United States person or the person owning such stock which results in the United States person being treated as no longer owning such stock, or "(ii) any disposition of property in respect of such stock to the person holding such stock, shall be treated as a disposition to, the United States person with respect to the stock in the passive foreign investment company. "(B) AMOUNT TREATED IN SAME MANNER AS PREVIOUSLY

TAXED INCOME.—Rules similar to the rules of section 959(b) shall apply to any amount described in subparagraph (A) and to any amount included in gross income under section 1293(a) (or which would have been so included but for section 951(f)) in respect of stock which the taxpayer is treated as owning under subsection (a)." (18) Subsection (e) of section 1293 of the 1986 Code is amended by adding at the end thereof the following new paragraph: "(3) DETERMINATION OF EARNINGS AND PROFITS.—The earnings

and profits of any qualified electing fund shall be determined without regard to paragraphs (4), (5), and (6) of section 312(n). Under regulations, the preceding sentence shall not apply to the extent it would increase earnings and profits by an amount which was previously distributed by the qualified electing fund." (19) Subsection (d) of section 1248 of the 1986 Code is amended by adding at the end thereof the following new paragraph: "(7)

AMOUNTS INCLUDED IN GROSS INCOME UNDER SECTION

1293.—Earnings and profits of the foreign corporation attributable to any amount previously included in the gross income of such person under section 1293 with respect to the stock sold or exchanged, but only to the extent the inclusion of such amount did not result in an exclusion of an amount under section 1293(c)." (20) Paragraph (6) of section 1297(b) of the 1986 Code is amended by striking out "If a" and inserting in lieu thereof "Except as provided in regulations, if a".

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