Page:United States Statutes at Large Volume 102 Part 4.djvu/552

 102 STAT. 3522

26 USC 1295 note.

PUBLIC LAW 100-647—NOV. 10, 1988

end of subparagraph (F) and inserting in lieu thereof ", and", and by adding at the end thereof the following new subparagraph: "(G) if a charitable deduction was allowable under section 642(c) to a trust for any distribution of its income, proper adjustments shall be made for the deduction so allowable to the extent allocable to distributions or gain in respect of stock in a passive foreign investment company." (34) Paragraph (2) of section 1294(c) of the 1986 Code is amended by adding at the end thereof the following new sentence: "To the extent provided in regulations, the preceding sentence shall not apply in the case of a transfer in a transaction with respect to which gain or loss is not recognized (in whole or in part), and the transferee in such transaction shall succeed to the treatment under this section of the transferor." (35) Section 1297 of the 1986 Oxie is amended by redesignating subsection (c) as subsection (d) and by inserting after subsection (b) the following new subsection: "(c) TREATMENT OF STOCK HELD BY POOLED INCOME P^JND.—If stock in a passive foreign investment company is owned (or treated as owned under subsection (a)) by a pooled income fund (as defined in section 642(c)(5)) and no portion of any gain from a disposition of such stock may be allocated to income under the terms of the governing instrument of such fund— "(1) section 1291 shall not apply to any gain on a disposition of such stock by such fund if (without regard to section 1291) a deduction would be allowable with respect to such gain under section 642(c)(3), "(2) section 1293 shall not apply with respect to such stock, and "(3) in determining whether section 1291 applies to any distribution in respect of such stock, subsection (d) of section 1291 shall not apply. (36) Paragraph (1) of section 1297(b) of the 1986 Code is amended by striking out "passive foreign investment corporation" and inserting in heu thereof "passive foreign investment company". (37XA) Paragraph (2) of section 1295(b) of the 1986 Code is amended by adding at the end thereof the following new sentence: "To the extent provided in r^ulations, such an election may be made later than as required by the preceding sentence in cases where the company failed to make a timely election because it reasonably believed it was not a passive foreign investment company. (B) The period during which an election under section 1295(b) of the 1986 Code may be made shall in no event expire before the date 60 days after the date of enactment of this Act. (q) AMENDMENTS RELATED TO SECTION 1241 OF THE ACT.—

dXA) Subparagraph (B) of section SS4(b)(2) of the 1986 Code is amended to read as follows: "(B) LIMITATION.—

"(i) IN GENERAL.—The increase under subparagraph (A) for any taxable year shall not exceed the accumulated effectively connected earnings and profits as of the close of the preceding taxable year. "(ii) ACCUMULATED EFFECTIVELY CONNECTED EARNINGS

AND PROFITS.—For puiposes of clause (i), the term

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