Page:United States Statutes at Large Volume 102 Part 4.djvu/558

 102 STAT. 3528

PUBLIC LAW 100-647—NOV. 10, 1988 "(1) any employee of a controlled commercial entity (as defined in section 892(a)(2)(B)), or "(2) any employee of a foreign government whose services are primarily in connection with a commercial activity (whether within or outside the United States) of the foreign government." (u) AMENDMENT RELATED TO SECTION 1249 OF THE REFORM ACT.—

Subsection (d) of section 1503 of the 1986 Code is amended by adding at the end thereof the following new paragraphs: "(3) TREATMENT OF LOSSES OF SEPARATE BUSINESS UNITS.—To

Regulations.

the extent provided in regulations, any loss of a separate unit of a domestic corporation shall be subject to the limitations of this subsection in the same manner as if such unit were a wholly owned subsidiary of such corporation. "(4) INCOME ON ASSETS ACQUIRED AFTER THE LOSS.—The Secretary shall prescribe such regulations as may be necessary or appropriate to prevent the avoidance of the purposes of this subsection by contributing assets to the corporation with the dual consolidated loss after such loss was sustained." (v) AMENDMENTS RELATED TO SECTION 1261 OF THE REFORM ACT.—

(I)(A) SO much of section 986 of the 1986 Code as precedes subsection (c) thereof is amended to read as follows: "SEC. 986. DETERMINATION OF FOREIGN TAXES AND FOREIGN CORPORATION'S EARNINGS AND PROFITS. "(a) FOREIGN TAXES.—

"(1) IN GENERAL.—For purposes of determining the amount of the foreign tax credit— "(A) any foreign income taxes shall be translated into dollars using the exchange rates as of the time such taxes were paid to the foreign country or possession of the United States, and "(B) any adjustment to the amount of foreign income taxes shall be translated into dollars using— "(i) except as provided in clause (ii), the exchange rate as of the time when such adjustment is paid to the foreign country or possession, or "(ii) in the case of any refund or credit of foreign income taxes, using the exchange rate as of the time of original payment of such foreign income taxes. "(2) FOREIGN INCOME TAXES.—For purposes of paragraph (1),

'foreign income taxes' means any income, war profits, or excess profits taxes paid to any foreign country or to any possession of the United States. "(b) EARNINGS AND PROFITS AND DISTRIBUTIONS.—For purposes of

determining the tax under this subtitle— "(1) of any shareholder of any foreign corporation, the earnings and profits of such corporation shall be determined in the corporation's functional currency, and profits determined under paragraph (1) (when distributed, deemed distributed, or otherwise taken into account under this subtitle) shall (if necessary) be translated into dollars using the appropriate exchange rate." (B) Section 987 of the 1986 (Dode is amended by inserting "and" at the end of paragraph (2), by striking out ", and" at the, end of paragraph (3) and inserting in lieu thereof a period, and by striking out paragraph (4).
 * (2) in the case of any United States person, the earnings and

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