Page:United States Statutes at Large Volume 103 Part 3.djvu/260

 \ 103 STAT. 2328 PUBLIC LAW 101-239—DEC. 19, 1989 qualified research and experimental expenditures for the taxable year referred to in subparagraph (A) which bears the same ratio to the total amount of such expenditures as— "(i) the lesser of 9 months or the number of months in the taxable year, bears to "(ii) the number of months in the taxable year." Securities. Subtitle B—Corporate Provisions SEC. 7201. LIMITATION ON USE OF GROUP LOSSES TO OFFSET INCOME OF SUBSIDIARY PAYING PREFERRED DIVIDENDS. (a) GENERAL RULE.— Section 1503 (relating to computation and payment of tax) is amended by adding at the end thereof the following new subsection: "(f) LnoTATiON ON USE OF GROUP LOSSES TO OFFSET INCOME OF SuBsmiARY PAYING PREFERRED DIVIDENDS.— "(1) IN GENERAL. —In the case of any subsidiary distributing ,,. during any taxable year dividends on any applicable preferred stock— "(A) no group loss item shall be allowed to reduce the ^ disqualified separately computed income of such subsidiary for such taxable year, and "(B) no group credit item shall be allowed against the tax imposed by this chapter on such disqualified separately computed income. "(2) GROUP ITEMS.— For purposes of this subsection— "(A) GROUP LOSS ITEM.— TT ie term 'group loss item' means any of the following items of any other member of the affiliated group which includes the subsidiary: "(i) Any net operating loss and any net operating loss carryover or carryback under section 172. "(li) Any loss from the sale or exchange of any capital asset and any capital loss carryover or carryback under section 1212. "(B) GROUP CREDIT ITEM. —The term jgroup credit item' means any credit allowable under part IV of subchapter A of chapter 1 (other than section 34) to any other member of the affiliated group which includes the subsidiary and any carryover or carryback of any such credit. , "(3) OTHER DEFINITIONS. —For purposes of this subsection— "(A) DISQUALIFIED SEPARATELY COMPUTED INCOME. — The term 'disqualified separately computed income' means the portion of the separately computed taxable income of the subsidiary which does not exceed the dividends distributed by the subsidiary during the taxable year on applicable « preferred stock. "(B) SEPARATELY COMPUTED TAXABLE iNOOiifE.-The term 'separately computed taxable income' means the separate taxable income of the subsidiary for the taxable year deter- mined— "(i) by taking into account gains and losses from the sale or exchiuoge of a capital asset and section 1231 gains and losses, "(ii) without r^ard to any net operating loss or capital loss carryover or carryback, and

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