Page:United States Statutes at Large Volume 103 Part 3.djvu/272

 103 STAT. 2340 PUBLIC LAW 101-239—DEC. 19, 1989 "(II) the sum of 50 percent of the adjusted tax- able income of the corporation plus any excess limitation carryforward under clause (ii). "(ii) EXCESS LIMITATION CARRYFORWARD,—If a cor- poration has an excess limitation for any taxable year, the amount of such excess limitation shall be an excess limitation canyforward to the 1st succeeding taxable year and to the 2nd and 3rd succeeding taxable years to the extent not previously taken into account under this clause. The amount of such a carryforward taken into account for any such succeeding taxable year shall not exceed the excess interest expense for such succeeding taxable year (determined without regard to the carryforward from the taxable year of such excess limitation). "(iii) EXCESS LIMITATION. — For purposes of clause (i), the term 'excess limitation' means the excess (if any) of- "(I) 50 percent of the adjusted taxable income of the corporation, over - _^. "(II) the corporation's net interest expense. "(C) RATIO OP DEBT TO EQUITY. —For purposes of this paragraph, the term 'ratio of debt to equity means the ratio which the total indebtedness of the corporation bears to the sum of its money and all other assets less such total indebt- edness. For purposes of the preceding sentence— "(i) the cunount taken into account with respect to any asset shall be the adjusted basis thereof for pur- poses of determining gain, "(ii) the amount ts^en into account with respect to any indebtedness with original issue discount shall be ^ its issue price plus the portion of the original issue discount previously accrued as determined under the rules of section 1272 (determined without regard to subsection (a)(7) or (b)(4) thereof), and "(iii) there shall be such other adjustments as the Secretary may by regulations prescribe. "(3) DiSQUAUFiED INTEREST. —For purposes of this subsec- • tion— " (A) IN GENERAL.—Except as provided in subparagraph (B), the term 'disqualified interest' means any interest paid or accrued by the taxpayer (directly or indirectly) to a related person if no tax is imposed by this subtitle with respect to such interest. '(B) EXCEPTION FOR CERTAIN EXISTING INDEBTEDNESS.— The term 'disqualified interest' does not include any in- terest paid or accrued under indebtedness with a ^ed term— "(i) which was issued on or before July 10, 1989, or "(ii) which was issued after such date pursuant to a written binding contract in effect on such date and all times thereafter before such indebtedness was issued. "(4) RELATED PERSON.— For purposes of this subsection— " (A) IN GENERAL.— Except as provided in subparagraph V (B), the term 'related person' means any person who is related (within the meaning of section 267(b) or 7070)X1)) to the taxpayer.

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