Page:United States Statutes at Large Volume 103 Part 3.djvu/275

 PUBLIC LAW 101-239—DEC. 19, 1989 103 STATL2343 "(iii) APPLICABLE CORPORATION.— For purposes of clause (i), the term 'applicable corporation means a C corporation— "(I) which acquires stock, or the stock of which is ^ acquired, in a msgor stock acquisition, (ID a corporation making distributions with respect to, or redeeming, its stock in connection with an excess distribution, or "(ni) any successor corporation of a corporation described in subclause (I) or (II). "(iv) OTHER DEFINITIONS.— "For deHnitions of terms used in this subparasrapli, see subsection (m)." (b) CORPORATE EQUITY REDUCTION INTEREST LOANS AND (CORPORATE EQUITY REDUCTION TRANSACTION DEFINED. —Section 172 is amended by redesignating subsection (m) as subsection (n) and by inserting after subsection (1) the following new subsection: "(m) CORPORATE EQUITY REDUCTION INTEREST LOSSES. —For pur- poses of this section— "(1) IN GENERAL.—The term 'corporate equity reduction in- terest loss' means, with respect to any loss limitation year, the excess (if any) of— "(A) the net operating loss for such taxable year, over "(B) the net operating loss for such taxable year deter- mined without regard to any allocable interest deductions otherwise taken into account in computing such loss. "(2) ALLOCABLE INTEREST DEDUCTIONS.— "(A) IN GENERAL.—The term 'allocable interest deduc- tions' means deductions allowed under this chapter for interest on the portion of any indebtedness allocable to a '^ corporate equity reduction transaction. "(B) METHOD OF ALLOCATION. —Except as provided in regu- lations and subparagraph (E), indebtedness shall be allo- cated to a corporate equity reduction transaction in the manner prescribed under clause (ii) of section 263A(fK2XA) (without regard to clause (i) thereof). " (C) ALLOCABLE DEDUCTIONS NOT TO EXCEED INTEREST IN- i:', ' CREASES. — Al locable interest deductions for any loss limita- tion year shall not exceed the excess (if any) of— "(i) the amount allowable as a deduction for interest paid or accrued by the taxpayer during the loss limita- tion year, over "(ii) the average of such amounts for the 3 taxable years preceding the taxable year in which the cor- ^ porate equity reduction transaction occurred. "(D) DE MINIMIS RULE. —A taxpayer shall be treated as having no allocable interest deductions for any taxable year if the amount of such deductions (without regard to this subparagraph) is less than $1,000,000. "(E) SPECIAL RULE FOR CERTAIN UNFORESEEABLE EVENTS. — If an unforeseeable extraordinary adverse event occurs during a loss limitation year but dfter the corporate equity / reduction transaction— "(i) indebtedness shall be allocated in the manner described in subparagraph (B) to unreimbursed costs - paid or incurred in connection with such event before

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