Page:United States Statutes at Large Volume 110 Part 3.djvu/185

 PUBLIC LAW 104-188—AUG. 20, 1996 110 STAT. 1915 "(A) by using an interest rate of 6 percent, and "(B) without compounding until January 1, 1996.". (b) ABUSIVE TRANSACTIONS.—Section 643(a) is amended by inserting after paragraph (6) the following new paragraph: "(7) ABUSIVE TRANSACTIONS. — The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this part, including regulations to prevent avoidance of such purposes.". (c) TREATMENT OF LOANS FROM TRUSTS.— (1) IN GENERAL. —Section 643 (relating to definitions applicable to subparts A, B, C, and D) is amended by adding at the end the following new subsection: " (i) LOANS FROM FOREIGN TRUSTS.— For purposes of subparts B,C,andD— "(1) GENERAL RULE.— Except as provided in regulations, if a foreign trust makes a loan of cash or marketable securities directly or indirectly to— "(A) any grantor or beneficiary of such trust who is a United States person, or "(B) any United States person not described in subparagraph (A) who is related to such grantor or beneficiary, the amount of such loan shall be treated as a distribution by such trust to such grantor or beneficiary (as the case may be). "(2) DEFINITIONS AND SPECIAL RULES.— For purposes of this subsection— "(A) CASH.—The term 'cash' includes foreign currencies and cash equivalents. "(B) RELATED PERSON.— "(i) IN GENERAL. — A person is related to another person if the relationship between such persons would result in a disallowance of losses under section 267 or 707(b). In applying section 267 for purposes of the preceding sentence, section 267(c)(4) shall be applied as if the family of an individual includes the spouses of the members of the family. "(ii) ALLOCATION. — If any person described in paragraph (1)(B) is related to more than one person, the grantor or beneficiary to whom the treatment under this subsection applies shall be determined under regulations prescribed by the Secretary. "(C) EXCLUSION OF TAX-EXEMPTS. —The term United States person' does not include any entity exempt from tax under this chapter. "(D) TRUST NOT TREATED AS SIMPLE TRUST.—Any trust which is treated under this subsection as making a distribution shall be treated as not described in section 651. " (3) SUBSEQUENT TRANSACTIONS REGARDING LOAN PRIN- CIPAL.—I f any loan is taken into account under paragraph (1), any subsequent transaction between the trust and the original borrower regarding the principal of the loan (by way of complete or partial repayment, satisfaction, cancellation, discharge, or otherwise) shall be disregarded for purposes of this title.".

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