Page:United States Statutes at Large Volume 111 Part 1.djvu/999

 PUBLIC LAW 105-34—AUG. 5, 1997 111 STAT. 975 "(h) COORDINATION WITH SECTION 851(b).—For purposes of paragraphs (2) and (3) of section 851(b), any amount included in gross income under subsection (a) shall be treated as a dividend. "(i) STOCK ACQUIRED FROM A DECEDENT. —In the case of stock of a passive foreign investment company which is acquired by bequest, devise, or inheritance (or by the decedent's estate) and with respect to which an election under this section was in effect as of the date of the decedent's death, notwithstanding section 1014, the basis of such stock in the hands of the person so acquiring it shall be the adjusted basis of such stock in the hands of the decedent immediately before his death (or, if lesser, the basis which would have been determined under section 1014 without regard to this subsection). "(j) COORDINATION WITH SECTION 1291 FOR FIRST YEAR OF ELECTION.— " (1) TAXPAYERS OTHER THAN REGULATED INVESTMENT COMPANIES.— "(A) IN GENERAL.—I f the taxpayer elects the application of this section with respect to siny marketable stock in a corporation after the beginning of the taxpayer's holding period in such stock, and if the requirements of subparagraph (B) are not satisfied, section 1291 shall apply to— "(i) any distributions with respect to, or disposition of, such stock in the first taxable year of the taxpayer for which such election is made, and "(ii) any amount which, but for section 1291, would have been included in gross income under subsection (a) with respect to such stock for such taxable year in the same manner as if such amount were gain on the disposition of such stock. " (B) REQUIREMENTS.—The requirements of this subparagraph are met if, with respect to each of such corporations taxable years for which such corporation was a passive foreign investment company and which begin after December 31, 1986, and included £my portion of the taxpayer's holding period in such stock, such corporation was treated as a qualified electing fund under this part with respect to the taxpayer. " (2) SPECIAL RULES FOR REGULATED INVESTMENT COMPA- NIES. — "(A) IN GENERAL. — If a regulated investment company elects the application of this section with respect to any marketable stock in a corporation after the beginning of the taxpayer's holding period in such stock, then, with respect to such company's first taxable year for which such company elects the application of this section with respect to such stock— "(i) section 1291 shall not apply to such stock with respect to any distribution or disposition during, or amount included in gross income under this section for, such first taxable year, but "(ii) such regulated investment company's tax under this chapter for such first taxable year shall be increased by the aggregate amount of interest which would have been determined under section 1291(c)(3) if section 1291 were applied without regard to this subparagraph.

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