Page:United States Statutes at Large Volume 115 Part 1.djvu/167

 PUBLIC LAW 107-16—JUNE 7, 2001 115 STAT. 145 "(2) EARNINGS AND PROFITS. —The earnings and profits of the sponsoring Native Corporation shall not be reduced on account of any contribution to such Settlement Trust. " (e) TAX TREATMENT OF DISTRIBUTIONS TO BENEFICIARIES. — Amounts distributed by an electing Settlement Trust during any taxable year shall be considered as having the following characteristics in the hands of the recipient beneficiary: "(1) First, as amounts excludable from gross income for the taxable year to the extent of the taxable income of such trust for such taxable year (decreased by any income tax paid by the trust with respect to the income) plus any amount excluded from gross income of the trust under section 103. "(2) Second, as amounts excludable from gross income to the extent of the amount described in paragraph (1) for all taxable years for which an election is in effect under subsection (c) with respect to the trust, and not previously taken into account under paragraph (1). "(3) Third, as amounts distributed by the sponsoring Native Corporation with respect to its stock (within the meaning of section 301(a)) during such taxable year and taxable to the recipient beneficiary as amounts described in section 301(c)(1), to the extent of current or accumulated earnings and profits of the sponsoring Native Corporation as of the close of such taxable year after proper adjustment is made for all distributions made by the sponsoring Native Corporation during such taxable year. "(4) Fourth, as amounts distributed by the trust in excess of the distributable net income of such trust for such taxable year. Amounts distributed to which paragraph (3) applies shall not be treated as a corporate distribution subject to section 311(b), and for purposes of determining the amount of a distribution for purposes of paragraph (3) and the basis to the recipients, section 643(e) and not section 301(b) or (d) shall apply. " (f) SPECIAL RULES WHERE TRANSFER RESTRICTIONS MODI- FIED. — "(1) TRANSFER OF BENEFICIAL INTERESTS. — If, at any time, a beneficial interest in an electing Settlement Trust may be disposed of to a person in a manner which would not be permitted by section 7(h) of the Alaska Native Claims Settlement Act (43 U.S.C. 1606(h)) if such interest were Settlement Common Stock— "(A) no election may be made under subsection (c) with respect to such trust, and "(B) if such an election is in effect as of such time— "(i) such election shall cease to apply as of the first day of the taxable year in which such disposition is first permitted, "(ii) the provisions of this section shall not apply to such trust for such taxable year and all taxable years thereafter, and "(iii) the distributable net income of such trust shall be increased by the current or accumulated earnings and profits of the sponsoring Native Corporation as of the close of such taxable year after proper adjustment is made for all distributions made by the

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