Page:United States Statutes at Large Volume 118.djvu/1627

 118 STAT. 1597 PUBLIC LAW 108–357—OCT. 22, 2004 in section 6662A(b)) with respect to which the requirement of section 6664(d)(2)(A) is not met.’’. (b) EFFECTIVE DATE.—The amendments made by this section shall apply to transactions in taxable years beginning after the date of the enactment of this Act. SEC. 839. CLARIFICATION OF RULES FOR PAYMENT OF ESTIMATED TAX FOR CERTAIN DEEMED ASSET SALES. (a) IN GENERAL.—Paragraph (13) of section 338(h) (relating to tax on deemed sale not taken into account for estimated tax purposes) is amended by adding at the end the following: ‘‘The preceding sentence shall not apply with respect to a qualified stock purchase for which an election is made under paragraph (10).’’. (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to transactions occurring after the date of the enactment of this Act. SEC. 840. RECOGNITION OF GAIN FROM THE SALE OF A PRINCIPAL RESIDENCE ACQUIRED IN A LIKE KIND EXCHANGE WITHIN 5 YEARS OF SALE. (a) IN GENERAL.—Section 121(d) (relating to special rules for exclusion of gain from sale of principal residence) is amended by adding at the end the following new paragraph: ‘‘(10) PROPERTY ACQUIRED IN LIKE KIND EXCHANGE.—If a taxpayer acquired property in an exchange to which section 1031 applied, subsection (a) shall not apply to the sale or exchange of such property if it occurs during the 5 year period beginning with the date of the acquisition of such property.’’. (b) EFFECTIVE DATE.—The amendment made by this section shall apply to sales or exchanges after the date of the enactment of this Act. SEC. 841. PREVENTION OF MISMATCHING OF INTEREST AND ORIGINAL ISSUE DISCOUNT DEDUCTIONS AND INCOME INCLUSIONS IN TRANSACTIONS WITH RELATED FOREIGN PERSONS. (a) ORIGINAL ISSUE DISCOUNT.—Section 163(e)(3) (relating to special rule for original issue discount on obligation held by related foreign person) is amended by redesignating subparagraph (B) as subparagraph (C) and by inserting after subparagraph (A) the fol lowing new subparagraph: ‘‘(B) SPECIAL RULE FOR CERTAIN FOREIGN ENTITIES.— ‘‘(i) IN GENERAL.—In the case of any debt instrument having original issue discount which is held by a related foreign person which is a controlled foreign corporation (as defined in section 957) or a passive foreign investment company (as defined in section 1297), a deduction shall be allowable to the issuer with respect to such original issue discount for any taxable year before the taxable year in which paid only to the extent such original issue discount is includ ible (determined without regard to properly allocable deductions and qualified deficits under section 952(c)(1)(B)) during such prior taxable year in the gross income of a United States person who owns (within the meaning of section 958(a)) stock in such corpora tion. ‘‘(ii) SECRETARIAL AUTHORITY.—The Secretary may by regulation exempt transactions from the application 26 USC 121 note. 26 USC 163 note. 26 USC 163 note.

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