Page:United States Statutes at Large Volume 119.djvu/2638

 119 STAT. 2620

26 USC 1361.

26 USC 1366 note.

VerDate 14-DEC-2004

07:21 Oct 30, 2006

PUBLIC LAW 109–135—DEC. 21, 2005

a taxable year of a partnership, S corporation, estate, or trust beginning before January 1, 2005, shall not be taken into account for purposes of subsection (d)(1) of such section.’’. (b) AMENDMENT RELATED TO SECTION 231 OF THE ACT.—Paragraph (1) of section 1361(c) is amended to read as follows: ‘‘(1) MEMBERS OF A FAMILY TREATED AS 1 SHAREHOLDER.— ‘‘(A) IN GENERAL.—For purposes of subsection (b)(1)(A), there shall be treated as one shareholder— ‘‘(i) a husband and wife (and their estates), and ‘‘(ii) all members of a family (and their estates). ‘‘(B) MEMBERS OF A FAMILY.—For purposes of this paragraph— ‘‘(i) IN GENERAL.—The term ‘members of a family’ means a common ancestor, any lineal descendant of such common ancestor, and any spouse or former spouse of such common ancestor or any such lineal descendant. ‘‘(ii) COMMON ANCESTOR.—An individual shall not be considered to be a common ancestor if, on the applicable date, the individual is more than 6 generations removed from the youngest generation of shareholders who would (but for this subparagraph) be members of the family. For purposes of the preceding sentence, a spouse (or former spouse) shall be treated as being of the same generation as the individual to whom such spouse is (or was) married. ‘‘(iii) APPLICABLE DATE.—The term ‘applicable date’ means the latest of— ‘‘(I) the date the election under section 1362(a) is made, ‘‘(II) the earliest date that an individual described in clause (i) holds stock in the S corporation, or ‘‘(III) October 22, 2004. ‘‘(C) EFFECT OF ADOPTION, ETC.—Any legally adopted child of an individual, any child who is lawfully placed with an individual for legal adoption by the individual, and any eligible foster child of an individual (within the meaning of section 152(f)(1)(C)), shall be treated as a child of such individual by blood.’’. (c) AMENDMENT RELATED TO SECTION 235 OF THE ACT.—Subsection (b) of section 235 of the American Jobs Creation Act of 2004 is amended by striking ‘‘taxable years beginning’’ and inserting ‘‘transfers’’. (d) AMENDMENTS RELATED TO SECTION 243 OF THE ACT.— (1) Paragraph (7) of section 856(c) is amended to read as follows: ‘‘(7) RULES OF APPLICATION FOR FAILURE TO SATISFY PARAGRAPH (4).— ‘‘(A) IN GENERAL.—A corporation, trust, or association that fails to meet the requirements of paragraph (4) (other than a failure to meet the requirements of paragraph (4)(B)(iii) which is described in subparagraph (B)(i) of this paragraph) for a particular quarter shall nevertheless be considered to have satisfied the requirements of such paragraph for such quarter if—

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