Page:United States Statutes at Large Volume 124.djvu/2423

 124 STAT. 2397 PUBLIC LAW 111–226—AUG. 10, 2010 ‘‘(ii) the income on which the foreign income tax referred to in paragraph (1) is determined (or, if the taxpayer fails to substantiate such income to the satis- faction of the Secretary, such income shall be deter- mined by dividing the amount of such foreign income tax by the highest marginal tax rate applicable to such income in the relevant jurisdiction). ‘‘(B) ALLOCATION OF BASIS DIFFERENCE.—For purposes of subparagraph (A)(i)— ‘‘(i) IN GENERAL.—The basis difference with respect to any relevant foreign asset shall be allocated to tax- able years using the applicable cost recovery method under this chapter. ‘‘(ii) SPECIAL RULE FOR DISPOSITION OF ASSETS.— Except as otherwise provided by the Secretary, in the case of the disposition of any relevant foreign asset— ‘‘(I) the basis difference allocated to the taxable year which includes the date of such disposition shall be the excess of the basis difference with respect to such asset over the aggregate basis dif- ference with respect to such asset which has been allocated under clause (i) to all prior taxable years, and ‘‘(II) no basis difference with respect to such asset shall be allocated under clause (i) to any taxable year thereafter. ‘‘(C) BASIS DIFFERENCE.— ‘‘(i) IN GENERAL.—The term ‘basis difference’ means, with respect to any relevant foreign asset, the excess of— ‘‘(I) the adjusted basis of such asset imme- diately after the covered asset acquisition, over ‘‘(II) the adjusted basis of such asset imme- diately before the covered asset acquisition. ‘‘(ii) BUILT-IN LOSS ASSETS.—In the case of a rel- evant foreign asset with respect to which the amount described in clause (i)(II) exceeds the amount described in clause (i)(I), such excess shall be taken into account under this subsection as a basis difference of a negative amount. ‘‘(iii) SPECIAL RULE FOR SECTION 338 ELECTIONS.— In the case of a covered asset acquisition described in paragraph (2)(A), the covered asset acquisition shall be treated for purposes of this subparagraph as occur- ring at the close of the acquisition date (as defined in section 338(h)(2)). ‘‘(4) RELEVANT FOREIGN ASSETS.—For purposes of this sec- tion, the term ‘relevant foreign asset’ means, with respect to any covered asset acquisition, any asset (including any goodwill, going concern value, or other intangible) with respect to such acquisition if income, deduction, gain, or loss attributable to such asset is taken into account in determining the foreign income tax referred to in paragraph (1). ‘‘(5) FOREIGN INCOME TAX.—For purposes of this section, the term ‘foreign income tax’ means any income, war profits, or excess profits tax paid or accrued to any foreign country or to any possession of the United States.