Page:United States Statutes at Large Volume 50 Part 1.djvu/845

 820 75 TH CONGRESS, 1ST SESSION-OH. 815-AUGUST 26, 19 37 Option rule in lieu tG (6) OPTION RULE IN LTF.U OF FAMILY AND PARTNERSHIP RULE.- of ule .ana partner- shi p If stock may be considered as owned by an individual under either paragraph (2) or (3) it shall be considered as owned by him under paragraph (3) . Convertible securi- "(b) CONVERTIBLE SEcuRrrins .-Outstanding securities convertible ties . into stock (whether or not convertible during the taxable year) shall be considered as outstanding stock- "(1) For the purpose of the stock ownership requirement provided in section 331 (a) (2), but only if the effect of the inclu sion of all su ch secu rities is to make th e corpo ration a foreign personal holding company ; "(2.) Fo r the purp ose of sec tion 332 ( e) (relati ng to perso nal service contracts), but only if the effect of the inclusion of all such securities is to make the amounts therein referred to includ- ible under such subsection as foreign personal holding company income ; and "( 3) For the purpose of section 332 (f) (relating to the use of property by shareholders), but only if the effect of the inclu- sion of all s uch securities is t o make the amounts therein referred to ineludible under such subsection as foreign personal holding company income. "The require ment in paragr aphs (1), (2), an d ( 3) t hat al l c onv ert ible securities must be included if any are to be included shall be subject to the exception that, where some of the outstanding securities are convertible only after a later date than in the case of others, the class having the earlier conversion date may be included although the others are not includ ed, but no converti ble securities shal l be included unles s all outstanding securities having a prior conversion date are also included . Gross income. "SEC. 334 . GROSS INCOME OF FOREIGN PERSONAL HOLDING CO M- PANIES. Term defined. "( a) GENERAL RULE .-As used in this Supplement with respect to a foreign corporation the term gross income' means gross income compu ted (wi thout r egard t o the p rovisio ns of S uppleme nt I) as if the fo reign corp oration we re a domes tic corpora tion . Additions to gross "(b) ADDITIONS TO GROSS INCOME .-In the case of a foreign personal income. holdi ng comp any (wh ether o r not a United States group, as de fined in section 331 (a) (2), existed with respect to such company on the last day of its taxable year) which was a shareholder in another foreign personal holding company on the day in the taxable year of the second company which was the last day on which a United States group existed with respect to the second company, there shall be included, as a dividend, in the gross income of the first company, for the taxable year in which or with which the taxable year of the second company ends, the amount the first company would have received as a dividend if on such last day there had been distributed by the second company, and received by the shareholders, an amount which bears the same ratio to the undistributed Supplement P net income of the second company for its taxable year as the portion of such taxable year up to and including such last day bears to the entire taxable year. Application of sub- "(c) APPLICATION OF SUBSECTION (b) .-The rule provided in sub- sec tion W Section (b)- "(1) shall be applied in the case of a foreign personal holding company for the purpose of determining its undistributed Sup- plement P net income which, or a part of which, is to be include d in the g ross incom e of its s hareholders, whether United State s sharehold ers or oth er foreign personal holding co mpanies ;