Page:United States Statutes at Large Volume 50 Part 1.djvu/846

 7 5TH CO NGR ESS, 1ST SESSION-CH. 8 15- AUGU ST 26, 193 7 "(2) shall be applied in the case of every foreign corporation with respect to which a United States group exists on some day of its taxable year, for the purpose of determining whether such corporation meets the gross income requirements of section 331 (a) (1) . "SEC. 335. UNDISTRIBUTED SUPPLEMENT P NET INCOME. "For the purposes of this title the term undistributed Supple- ment P net income' means the Supplement P net income (as defined in section 336) minus the amount of the dividends paid credit pro- vided in section 27, computed without the benefit of subsection (b) thereof (relating to the dividend carry-over) . "SEC. 336 . SUPPL EMENT P NET INCOME. " For the pu rposes of t his title the term Supplement P net inc ome' means the net income with the following adjustments : "(a) ADDITIONAL DEDUCTIONS .-There shall be allowed as deduc- tions- "(1) Federal income, war-profits, and excess-profits taxes paid or accrued during the taxable year to the extent not allowed as a dedu ction unde r section 23 ; bu t not inclu ding the t ax imposed by section 102, section 351 (either before or after its amend- ment by the Revenue Act of 1937), or a section of a prior income- tax law corresponding to either of such sections . "(2) I n lieu of the deduct ion allowe d by sectio n 23 (q), con- tributions or gifts made within the taxable year to or for the use of donees described in section 23 (q) for the purposes therein specified, to an amount which does not exceed 15 per centum of the company's net income, computed without the benefit of this paragraph and section 23 (q), and without the deduction of the amount disallowed under subsection (b) of this section, and with- out the inclusion in gross income of the amounts includible therein as dividends by reason of the application of the pro- visions of section 334 (b) (relating to the inclusion in the gross income of a foreign personal holding company of its distributive share of the undistributed Supplement P net income of another foreign personal holding company in which it is a shareholder). "(b) DEDUCTIONS NOT ALLowED .- "(1) TAXES AND PENSION TRUSTS .-The deductions provided in section 23 (d), relating to taxes of a shareholder paid by the corporation, and in section 23 (p ), relating to pension trusts, shall not be allowed. " (2) EXPENSES AND DEPRECIATION .-The aggregate of the deductions allowed under section 23 (a ), relating to expenses, and section 23 (1) ; relating to depreciation, which are allocable to the operation and maintenance of property owned or operated by the company, shall be allowed only in an amount equal to the rent or other compensation received for the use or right to use the property, unless it is established (under regulations pre- scribe d by the C ommissione r with the approval o f the Secr etary) to the satisfact ion of the Commission er "(A) That the re nt or o ther co mpensat ion rec eived w as the hi ghest obta inable, or, if none was receiv ed, that n one was obtainable ; "(B) That the property was held in the course of a busi- ness carried on bona fide for profit ; and "(C) Either that there was reasonable expectation that the operation of the property would result in a profit, or that the property was necessary to the conduct of the business. 821 Undistributed Sup- plement P net income. Term defined. Supplement P net income. Term defined . Ad diti ona l de duc- tions. Computation. 49 Stat. 1659, 1676, 1732. Charitable, etc ., con- tributions . 49 Stat. 1661. Deductions not al- lowed. Taxes and pension trusts. 49 Stat . 1661. Expenses and depre- ciation . 49 Stat. 1658.