Page:United States Statutes at Large Volume 52.djvu/550

 52 STAT.] 75TH CONG. , 3D SESS.-CH. 289-MAY 28, 1938 prior to the making of the return, then the regulations prescribed under section 141 (b) of the Revenue Act of 1936 insofar as not inconsistent with this Act) prescribed prior to the making of such return; and the making of a consolidated return shall be considered as such consent. In the case of a corporation which is a member of the affiliated group for a fractional part of the year the consolidated return shall include the income of such corporation for such part of the year as it is a member of the affiliated group. (b) REGULATIONS.-The Commissioner, with the approval of the Secretary, shall prescribe such regulations as he may deem necessary in order that the tax liability of any affiliated group of corporations making a consolidated return and of each corporation in the group, both during and after the period of affiliation, may be determined, computed, assessed, collected, and adjusted in such manner as clearly to reflect the income and to prevent avoidance of tax liability. (c) COMPUTATION AND PAYMENT OF TAx. -In any case in which a consolidated return is made the tax shall be determined, computed, assessed, collected, and adjusted in accordance with the regulations under subsection (b) (or, in case such regulations are not prescribed prior to the making of the return, then the regulations prescribed under section 141 (b) of the Revenue Act of 1936 insofar as not inconsistent with this Act) prescribed prior to the date on which such return is made. (d) DEFINITION OF "AFFILIATED GROUP". - As used in this section an "affiliated group" means one or more chains of corporations con- nected through stock ownership with a common parent corporation if- (1) At least 95 per centum of the stock of each of the corpora- tions (except the common parent corporation) is owned directly by one or more of the other corporations; and (2) The common parent corporation owns directly at least 95 per centum of the stock of at least one of the other corporations; and (3) Each of the corporations is either (A) a corporation whose principal business is that of a common carrier by railroad or (B) a corporation the assets of which consist principally of stock in such corporations and which does not itself operate a business other than that of a common carrier by railroad. For the pur- pose of determining whether the principal business of a corpora- tion is that of a common carrier by railroad, if a common carrier by railroad has leased its railroad properties and such properties are operated as such by another common carrier by railroad, the business of receiving rents for such railroad properties shall be considered as the business of a common carrier by railroad. As used in this paragraph, the term "railroad" includes a street, suburban, or interurban electric railway, or a street or suburban trackless trolley system of transportation, or a street or suburban bus system of transportation operated as part of a street or sub- urban electric railway or trackless trolley system. As used in this subsection (except in paragraph (3)) the term "stock" does not include nonvoting stock which is limited and pre- ferred as to dividends. (e) FOREIGN CORPORATIONS. - A foreign corporation shall not be deemed to be affiliated with any other corporation within the meaning of this section. (f) CHINA TRADE ACT CORPORATIONS. -A corporation organized under the China Trade Act, 1922, shall not be deemed to be affiliated with any other corporation within the meaning of this section. 509 49 Stat. 1698. Fractional part of year. Regulations. Computation and payment of tax. Returns filed prior to making regulations. 49 Stat. 1698. "Affiliated group" defined. Stock ownership of members. Of parent organiza- tion. Corporations in- cluded. "Railroad" defined. "Stock" defined. Foreign corpora- tions. China Trade Act corporations.

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