Page:United States Statutes at Large Volume 52.djvu/591

 PUBLIC LAWS-CH. 289-MAY 28, 1938 Amount included in gross income. Ante, p. 546. Credit for obliga- tions of United States and its instrumentali- ties. Ante, pp. 452, 455, 456, 522, 524, 526; post, p. 553. Ante, p. 466. Ante, p. 548. Information in re- turn. Effect on capital ac- count of foreign per- sonal holding com- pany. Basis of stock in hands of shareholders. only income from sources within the United States), who are share- holders in such foreign personal holding company (hereinafter called "United States shareholders") in the manner and to the extent set forth in this Supplement. (b) AMOUNT INCLUDED IN GROSS INCOME. -Each United States shareholder, who was a shareholder on the day in the taxable year of the company which was the last day on which a United States group (as defined in section 331 (a) (2)) existed with respect to the company, shall include in his gross income, as a dividend, for the taxable year in which or with which the taxable year of the company ends, the amount he would have received as a dividend if on such last day there had been distributed by the company, and received by the shareholders, an amount which bears the same ratio to the undis- tributed Supplement P net income of the company for the taxable year as the portion of such taxable year up to and including such last day bears to the entire taxable year. (c) CREDIT FOR OBLIGATIONS OF UNITED STATES AND ITS INSTRU- MENTALrTIEs.-Each United States shareholder shall be allowed a credit against net income, for the purpose of the tax imposed by section 11,13 14,201,204,207, or 362, of his proportionate share of the interest specified in section 25 (a) (1) or (2) which is included in the gross income of the company otherwise than by the application of the provisions of section 334 (b) (relating to the inclusion in the gross income of a foreign personal holding company of its distrib- utive share of the undistributed Supplement P net income of another foreign personal holding company in which it is a shareholder). (d) INFORMATION IN RETURN. -Every United States shareholder who is required under subsection (b) to include in his gross income any amount with respect to the undistributed Supplement P net income of a foreign personal holding company and who, on the last day on which a United States group existed with respect to the com- pany, owned 5 per centum or more in value of the outstanding stock of such company, shall set forth in his return in complete detail the gross income, deductions and credits, net income, Supplement P net income, and undistributed Supplement P net income of such company. (e) EFFECT ON CAPITAL ACCOUNT OF FOREIGN PERSONAL HOLDING COMPANY.-An amount which bears the same ratio to the undistrib- uted Supplement P net income of the foreign personal holding com- pany for its taxable year as the portion of such taxable year up to and including the last day on which a United States group existed with respect to the company bears to the entire taxable year, shall, for the purpose of determining the effect of distributions in subse- quent taxable years by the corporation, be considered as paid-in surplus or as a contribution to capital and the accumulated earnings and profits as of the close of the taxable year shall be correspondingly reduced, if such amount or any portion thereof is required to be included as a dividend, directly or indirectly, in the gross income of United States shareholders. (f) BASIS OF STOCK IN HANDS OF SHAREHOLDERS.- The amount required to be included in the gross income of a United States share- holder under subsection (b) shall, for the purpose of adjusting the basis of his stock with respect to which the distribution would have been made (if it had been made), be treated as having been reinvested by the shareholder as a contribution to the capital of the corpora- tion; but only to the extent to which such amount is included in his gross income in his return, increased or decreased by any adjust- ment of such amount in the last determination of the shareholder's tax liability, made before the expiration of seven years after the date prescribed by law for filing the return. 550 [52 STAT.

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