Page:United States Statutes at Large Volume 53 Part 1.djvu/106

 94 CODIFICATION OF INTERNAL REVENUE LAWS for his family or by or for his partner. For the purposes of this paragraph the family of an individual includes only his brothers and sisters (whether by the whole or half blood), spouse, ancestors, and lineal descendants. (3) OPIIoNs.-If any person has an option to acquire stock such stock shall be considered as owned by such person. For the pur- poses of this paragraph an option to acquire such an option, and each one of a series of such options, shall be considered as an option to acquire such stock. (4) APPLICATION OF FAMILY-PARTNERSHIP AND OPTION RULES.- Paragraphs (2) and (3) shall be applied- (A) For the purposes of the stock ownership requirement pro- vided in section 331 (a) (2), if, but only if, the effect is to make the corporation a foreign personal holding company; (B) For the purposes of section 332 (e) (relating to personal service contracts), or of section 332 (f) (relating to the use of property by shareholders), if, but only if, the effect is to make the amounts therein referred to includible under such subsection as foreign personal holding company income. (5) CONSTRUCTIVE OWNERSHIP AS ACTUAL OWNERSHIP.-Stock con- structively owned by a person by reason of the application of paragraph (1) or (3) shall, for the purpose of applying paragraph (1) or (2), be treated as actually owned by such person; but stock constructively owned by an individual by reason of the application of paragraph (2) shall not be treated as owned by him for the pur- pose of again applying such paragraph in order to make another the constructive owner of such stock. (6) OPTION RULE IN LIEU OF FAMILY AND PARTNERSHIP RULE.-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). (b) CONVERTIBLE SECuRITIES. - Outstanding securities convertible 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 inclusion of all such securities is to make the corporation a foreign personal hold- ing company; (2) For the purpose of section 332 (e) (relating to personal serv- ice contracts), but only if the effect of the inclusion of all such securities is to make the amounts therein referred to includible 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 inclusion of all such securities is to make the amounts therein referred to includ- ible under such subsection as foreign personal holding company income. The requirement in paragraphs (1), (2), and (3) that all convertible 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 included, but no convertible securities shall be included unless all outstanding securities having a prior conversion date are also included. SEC. 334. GROSS INCOME OF FOREIGN PERSONAL HOLDING COM- PANIES. (a) GENERAL RULE.-As used in this Supplement with respect to a foreign corporation the term "gross income" means gross income computed (without regard to the provisions of Supplement I) as if the foreign corporation were a domestic corporation.

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