Page:United States Statutes at Large Volume 55 Part 1.djvu/43

 PUBLIC LAWS-CH. 10 -MAR. 7, 1941 SEC. 3. ABNORMAL DEDUCTION IN BASE PERIOD. 54^tat. 97a8,9b) Sections 711 (b) (1) (G), (H), and (I), of the Internal Revenue (I). Code are amended to read as follows: "(G) Dividends Received.-The credit for dividends received shall apply, without limitation, to dividends on stock of domestic corporations; "(H) Payment of Judgments, and So Forth. -Deduc- tions attributable to any claim, award, judgment, or decree against the taxpayer, or interest on any of the foregoing, if abnormal for the taxpayer, shall not be allowed, and if normal for the taxpayer, but in excess of 125 per centum of the average amount of such deductions in the four previous taxable years, shall be disallowed in an amount equal to such excess; "(I) Intangible Drilling and Development Costs.-Deduc- tions attributable to intangible drilling and development costs paid or incurred in or for the drilling of wells or the preparation of wells for the production of oil or gas, and for development costs in the case of mines, if abnormal for the taxpayer, shall not be allowed, and if normal for the taxpayer, but in excess of 125 per centum of the average amount of such deductions in the four previous taxable years, shall be disallowed in an amount equal to such excess; and "(J) Abnormal Deductions. - - Under regulations pre- scribed by the Commissioner, with the approval of the Secretary, for the determination, for the purposes of this subparagraph, of the classification of deductions- "(i) Deductions of any class shall not be allowed if deductions of such class were abnormal for the tax- payer, and "(ii) If the class of deductions was normal for the taxpayer, but the deductions of such class were in excess of 125 per centum of the average amount of deductions of such class for the four previous taxable years, they shall be disallowed in an amount equal to such excess. "(K) Rules for Application of Subparagraphs (H), (I), and (J).- For the purposes of subparagraphs (H), (I), and (J)- "(i) If the taxpayer was not in existence for four previous taxable years, then such average amount speci- fed in such subparagraphs shall be determined for the previous taxable years it was in existence and the suc- ceeding taxable years which begin before the beginning of the taxpayer's second taxable year under this sub- chapter. If the number of such succeeding years is greater than the number necessary to obtain an aggre- gate of four taxable years there shall be omitted so many of such succeeding years, beginning with the last, as are necessary to reduce the aggregate to four. "(ii) Deductions shall not be disallowed under such subparagraphs unless the taxpayer establishes that the abnormality or excess is not a consequence of an increase in the gross income of the taxpayer in its base period or a decrease in the amount of some other deduction in its base period, and is not a consequence of a change at any time in the type, manner of operation, size, or condition of the business engaged in by the taxpayer. "(iii) The amount of deductions of any class to be disallowed under such subparagraphs with respect to [55 STAT.

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