Page:United States Statutes at Large Volume 56 Part 1.djvu/848

 PUBLIC LAWS-CH. 619-OCT. 21, 1942 55 Stat. 700. 26U.S.C.§23(c); Supp. I, § 23 (c). Ante, p. 806. 53 Stat. 13 . 26U.S.C. 23(g). Infra. 53 Stat. 13. 26 U.. C. 23 (g) (3). Infra. 53 Stat. 13. 26U. .C. 23(k). 53 Stat. 36. 26U.S.C.i10 Supp. I, 104. SEC. 122. DEDUCTION ALLOWABLE TO PURCHASERS FOR STATE AND LOCAL RETAIL SALES TAXES. Section 23 (c) (relating to deduction for taxes) is amended by inserting at the end thereof the following new paragraph: "(3) RETAIL SALES TAX. - In the case of a tax imposed by any State, Territory, District, or possession .of the United States, or any political subdivision thereof, upon persons engaged in selling tangible personal property at retail, which is measured by the gross sales price or the gross receipts from the sale or which is a stated sum per unit of such property sold, or upon persons engaged in furnishing services at retail, which is measured by the gross receipts for furnishing such services, if the amount of such tax is separately stated, then to the extent that the amount so stated is paid by the purchaser (otherwise than in connection with the purchaser's trade or business) to such person such amount shall be allowed as a deduction in computing the net income of such purchaser as if such amount constituted a tax imposed upon and paid by such purchaser." SEC. 123. DEDUCTION FOR STOCK AND BOND LOSSES ON SECURITIES IN AFFILIATED CORPORATIONS. (a) STOCK LossE8.- (1) IN GENERAL-- -Section 23 (g) (relating to capital losses) is amended by inserting at the end thereof the following: "(4) STOCK IN AFrtIATED CORPoRATION. -For the purposes of paragraph (2) stock in a corporation affiliated with the tax- payer shall not be deemed a capital asset. For the purposes of this paragraph a corporation shall be deemed to be affiliated with the taxpayer only if: "(A) at least 95 per centum of each class of its stock is owned directly by the taxpayer; and "(B) more than 90 per centum of the aggregate of its gross incomes for all taxable years has been from sources other than royalties, rents, dividends, interest, annuities, or gains from sales or exchanges of stocks and securities; and "(C) the taxpayer is a domestic corporation." (2) TECHNICAL AMENDMENT.- Section 23 (g) (3) is amended by inserting before "subsection" the following "paragraph (2) of". (b) BOND, ETC., LossES.-For losses on bonds, etc., of affiliated corporations, see amendment made to section 23 (k) by section 124 of this Act. SEC. 124. DEDUCTION FOR BAD DEBTS, ETC. (a) GENERAL RtLE.- Section 23 (k) (relating to bad debts and securities becoming worthless) is amended to read as follows: "(k) BAD DEBTS. - "(1) GENERAL RULE.- Debts which become worthl_ . within the taxable year; or (in the discretion of the Commissioner, a reasonable addition to a reserve for bad debts); and when satis- fied that a debt is recoverable only in part, the Commissioner may allow such debt, in an amount not in excess of the part which becomes worthless within the taxable year, as a deduc- tion. This paragraph shall not apply in the case of a taxpayer, other than a bank, as defined in section 104, with respect to a debt evidenced by a security as defined in paragraph (3) of 820 [56 STAT.

�