Page:United States Statutes at Large Volume 56 Part 1.djvu/852

 PUBLIC LAWS-CH. 619-OCT. 21, 1942 53 Stat. 68, 92. 26U.s. C. C§ 169, 331. "Bond." 53 Stat. 44 . 26U.. C. 113(b) (1). Supra. Ante, p. 823. 63 Stat. 67 . 2U.S.C.§163. Ante, p. 822. 53 Stat. 17. 26U.S.C.§25(a) (2). Ante, p. 811; post, p. 825. Ante, p. 823. Ante, p. 822. 63 Stat. 69. 26U.8.C.I169(c) (2). bond (described in paragraph (1)) of the taxpayer, it shall also apply to all such bonds held by the taxpayer at the beginning of the first taxable year to which the election applies and to all such bonds thereafter acquired by him and shall be binding for all subsequent taxable years with respect to all such bonds of the taxpayer, unless, upon application by the taxpayer, the Commis- sioner permits him, subject to such conditions as the Commis- sioner deems necessary, to revoke such election. The election authorized under this subsection in the case of a member of a partnership shall be exercisable with respect to bonds of the partnership only by the partnership. In the case of bonds held by a common trust fund, as defined in section 169, or by a foreign personal holding company, as defined in section 331, the election authorized under this subsection shall be exercisable with respect to such bonds only by the common trust fund or foreign personal holding company. "(d) DEFINITION OF BOND.- As used in this section, the term 'bond' means any bond, debenture, note, or certificate or other evidence of indebtedness, issued by any corporation and bearing interest (includ- ing any like obligation issued by a government or political subdivision thereof), with interest coupons or in registered form, but does not include any such obligation which constitutes stock in trade of the taxpayer or any such obligation of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or any such obligation held by the taxpayer pri- marily for sale to customers in the ordinary course of his trade or business." (c) ADJUSTMENT TO BAsIs. - Section 113 (b) (1) (relating to adjustments to basis) is amended by inserting at the end thereof the following new subparagraph: "(H) in the case of any bond (as defined in section 125) the interest on which is wholly exempt from the tax imposed by this chapter, to the extent of the amortizable bond pre- mium disallowable as a deduction pursuant to section 125 (a) (2), and in the case of any other bond (as defined in such section) to the extent of the deductions allowable pursuant to section 125 (a) (1) with respect thereto." (d) CREDrrS OF ESTATE OR TRUST AND BFNEFICIARY.-Section 163 (relating to credits of estate or trust and beneficiary) is amended by inserting at the end thereof the following new subsection: "(c) CREDITS OF ESTATE OR TRUST AND BENEFICIARY IN CASE OF BOND PREzMIivM.- If the estate or trust elects under section 125 to treat the premium on bonds, the interest on which is allowable as a credit under section 25 (a) (1) or (2), as amortizable, "(1) For the purposes of subsection (a) (2), the credits allowed by section 25 (a) shall be reduced as provided in section 125 (a) (3); "(2) For the purposes of subsection (b), the proportionate share of the legatee, heir, or beneficiary of such interest shall be his proportionate share of such interest (determined without regard to this paragraph) reduced by so much of the deduction under section 23 (v) as is attributable to such share. The remainder of such deduction, for the purposes of the last sen- tence of subsection (b), shall be applied in reduction of such credits of the estate or trust." (e) CREDrr OF PARTCIPANT IN COMMON TRUT FUIND FOR PARTEAIAY TAx-EXEMP INTEEsT. -- -Section 169 (c) (2) (relating to credits of participants) is amended by inserting at the end thereof the follow- ing new sentence: "If the common trust fund elects under section 824 [56 STAT.

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