Page:United States Statutes at Large Volume 56 Part 1.djvu/938

 PUBLIC LAWS-CH. 619-OCT. 21, 1942 55 Stat. 20. 26 U. S. C ., Supp.I, § 713 (e) (1). 54 Stat. 981; 55 Stat 21. 26 U.S. C., Supp. I, i713 (g). Ante, p. 811. SEC. 215. BASE PERIOD NET INCOME OF LOWEST YEAR IN BASE PERIOD. Section 713 (e) (1) (relating to exclusion of deficit year from com- putation of average base period net income) is amended to read as follows: "(1) By computing the aggregate of the excess profits net income for each of the taxable years of the taxpayer in the base period, reduced by the sum of the deficits in excess profits net income for each of such years. If the excess profits net income (or deficit in excess profits net income) for one taxable year in the base period divided by the number of months in such taxable year is less than 75 per centum of the aggregate of the excess profits net income (reduced by deficits in excess profits net income) for the other taxable years in the taxpayer's base period divided by the number of months in such other taxable years (herein called 'average monthly amount') the amount used for such one year under this paragraph shall be 75 per centum of the average monthly amount multiplied by the number of months in such one year, and the year increased under this sentence shall be the year the increase in which will produce the highest average base period net income;". SEC. 216. CAPITAL REDUCTION IN CASE OF MEMBERS OF CON- TROLLED GROUP. Section 713 (g) (relating to adjustments in excess profits credit on account of capital changes) is amended by adding at the end thereof the following new paragraph: "(5) If, on any day of the taxable year, the taxpayer and any one or more other corporations are members of the same con- trolled group. then the daily capital reduction of the taxpayer for such day shall be increased by whichever of the following amounts is the lesser: "(A) The aggregate of the adjusted basis (for determining loss upon sale or exchange) of stock in such other corporation (or if more than one, in such other corporations) acquired by the taxpayer after the beginning of the taxpayer's first taxable year under this subchapter, minus the aggregate of the adjusted basis (for determining loss upon sale or exchange) of stock in such other corporation (or if more than one, in such other corporations) disposed of by the taxpayer prior to such day and after the beginning of the taxpayer's first taxable year under this subchapter; or " (B) The excess of the aggregate of the adjusted basis (for determining loss upon sale or exchange) of stock in all domes- tic corporations and of obligations described in section 22 (b) (4), held by the taxpayer at the beginning of such day over the aggregate of the adjusted basis (for determining loss upon sale or exchange) of stock in all domestic corpora- tions and of obligations described in section 22 (b) (4), held by the taxpayer at the beginning of its first taxable year under this subchapter. If any stock or obligations described in subparagraph (A) or (B) was disposed of prior to such day, its basis shall be determined under the law applicable to the year in which so disposed of. The excluded capital of the taxpayer for such day shall be reduced by the amount by which the taxpayer's daily capital reduction for such day is increased under this paragraph. As used in this paragraph, a controlled group means one or more chains of corporations connected through stock ownership with a 910 [56 STAT.

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