Page:United States Statutes at Large Volume 56 Part 1.djvu/958

 PUBLIC LAWS-CH. 619-OCT. 21, 1942 54 Stat. 994. 26U..C.i743; Supp. I, 743. 55Stat. 21. 26 U.S. C., Supp. L 713 (g). Ante, p. 910. Ante, p. 926. months after May 31, 1940, bears to the total number of months in such taxable year; and "(B) By adding to the amount ascertained under sub- paragraph (A) an amount which bears the same ratio to the excess profits net income for the last preceding taxable year as such number of months after May 31, 1940, bears to the number of months in such preceding year. The amount added under this subparagraph shall not exceed the amount of the excess profits net income for such last preceding tax- able year. "(C) If the number of months in such preceding taxable year is less than such number of months after May 31, 1940, by adding to the amount ascertained under subparagraph (B) an amount which bears the same ratio to the excess profits net income for the second preceding taxable year as the excess of such number of months after May 31, 1940, over the num- ber of months in such preceding taxable year bears to the number of months in such second preceding taxable year. (d) AMENDMENTS TO SECTION 743.- Section 743 is amended to read as follows: "SEC. 743. NET CAPITAL CHANGES. "(a) TAXPAYER UsING TEns SUPPLEMENT.-For the purposes of section 713 (g), if the transaction which constitutes the taxpayer an acquiring corporation occurs in a taxable year of the taxpayer which begins after December 31, 1939, and the taxpayer's average base period net income is computed under section 742, the following rules shall apply in computing the daily capital addition and reduction of the taxpayer for each day after such transaction: "(1) The transferred capital addition or reduction of the com- ponent corporation shall be treated as if it were a capital addition or reduction, as the case may be, of the taxpayer. "(2) The transferred capital addition of the component cor- poration shall be its daily capital addition as of the time immedi- ately before the transaction (computed under section 713 (g), but without regard to its reduction under the fourth sentence of paragraph (3) on account of excluded capital, but with the appli- cation of paragraph (6) of this subsection). "(3) The transferred capital reduction of the component corporation shall be its daily capital reduction as of the time immediately before the transaction (computed under section 713 (g) but with the application of paragraph (7) of this sub- section). "(4) In computing the daily capital addition of the taxpayer, money or property paid in to the taxpayer by any of its com- ponent corporations, and property consisting of stock in any such component corporation paid in by shareholders of such com- ponent corporation, shall be disregarded. "(5) In computing the daily capital reduction of the taxpayer, distributions by the taxpayer to any of its component corpora- tions not out of earnings and profits shall be disregarded. "(6) In computing the transferred capital addition of the component corporation, money or property paid in to such com- ponent corporation by the taxpayer or any other component corporation and property consisting of stock in the taxpayer or any other component corporation paid in by shareholders of the taxpayer or other component corporation, shall be disregarded. [56 STAT. 930

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