Page:United States Statutes at Large Volume 68A.djvu/223

 CH.

1—NORMAL TAXES AND SURTAXES

183

permanently set aside or to be used exclusively for the purposes described in section 642(c) or a corresponding provision of a prior income tax law shall be considered an individual. (b)

CORPORATIONS F I L I N G CONSOLIDATED R E T U R N S. —

(1) GENERAL RULE.—In the case of an affiliated group of corporations filing or required to file a consolidated return under section 1501 for any taxable year, the gross'income requirement of subsection (a)(1) of this section shall, except as provided in paragraphs (2) and (3), be applied for such year with respect to the consolidated gross income and the consolidated personal holding company income of the affiliated group. No member of such an affiliated group shall be considered to meet such gross income requirement unless the affiliated group meets such requirement. (2) INELIGIBLE AFFILIATED GROUP.—Paragraph (1) shall not apply to an affiliated group of corporations, other than an affiliated group of railroad corporations the common parent of which would be eligible to file a consolidated return under section 141 of the Internal Revenue Code of 1939 prior to its amendment by the Revenue Act of 1942, if— (A) any member of the affiliated group of corporations (including the common parent corporation) derived 10 percent or more of its gross income for the taxable year from sources outside the affiliated group, and (B) 80 percent or more of the amount described in subparagraph (A) consists of personal holding company income (as defined in section 543). For purposes of this paragraph, section 543 shall be applied as if the amoiint described in subparagraph (A) were the gross income of the corporation. (3) EXCLUDED CORPORATIONS.^—Paragraph (1) shall not apply to an affiliated group of corporations if any member of the affiliated group (including the common parent corporation) is a corporation excluded from the definition of personal holding company under subsection (c). (4) CERTAIN DIVIDEND INCOME RECEIVED BY A COMMON PARENT.—

In applying paragraph (2)(A) and (B), personal holding company income and gross income shall not include dividends received by a common parent corporation from another corporation if— (A) the common parent corporation owns, directly or indirectly, more than 50 percent of the outstanding voting stock of such other corporation, and (B) such other corporation is not a personal holding company for the taxable year in which the dividends are paid. (c) EXCEPTIONS.—The term "personal holding company" as defined in subsection (a) does not include— (1) a corporation exempt from tax under subchapter F (sec. 501 and following); (2) a bank as'defined in section 581; (3) a life insurance company; (4) a surety company; (5) a foreign personal holding company as defined in section 552; § 542(c)(5)

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