Page:United States Statutes at Large Volume 69.djvu/759

 69

STAT.]

717

PUBLIC LAW 385-AUG. 12, 1955

SEC. 3. The Internal Revenue Code of 1954 is amended by adding a new section to chapter 1 of subtitle A immediately following section 1341 to read as follows: "SEC. 1342. COMPUTATION OF TAX WHERE TAXPAYER RECOVERS SUBSTANTIAL AMOUNT HELD BY ANOTHER UNDER CLAIM OF RIGHT. " (a) GENERAL EuLE.—If—

"(1) an item was deducted from gross income for a prior taxable year (or years) because it appeared that another person held an unrestricted right to such item as a result of a court decision in a patent infringement suit (whether or not the taxpayer is a party to such s u i t); and "(2) gross income is increased for the taxable year because it was established after the close of such prior taxable year (or years) that such other person did not have an unrestricted right to such item or to a portion of such item because of the subsequent reversal of such court decision on the ground that such decision was induced by fraud or undue influence; and "(3) the amount of such increase in gross income exceeds $3,000, then the tax imposed by this chapter for the taxable year shall be the lesser of the following: "(4) the tax for the taxable year computed with the gross income so increased; or "(5) an amount equal to— " (A) the tax for the taxable year computed without such increase in gross income, plus " (B) the increase in tax (including interest) under this chapter (or the corresponding provisions of prior revenue laws) for the prior taxable year (or years) which would result solely from the elimination of such item (or portion thereof) as a deduction from gross income for such prior taxable year (or years). "(b) SPECIAL RULE.—For purposes of subsection (a)(5)(B) ' interest shall be computed from the due date of the return for such prior taxable year to the due date of the return for the taxable year.*' SEC. 4. The amendment made by section 3 of this Act shall apply with respect to taxable years beginning after December 31, 1954. Approved August 12, 1955.

Public Law 385

CHAPTER

Applicability.

871

AN ACT To amend section 1233 and section 542(a)(2) of the Internal Revenue Code of 1954.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 1233 of the Internal Revenue Code of 1954 is amended by adding at the end thereof a new subsection as follows: " (f) ARBITRAGE OPERATIONS IN SECURITIES.—In the case of a short sale which had been entered into as an arbitrage operation, to which sale the rule of subsection (b)(2) would apply except as otherwise provided in this subsection— "(1) subsection (b)(2) shall apply first to substantially identical assets acquired for arbitrage operations held at the close

August 12, 195!i

[H« R« 6263]

Income tax e s. 68A Stat. 327. 26 USC 1233. Capital gains and losses. Short s a l e s.

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