Page:United States Statutes at Large Volume 76.djvu/1028

 PUBLIC LAW 87-834-OCT. 16, 1962

26 USC 166.

53 Stat. 10.

[76 STAT.

from zero to the amount thereof outstanding at the close of December 31, 1962; and "(C) then to the supplemental reserve for losses on loans. "(4) P R E - 1963 RESERVES DEFINED.—For purposes of this subsection, the term 'pre-1963 reserves' means the net amount, determined as of the close of December 31, 1962 (after applying subsection (d)(1)), accumulated in the reserve for bad debts pursuant to section 166(c) (or the corresponding provisions of prior revenue laws) for taxable years beginning after December 31, 1951. "(5) CERTAIN PRE-1952 SURPLUS.—If after the application of paragraph (3), the opening balance of the reserve described in paragraph (2)(B) is less than the amount described in paragraph (3)(B), then, for purposes of this subsection, the term 'pre-1963 reserves' includes so much of the surplus, undivided profits, and bad debt reserves (determined as of December. 31, 1962) attributable to the period before the first taxable year beginning after December 31, 1951, as does not exceed the amount by which such opening balance is less than the amount described in paragraph (3)(B). For purposes of the preceding sentence, the surplus, undivided profits, and bad debt reserves attributable to the period before the first taxable year beginning after December 31, 1951, shall be reduced by the amount thereof which is attributable to interest which would have been excludable from gross income under section 22(b)(4) of the Internal Revenue Code of 1939 (relating to interest on governmental obligations) or the corresponding provisions of prior laws. Notwithstanding the second sentence of paragraph (1), any amount which, by reason of the application of the first sentence of this paragraph, is allocated to the reserve described in paragraph (2)(B) shall not be treated as a reserve for bad debts for any purpose other than determining the amount referred to itf suDsection (b)(1) (B), and for such purpose such amount shall be treated as remaining in such reserve. "(6) CHARGING or BAD DEBTS TO RESERVES.—Any debt becoming worthless or partially worthless in respect of a qualifying real property loan shall be charged to the reserve for losses on such loans, and any debt becoming worthless or partially worthless in respect of a nonqualifying loan shall be charged to the reserve for losses on nonqualifying loans; except that any such debt may, at the election of the taxpayer, be charged in whole or in part to the supplemental reserve for losses on loans. " (d) TAXABLE YEARS BEGINNING IN 1962 AND ENDING I N 1963.—In the case of a taxable year beginning before January 1. 1963, and ending after December 31, 1962, of a taxpayer described in subsection (a) which uses the reserve method of accounting for bad debts, the taxable income shall be the sum of— " (1) that portion of the taxable income allocable to the part of the taxable year occurring before January 1, 1963, reduced by the amount of the deduction for an addition to a reserve for bad debts which would be allowable under section 166(c) (without regard to the amendments made by section 6 of the Revenue Act of 196?) if such part year constituted a taxable year, plus "(2) that portion of the taxable income allocable to the part of the taxable year occurring after December 31, 1962, reduced by the amount of the deduction for an addition to a reserve for bad debts which would be allowed under section 166(c) (taking into account the amendments made by sec<don 6 of the Revenue Act of 1962) if such part year constituted a taxable year.

�