Page:United States Statutes at Large Volume 76.djvu/1087

 76 STAT.]

PUBLIC

LAW 87-834-OCT. 16, 1962

"(c) QUALIFIED SHAREHOLDERS,—For purposes of this section— "(1) IN GENERAL.—The term 'qualified shareholder' means any shareholder who is a United States person (as defined in section 7701 (a).(30)), other than a shareholder described in paragraph (2). "(2)

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Ante, p. 988.

CERTAIN UNITED STATES PERSONS EXCLUDED FROM DEFINI-

TION.—A United States person shall not be treated as a qualified shareholder for the taxable year if for such taxable year (or for any prior taxable year) he did not include, in computing his long-term capital gains in his return for such taxable year, the amount designated by such company pursuant to subsection (a) (1)(B) as his share of the undistributed capital gains of such company for its taxable year ending within or with such taxable year of the taxpayer. The preceding sentence shall not apply with respect to any failure by the taxpayer to treat an amount as provided therein if the taxpayer shows that such failure was due to reasonable cause and not due to willful neglect.

" (d) TREATMENT OF DISTRIBUTED AND UNDISTRIBUTED CAPITAL GAINS BY A QUALIFIED SHAREHOLDER.—Every qualified shareholder of

a foreign investment company for any taxable year of such company with respect to which an election pursuant to subsection (a) is in effect shall include, in computing his long-term capital gains— " (1) for his taxable year in which received, his pro rata share of the distributed portion of the excess of the net long-term capital gain over the net short-term capital loss for such taxable year of such company, and "(2) for his taxable year in which or with which the taxable year of such company ends, his pro rata share of the undistributed portion of the excess of the net long-term capital gain over the net short-term capital loss for such taxable year of such company. "(e) ADJUSTMENTS.—Under regulations prescribed by the Secretary or his delegate, proper adjustment shall be made— "(1) in the earnings and profits of the electing foreign investment company and a qualified shareholder's ratable share thereof, and "(2) in the adjusted basis of stock of such company held by such shareholder,, to reflect such shareholder's inclusion in gross income of undistributed capital gains.

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" (f) ELECTION BY FOREIGN INVESTMENT COMPANY W I T H RESPECT TO FOREIGN T A X CREDIT.—A foreign investment company with respect

to which an election pursuant to subsection (a) is in effect and more than 50 percent of the value (as defined in section 851(c)(4)) of whose total assets at the close of the taxable year consists of stock or securities in foreign corporations may, for such taxable year, elect the application of this subsection with respect to income, w ar profits, and excess profits taxes described in section 901(b)(1) which are paid by the foreign investment company during such taxable year to foreign countries and possessions of the United States. If such election is made— "(1) the foreign investment company— " (A) shall compute its taxable income, for purposes of subsection (a)(1)(A), without any deductions for income, war profits, or excess profits taxes paid to foreign countries or possessions of the United States, and (B) shall treat the amount of such taxes, for purposes of subsection (a)(1)(A), as distributed to its shareholders;

26 USC ssi.

26 USC 9o i.

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