Page:United States Statutes at Large Volume 78.djvu/103

 78 STAT. ]

PUBLIC LAW 88-272-FEB. 26, 1964

61

"(ii) 95 percent or more of its gross income for the three-year period immediately preceding the close of its taxable year which ends on or before the close of the taxable year of such other domestic corporation (or for such part of such period during which the corporation was in existence) was derived from sources without the United States; and "(iii) 90 percent or more of its gross income for such period (or such part) was derived from the active conduct of a trade or business. If for the period (or part thereof) referred to in clauses (ii) and (iii) such corporation has no gross income, the provisions of clauses (ii) and (iii) shall be treated as satisfied if it is reasonable to anticipate that, with respect to the first taxable year thereafter for which such corporation has gross income, the provisions of such clauses will be satisfied. " (B) DOMESTIC PARENT CORPORATION.—The domestic parent corporation of any domestic subsidiary is the domestic corporation which owns 80 percent or more of the outstanding voting stock of such domestic subsidiary. " (b) SPECIAL RULES FOR APPLICATION OF SECTION 401(a).— " (1) NONDISCRIMINATION REQUIREMENTS.—For purposes

of

supplying paragraphs (3)(B) and (4) of section 401(a) with respect to an individual who is treated as an employee of a domestic parent corporation under subsection (a) — " (A) if such individual is an officer, shareholder, or person whose principal duties consist in supervising the work of other employees of a domestic subsidiary, he shall be treated as having such capacity with respect to such domestic parent corporation; and " (B) the determination of whether such individual is a highly compensated employee shall be made by treating such individual's total compensation (determined with the application of paragraph (2) of this subsection) as compensation paid by such domestic parent corporation and by determining such individual's status with regard to such domestic parent corporation. " (2) DETERMINATION OF COMPENSATION.—For

purposes

!

68A Stat. 134. 26 USC 4 0 1.

of

applying paragraph (5) of section 401(a) with respect to an individual who is treated as an employee of a domestic parent corporation under subsection (a), the total compensation of such individual shall be the remuneration paid to such individual by the domestic subsidiary which would constitute his total compensation if his services had been performed for such domestic parent corporation, and the basic or regular rate of compensation of such individual shall be determined under regulations prescribed by the Secretary or his delegate., " (c) TERMINATION OF STATUS AS DEEMED EMPLOYEE N'OT TO B E TREATED AS SEPARATION FROM SERVICE FOR PURPOSES OF CAPITAL

(TATN PROVISIONS.—For purposes of applying section 402(a)(2) and section 403(a)(2) with respect to an individual who is treated as an eniployee of a domestic parent corporation under subsection (a), fnicli individual shall not be considered as separated from the service of such domestic parent corporation solely by reason of the fact that— "(1) the corporation of which such individual is an employee ceases, for any taxable year, to be a domestic subsidiary within the meaning of subsection (a)(2)(A),

26use 402,403.

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