Page:United States Statutes at Large Volume 78.djvu/122

 80

PUBLIC LAW 88-272-FEB. 26, 1964

[78

STAT.

able year (computed without regard to income desciibed in subsection (d)(3) and income derived directly from the active and regular conduct of a lending or firiHiice business, and computed by including as personal holding company income the entire amount of the gross income from rents, royalties, produced film rents, and compensation for use of corporate property by shareholders) is not more than 20 percent of the ordinary gross income; " (C) the sum of the deductions which are directly allocable to the active and regular conduct of its lending or finance business equals or exceeds the sum of— " (i) 15 percent of so much of the ordinary gross income derived therefrom as does not exceed $500,000. plus "(ii) 5 percent of so nuich of the ordinary gross income derived therefrom as exceeds $500,000 but not $1,000,000; and " (D) the loans to a person who is a shareholder in such company during the taxable year by or for whom 10 percent or more in value of its outstanding stock is owned directiv or indirectly (including, in the case of an individual, stock owned by members of his family as defined in section 544 (a)(2)), outstanding at any time during such year do not exceed $5,000 in principal amount;". 1^3^ SPKCIAL RiTj.KS i<^)K SECTION r)42(C)(r, t.—Section 542 is amended by adding at the end thereof the following new subsection:

68A Stat. 1! 26 USC 544

26 USC 542.

•*('d) S P E C I A L R L L E S FOR A P P L Y I N G SUHSECTION (c) ((>).— " (1) L E N D I N G OR F I N A N C E BUSINESS D E F I N E D. —

,

26 USC 1504.

" (A) IN GENERAL.—Except as provided in subparagraph (B), for purposes of subsection (c)(6), the term 'lending 01' finance business' means a business of— "(i) making loans, "(ii) purchasing or discounting accounts receivable, notes, or installment obligations, "(iii) rendering services or making facilities available in connection with activities described in clauses (i) and (ii) carried on by the corporation rendering services or making facilities available, or "(iv) rendering services or making facilities available to another corporation which is engaged in the lending or finance business (within the meaning of this paragraph), if such services or facilities are related to the lending or finance business (within such meaning) of such other corporation and such other corporation and the corporation rendering services or making facilities available are members of the same affiliated group (as defined in section 1504). " (B) PJX(EPTIONS.—For purposes of subparagraph (A), ihe term 'lending or finance business' does not include the business of— " (i) making loans, or purchasing or discounting accounts receivable, notes, or installment obligations, if (at the time of the loan, purchase, or discount) the I'emaining maturity exceeds 60 monlks, unless the loans, notes, or installment obligations are evidenced or secured by contracts of conditional sale, chattel mortgages, or chattel lease agreements arising out of the sale of goods or services in the course of the bonower's or transferor's trade or business, or

�