Page:United States Statutes at Large Volume 78.djvu/129

 78 STAT. ] "(4)

PUBLIC LAW 88-272-FEB. 26, 1964

87

A F P M C ATIOX OF FAMILY-PAKTNKRSHII' AM) o m i O N IJl l.KS.

Parairisiphs {'2) and (8) shall l>e applied— " (A) for purposes of the stock ownership requirement provided in section 552(a)(2), if, but only if, the eti'ect is to make the corporation a forei<>:n personal holding company; " (B) for purposes of section 553(a)(5) (relating to personal service contracts) or of section 553(a)(6) (relating to the use of property by shareholders), if, but only if, the effect is to make the amounts therein referred to includible under such paragraph as foreign personal holding company income.

68A Stat. 195. 26ljsc*552 26 USC 552. Ante, p, 85.

" (5) CONSTRUCTIVE OWNERSHIP AS ACTUAL OWNERSHIP.—Stock

constructively owned by a person by reason of the application of paragraph (1) or (3) shall, for purposes of applying paragraph (1) or (2), be treated as actually owned by such person; but stock constructively owned by an individual by reason of the application of paragraph (2) shall not be treated as owned by him for purposes of again applying such paragraph in order to make another the constructive owner of such stock. " (6) OPTION RULE I N LIEU OF FAMILY AND PARTNERSHIP RULE.—•

I f stock may be considered as owned by an individual under either paragraph (2) or (3) it shall be considered as owned by him under paragraph (3). "(b) CONVERTIBLE SECURITIES.—Outstanding securities convertible into stock (whether or not convertible during the taxable year) shall be considered as outstanding stock— "(1) for purposes of the stock ownership requirement provided in section 552(a)(2), but only if the effect of the inclusion of all such securities is to make the corporation a foreign personal holding company; "(2) for purposes of section 553(a)(5) (relating to personal service contracts), but only if the effect of the inclusion of all such securities is to make the amounts therein referred to includible under such paragraph as foreign personal holding company income; and "(3) for purposes of section 553(a)(6) (relating to the use of property by shareholders), but only if the effect of the inclusion of all such securities is to make the amounts therein referred to includible under such paragraph as foreign personal holding company income. The requirement in paragraphs (1), (2), and (3) that all convertible securities must be included if any are to be included shall be subject to the exception that, where some of the outstanding securities are convertible only after a later date than in the case of others, the class having the earlier conversion date may be included although the others are not included, but no convertible securities shall be included unless all outstanding securities having a prior conversion date are also included." (f) DIVIDENDS-PAID DEDICTION.—

(1) Paragraph (2) of section 316(b) (relating to special rules for dividend defined) is amended to read as follows:

26 USC 316.

" (2) DISTRIBUTIONS BY PERSONAL HOLDING COMPAXTES.—

" (A) I n the case of a corporation which— " (i) under the law applicable to the taxable year in which the distribution is made, is a personal holding company (as defined in section 542), or "(ii) for the taxable year in respect of which the distribution is made under section 563(b) (relating to dividends paid after the close of the taxable year), or section 547 (relating to deficiency dividends), or the cor31-667 0-65—9

Ante, p. 79. 26 USC 542. 26 USC 563. 26 USC 547.

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