Page:United States Statutes at Large Volume 80 Part 1.djvu/1188

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PUBLIC LAW 89-722-NOV. 2, 1966

[80 STAT.

" (4) S U S P E N S E ACCOUNT.—

Infra-

68A Stat. 124. 26 USC 381.

26 USC 71.

" (A) REQUIREMENT.—Except as provided by subparagraph (C), each taxpayer who maintains a reserve described in paragraph (1)(A) shall, for purposes of this subsection and section 81, establish and maintain a suspense account. The initial balance of such account shall be equal to the opening balance described in paragraph (3), " (B) ADJUSTMENTS.—At the close of each taxable year the suspense account shall be— " (i) reduced by the excess of the suspense account at the beginning of the year over the reserve described in paragraph (1)(A) (after making the addition for such year provided in such paragraph), or "(ii) increased (but not to an amount greater than the initial balance of the suspense account) by the excess of the reserve described in paragraph (1)(A) (after making the addition for such year provided m such paragraph) over the suspense account at the beginning of such year. " (C) LIMITATIONS.—Subparagraphs (A) and (B) shall not apply in the case of the taxpayer who maintained for his last taxable year ending before October 22, 1965, a reserve for bad debts under subsection (c) which included debt obligations described in paragraph (1)(A). " (D) SECTION 3 8 1 ACQUISITIONS.—The application of this paragraph in any acquisition to which section 381(a) applies shall be determined under regulations prescribed by the Secretary or his delegate." (b)(1) Part II of subchapter B of chapter 1 of the Internal Revenue Code of 1954 (relating to items specifically included in gross income) is amended by inserting after section 80 the following new section: "SEC. 81. INCREASES IN SUSPENSE ACCOUNT UNDER SECTION 16€(g).

Supra.

"The amount of any increase in the suspense account required by paragraph (4)(B) (ii) of section 166(g) (relating to certain debt obligations guaranteed by dealers) shall be included in gross income for the taxable year for which such increase is required." (2) The table of sections for part II of subchapter B of chapter 1 is amended by adding at the end thereof the following: "Sec. 81. Increases in suspense account under section 166(g)."

26 USC 446. Effective date.

26 USC 166.

(c) If the taxpayer establishes a reserve described in section 166 (g)(1) of the Internal Revenue Code of 1954 (as amended by subsection (a) of this section) for a taxable year ending after October 21, 1965, and beginning before August 2, 1966, the establishment of such reserve shall not be considered as a change in method of accounting for purposes of section 446(e) of such Code. SEC. 2. (a) Except as provided in subsections (b) and (c), the amendments made by the first section of this Act shall apply to taxable years ending after October 21, 1965. (b) I f (1) the taxpayer before October 22, 1965, claimed a deduction, for a taxable year ending before such date, under section 166(c) of the Internal Revenue Code of 1954 for an addition to a reserve for bad debt^ on account of debt obligations described in section 1 6 6 ( ^) (1)(A) of such Code (as amended by the first section of this Act), and (2) the assessment of a deficiency of the tax imposed by chapter 1 of such Code for such taxable year and each subsequent

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