Page:United States Statutes at Large Volume 80 Part 1.djvu/151

 80 STAT. ]

PUBLIC LAW 89-389-APRIL 14, 1966

115

receipts more than 20 percent of which is passive investment income. Such termination shall be effective for the taxable year of the corporation in which it has gross receipts of such amount, and for all succeeding taxable years of the corporation. " (B) Subparagraph (A) shall not apply with respect to a Nonappucabiuty taxable year in which a small business corporation has gross P*^""'®^""^ receipts more than 20 percent of which is passive investment income, if— " (i) such taxable year is the first taxable year in which the corporation commenced the active conduct of any trade or business or the next succeeding taxable year; and "(ii) the amount of passive investment income for such taxable year is less than $3,000. " (C) For purposes of this paragraph, the term 'passive "Passive in^.'

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investment income means gross receipts derived from royalties, rents, dividends, interest, annuities, and sales or exchanges of stock or securities (gross receipts from such sales or exchanges being taken into account for purposes of this paragraph only to the extent of gains therefrom)." (b) The amendment made by subsection (a) shall apply to taxable „ applicability »

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years of electing small business corporations ending after the date oi the enactment of this Act. Such amendment shall also apply with respect to taxable years beginning after December 31, 1962, and ending on or before such date of enactment, if (at such time and in such manner as the Secretary of the Treasury or his delegate prescribes by regulations) — (1) the corporation elects to have such amendment so apply, and (2) all persons (or their personal representatives) who were shareholders of such corporation at any time during any taxable year beginning after December 31, 1962, and ending on or before the date of the enactment of this Act consent to such election and to the application of the amendment made by subsection (a). SEC. 4. (a) Section 1361 of the Internal Revenue Code of 1954 (relating to unincorporated business enterprises electing to be taxed as domestic corporations) is amended— (1) by adding at the end of subsection (a) the following new sentence: "No election (other than an election referred to in subsection (f)) may be made under this subsection after the date of the enactment of this sentence."; (2) by striking out in subsection (c) ", except as provided in subsection (m)^"; (3) by striking out "subsection (f) " in subsection (e) and inserting in lieu thereof "subsections (i) and (n) "; (4) by striking out subsection (m); and (5) by adding at the end of such section the following new subsection: "(n)

REVOCATION AND TERMINATION OF ELECTIONS.—

"(1) REVOCATION.—An election under subsection (a) with respect to an unincorporated business enterprise may be revoked after the date of the enactment of this subsection by the proprietor of such enterprise or by all the partners owning an interest in such enterprise on the date on which the revocation is made. Such enterprise shall not be considered a domestic corporation for any period on or after the effective date of such revocation. A revocation under this paragraph shall be made in such manner as the Secretary or his delegate may prescribe by regulations.

SSA Stat. 350.

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