Page:United States Statutes at Large Volume 85.djvu/574

 544

PUBLIC LAW 92-178-DEC. 10, 1971

[85 STAT.

"Subpart B—Treatment of Distributions to Shareholders "Sec. 995. Taxation of DISC income to shareholders. "Sec. 996. Rules for allocation in the case of distributions and losses. "Sec. 997. Special subchapter C rules. "SEC. 995. TAXATION OF DISC INCOME TO SHAREHOLDERS. " (a) GENERAL RULE.—^A shareholder of a D I S C or former D I S C

26^sc^*i 2^2^!'

6|A Stat. 325;

shall be subject to taxation on the earnings and profits of a D I S C as provided in this chapter, but subject to the modifications of this subpart. " (b) DEEMED DiSTRiBTJTioisrs.— "(1) DISTRIBUTIONS I N QUALIFIED YEARS.—^A shareholder of a D I S C shall be treated as having received a distribution taxable as a dividend with respect to his stock in an amount which is equal to his pro rata share of the sum (or, if smaller, the earnings and profits for the taxable year) of— " (A) the gross interest derived during the taxable year from producer's loans, " (B) the gain recognized by the D I S C during the taxable year on the sale or exchange of property, other than property which in the hands of the D I S C is a qualified export asset, previously transferred to it in a transaction in which gain was not recognized in whole or in part, but only to the extent that the transferor's gain on the previous transfer was not recognized, " (C) the gain (other than the gain described in subparagraph (B)) recognized by the D I S C during the taxable year on the sale or exchange of property (other than property which in the hands of the D I S C is stock in trade or other property described in section 1221(1)) previously transferred to it in a transaction in which gain was not recognized in whole or in part, but only to the extent that the transferor's gain on the previous transfer was not recognized and would have been treated as gain from the sale or exchange of property which is neither a capital asset nor property described jj^ section 1231 if the property had been sold or exchanged rather than transferred to the D I S C, " (D) one-half of the excess of the taxable income of the D I S C for the taxable year, before reduction for any distributions during the year, over the sum of the amounts deemed distributed for the taxable year under subparagraphs (A), (B), and (C), and " (E) the amount of foreign investment attributable to producer's loans (as defined in subsection (d)) of a D I S C for the taxable year. Distributions described in this paragraph shall be deemed to be received on the last day of the taxable year of the D I S C in which the gross income (taxable income in the case of subparagraph (D)) was derived. I n the case of a distribution described in subparagraph (E), earnings and profits for the taxable year shall include accumulated earnings and profits. " (2) DISTRIBUTIONS UPON DISQUALIFICATION.—

Ante, p. 535.

" (A) A shareholder of a corporation which revoked its election to be treated as a D I S C or failed to satisfy the conditions ^f section 992(a)(1) for a taxable year shall be deemed to have received (at the time specified in subparagraph (B)) a distribution taxable as a dividend equal to his pro rata share of the D I S C income of such corporation accumulated during

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