Page:United States Statutes at Large Volume 90 Part 2.djvu/161

 PUBLIC LAW 94-455—OCT. 4, 1976

9 0 STAT. 1629

SEC. 1034. TREATMENT OF CAPITAL GAINS FOR PURPOSES OF FOREIGN TAX CREDIT. (a) IN" GENERAL.—Section (b) of section 904 (relating to taxable 26 USC 904. income for purposes of computing the foreign tax credit limitation), as amended by section 1031 of this Act, is amended to read as follows: " (b) TAXABLE I N C O M E FOR PURPOSE OF COMPUTING L I M I T A T I O N. — " (1) PERSONAL EXEMPTIONS.—For purposes of subsection (a),

the taxable income i n the case of a n individual, estate, or trust shall be computed without any deduction for personal exemptions under section 151 or 6 4 2 (b).

-

" (2) CAPITAL G A I N S. — For purposes of subsection (a) —

" (A) CORPORATIONS.—In the case of a corporation— " (i) the taxable income of such corporation from sources without the United States shall include gain from the sale or exchange of capital assets only in an amount equal to foreign source capital gain net income reduced by three-eighths of foreign source n e t capital S^^. . . . " ( i i) the entire taxable income of such corporation shall include gain from the sale or exchange of capital assets only in an amount equal to capital gain net income reduced by three-eights of net capital gain, and " ( i i i) any net capital loss from sources without the United States to the extent taken into account in determining capital gain net income for the taxable year shall be reduced by an amount equal to three-eighths of the excess of net capital gain from sources within the United States over net capital gain. " (B) OTHER TAXPAYERS.—In the case of a tax p a y e r other

than a tax p a y e r described in subparagraph (A), taxable income from sources without the United States shall include gain from the sale or exchange of capital assets only to the extent of foreign source capital gain net income. " (3) DEFINITIONS. — For purposes of this subsection— " (A) FOREIGN SOURCE CAPITAL GAIN NET INCOME.—The term

'foreign source capital gain net income' means the lesser of— " (i) capital gain net income from sources without the United States, or " (ii) capital gain net income. " (B) FOREIGN SOURCE N E T CAPITAL G A I N. — The term 'for-

eign source "(i) States, "(ii)

net capital gain' means the lesser of— net capital gain from sources without the United or net capital gain.

" (C) EXCEPTION FOR GAIN FROM THE SALE o r CERTAIN PER-

SONAL PROPERTY.—For purposes of this paragraph, there shall be included as gain from sources within the United States any gain from sources without the United States from the sale or exchange of a capital asset which is personal property which— " (i) i n the case of an individual, is sold or exchanged outside of the country (or possession) of the individual's residence, " ( i i) in the case of a corporation, is stock in a second corporation sold or exchanged other than in a country (or possession) i n which such second corporation derived more than 50 percent of its gross income for the 3-year



r

�