Page:United States Statutes at Large Volume 90 Part 2.djvu/75

 PUBLIC LAW 94-455—OCT. 4, 1976

9 0 STAT. 1543

taxable year to which this subsection (as in effect before the T a x Reform "Act of 1976) applies, the amount of the n e t investment Ante, p. 1520. income taken into account under this subsection shall be the amount of such income (determined without regard to this sentence) multiplied by a fraction the numerator of which is the excess of the investment interest for the taxable year over the investment interest to which such prior provision applies, and the denominator of which is the investment interest for the taxable year."; (3") by striking out "limitations in paragraph s (1) and (2) (A) ' ' in paragraph (3)(E) and inserting in lieu thereof "limitation in paragraph (1) "; (4) by striking out paragraph (5) and redesignating paragraph s (6) and (7) as paragraph s (5) and (6), respectively; (5) by a d d i n g at the end of paragraph (5) (as so redesignated) the following: " For taxable years beginning after December 31, 1975, this paragraph shall be applied on an allocation basis rather than a specific item basis."; and (6) by a d d i n g at the end thereof the following new paragraph: " (7) SPECIAL RULE WHERE TAXPAYER OWNS SO PERCENT OR MORE OF ENTERPRISE.

" (A) GENERAL RULE.—In the case of any 50 percent owned corporation or partnership, the $10,000 figure specified in paragraph (1) shall be increased by the lesser of— " (i) $15,000, or " ( i i) the interest paid or accrued during the taxable year on investment indebtedness incurred or continued in connection with the acquisition of the interest in such corporation or partnership. I n the case of a separate return by a married individual, $7,500 shall be substituted for the $15,000 figure in clause (1). "(B)

O W N E R S H I P REQUIREMENTS.—This paragraph

shall

apply with respect to indebtedness only if the taxpayer, his spouse, and his children own 50 percent or more of the total value of all classes of stock of the corporation or 50 percent or more of all capital interests in the partnership, as the case may be." (b) EFEECTIVE D A T E. —

26 USC 163

(1) IN GENERAL.—Except as provided in paragraph (2), the °°*®amendments made by subsection (a) shall a p p l y to taxable years beginning after December 31, 1975. (2) INDEBTEDNESS INCURRED BEFORE SEPTEMBER 11,19 7 5.—In the

case of indebtedness attributable to a specific item of property which— (A) is for a specified term, and (B) was incurred before September 11, 1975, or is incurred after September 10, 1975, pursuant to a written contract or commitment which on September 11, 1975, and a t all times thereafter before the incurring of such indebtedness, is binding on the taxpayer, the amendments made by this section shall not apply, but section 163(d) of the I n t e r n a l Revenue Code of 1954 (as in effect before the enactment of this Act) shall apply. For purposes of the preceding sentence, so much of the net investment income (as defined in section 163(d)(3)(A) of such Code) for any taxable year as

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