Page:United States Statutes at Large Volume 92 Part 3.djvu/214

 92 STAT. 2846

PUBLIC LAW 95-600—NOV. 6, 1978

Subtitle F—Accounting Provisions

26 USC 447.

SEC. 351, TREATMENT OF CERTAIN CLOSELY HELD FARM CORPORATIONS FOR PURPOSES OF RULE REQUIRING ACCRUAL ACCOUNTING. (a) GENERAL RULE.—Section 447 (relating to method of accounting for corporations engaged in farming) is amended by adding at the end thereof the following new subsection: "(h) EXCEPTION FOR CERTAIN CLOSELY HELD CORPORATIONS.—

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26 USC 267. 26 USC 401. 26 USC 501.

26 USC 267.

"(1) IN GENERAL.—This section shall not apply to any corporation if, on October 4, 1976, and at all times thereafter— "(A) members of 2 families (within the meaning of subsection (d)(1)) have owned (directly or through the application of subsection (d)) at least 65 percent of the total combined voting power of all classes of stock of such corporation entitled to vote, and at least 65 percent of the total number of shares of all other classes of stock of such corporation; or "(B)(i) members of 3 families (within the meaning of subsection (d)(1)) have owned (directly or through the application of subsection (d)) at least 50 percent of the total combined voting power of all classes of stock of such corporation entitled to vote, and at least 50 percent of the total number of shares of all other classes of stock of such corporation; and "(ii) substantially all of the stock of such corporation which is not so owned (directly or through the application of subsection (d)) by members of such 3 families is owned directly— "(I) by employees of the corporation or members of their families (within the meaning of section 267(c)(4)), or "(II) by a trust for the benefit of the employees of such corporation which is described in section 401(a) and which is exempt from taxation under section 501(a). "(2) STOCK HELD BY EMPLOYEES, ETC.—For purposes of this subsection, stock which— "(A) is owned directly by employes of the corporation or members of their families (within the meaning of section 267(c)(4)) or by a trust described in paragraph (l)(B)(ii)(II), and "(B) was acquired on or after October 4, 1976, from the corporation or from a member of a family which, on October 4, 1976, was described in subparagraph (A) or (B)(i) of paragraph (1), shall be treated as owned by a member of a family which, on October 4, 1976, was described in subparagraph (A) or (B)(i) of paragraph (1). "(3) CORPORATION MUST BE ENGAGED IN FARMING.—This subsec-

26 USC 447

tion shall apply only in the case of a corporation which was, on October 4, 1976, and at all times thereafter, engaged in the trade or business of farming." (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to taxable years beginning after December 31, 1977. SEC. 352. ACCOUNTING FOR GROWING CROPS. (a) APPLICATION OF SECTION.—This section shall apply to a taxpayer

note.

VvllO—

26 USC 447 note.

(1) is a farmer, nurseryman, or florist, (2) is on an accrual method of accounting, and

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