Page:United States Statutes at Large Volume 92 Part 3.djvu/277

 PUBLIC LAW 95-600—NOV. 6, 1978

92 STAT. 2909

(4) CONFORMING AMENDMENT TO REVISION OF SECTION 644.— 26 USC 644 Section 1402(b)(1) of the Tax Reform Act of 1976 (relating to "ote. holding period for long-term capital gains treatment) is amended by striking out subparagraph (K) thereof. (5) EFFECTIVE DATES.—

26 USC 644

(A) Except as provided in subparagraph (B), the amend- "o*^ment made by this subsection shall apply to transfers in trust made after May 21, 1976. (B) The amendment made by paragraph (4) shall take effect on October 4, 1976. (q) ALLOWANCE OF FOREIGN TAX CREDIT FOR ACCUMULATION DISTRIBUTIONS.— (1) SPECIAL RULES FOR FOREIGN TRUST.—

(A) Subsection (d) of section 665 is amended to read as follows: "(d) TAXES IMPOSED ON THE TRUST.—For purposes of this subpart— "(1) IN GENERAL.—The term 'taxes imposed on the trust' means the amount of the taxes which are imposed for any taxable year of the trust under this chapter (without regard to this subpart or subpart A of part IV of subchapter A) and which, under regulations prescribed by the Secretary, are properly allocable to the undistributed portions of distributable net income and gains in excess of losses from sales or exchanges of capital assets. The amount determined in the preceding sentence shall be reduced by any amount of such taxes deemed distributed under section 666 (b) and (c) or 669 (d) and (e) to any beneficiary. "(2) FOREIGN TRUSTS.—In the case of any foreign trust, the term 'taxes imposed on the trust' includes the amount, reduced as provided in the last sentence of paragraph (1), of any income, war profits, and excess profits taxes imposed by any foreign country or possession of the United States on such foreign trust which, as determined under paragraph (1), are so properly allocable." (B) Section 667 is amended by adding at the end thereof the following new subsection: "(d) SPECIAL RULES FOR FOREIGN TRUST.— "(1) FOREIGN TAX DEEMED PAID BY BENEFICIARY.—

"(A) IN GENERAL.—In determining the increase in tax under subsection (b)(1)(D) for any computation year, the taxes described in section 665(d)(2) which are deemed distributed under section 666(b) or (c) and added under subsection (b)(1)(C) to the taxable income of the beneficiary for any computation year shall, except as provided in subparagraphs (B) and (C), be treated as a credit against the increase in tax for such computation year under subsection (b)(1)(D). "(B) DEDUCTION IN LIEU OF CREDIT.—If the beneficiary did not choose the benefits of subpart A of part III of subchapter N with respect to the computation year, the beneficiary may in lieu of treating the amounts described in subparagraph (A) (without regard to subparagraph (O) as a credit may treat such amounts as a deduction in computing the beneficiary's taxable income under subsection (b)(1)(C) for the computation year. "(C) LIMITATION ON CREDIT; RETENTION OF CHARACTER.—

"(i) LIMITATION ON CREDIT.—For purposes of determin-

ing under subparagraph (A) the amount treated as a credit for any computation year, the limitations under subpart A of part III of subchapter N shall be applied

26 USC 665.

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26 USC 666, 669.

26 USC 667.

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