Page:United States Statutes at Large Volume 96 Part 2.djvu/328

 96 STAT. 1690

26 USC 267.

PUBLIC LAW 97-354—OCT. 19, 1982 "(12) An S corporation and a C corporation, if the same individual owns more than 50 percent in value of the outstanding stock of each corporation." (2) Section 267 is amended by adding at the end thereof the following new subsection:

"(f) SPECIAL RULES FOR UNPAID EXPENSES AND INTEREST OF S CORPORATIONS.—

"(1) IN GENERAL.—In the case of any amount paid or incurred by an S corporation, if— "(A) by reason of the method of accounting of the person to whom the payment is to be made, the amount thereof is not (unless paid) includible in the gross income of such person, and "(B) at the close of the taxable year of the S corporation for which (but for this paragraph) the amount would be deductible under section 162, 212, or 163, both the S corporation and the person to whom the payment is to be paid are persons specified in one of the paragraphs of subsection (b), then no deduction shall be allowed in respect of expenses otherwise deductible under section 162 or 212, or of interest otherwise deductible under section 163, before the day as of which the amount thereof is includible in the gross income of the person to whom the pa5niient is made. "(2) CERTAIN SHAREHOLDERS, ETC., TREATED AS RELATED PER-

SONS.—For purposes of applying paragraph (1) ^ "(A) an S corporation, "(B) any person who owns, directly or indirectly, 2 percent or more in value of the outstanding stock of such corporation, and "(C) any person related (within the meaning of subsection (b) of this section or section 707(b)(1)(A)) to a person described in subparagraph (B), shall be treated as persons specified in a paragraph of subsection (b). "(3) SUBSECTION (a)(2) NOT TO APPLY.—Subsection (a)(2) shall not apply to any amount paid or incurred by an S corporation." (3) Subsection (b) of section 267 is amended by striking out "or" at the end of paragraph (8), and by striking out the period at the end of paragraph (9) and inserting in lieu thereof a semicolon, (i) WITHHOLDING FROM INTEREST AND DIVIDENDS.—

Ante, p. 579.

Ante, p. 580.

(1) Paragraph (1) of section 3453(b) (relating to certain middlemen treated as payors) is amended by striking out "or" at the end of subparagraph (B), by inserting "or" at the end of subparagraph (C), and by inserting after subparagraph (C) the following new subparagraph: "(D) any S corporation which receives any payment,". (2) Subsection (b) of section 3454 (defining dividend) is amended by striking out paragraph (2) and by redesignating paragraph (3) as paragraph (2). (3) Paragraph (2) of section 3454(b) (as redesignated by paragraph (2)) is amended by inserting "and" at the end of subparagraph (F), by striking out ", and" at the end of subparagraph (G) and inserting in lieu thereof a period, and by striking subparagraph (H).

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