Page:United States Statutes at Large Volume 98 Part 1.djvu/610

 98 STAT. 562

Ante, p. 531.

PUBLIC LAW 98-369—JULY 18, 1984 transitional rule) for any provision which was a predecessor to any provision contained in part V of subchapter P of chapter 1 of the Internal Revenue Code of 1954 (as added by section 41).

Subtitle D—Corporate Provisions PART I—LIMITATIONS ON DIVIDENDS RECEIVED DEDUCTION

26 USC 246A.

SEC. 51. DIVIDENDS RECEIVED DEDUCTION REDUCED WHERE PORTFOLIO STOCK IS DEBT FINANCED. (a) GENERAL RULE.—Part VIII of subchapter B of chapter 1 (relating to special deductions for corporations) is amended by inserting after section 246 the following new section: "SEC. 246A. DIVIDENDS RECEIVED DEDUCTION REDUCED WHERE PORTFOLIO STOCK IS DEBT FINANCED. "(a) GENERAL RULE.—In the case of any dividend on debt-financed portfolio stock, there shall be substituted for the percentage which (but for this subsection) would be used in determining the amount of the deduction allowable under section 243, 244, or 245 a percentage equal to the product of— "(1) 85 percent, and "(2) 100 percent minus the average indebtedness percentage. "(b) SECTION NOT To APPLY TO DIVIDENDS FOR WHICH 100 PERCENT DIVIDENDS RECEIVED DEDUCTION ALLOWABLE.—Subsection (a) shall

not apply to— "(1) qualifying dividends (as defined in section 2430t)) without regard to section 243(c)(4)), and "(2) dividends received by ^a small business investment company operating under the Small Business Investment Act of 15 USC 661 note. 1958. "(c) DEBT FINANCED PORTFOLIO STOCK.—For purposes of this section— "(1) IN GENERAL.—The term 'debt financed portfolio stock' means any portfolio stock if at some time during the base period there is portfolio indebtedness with respect to such stock. "(2) PoRTFOuo STOCK.—The term 'portfolio stock' means any stock of a corporation unless— "(A) as of the beginning of the ex-dividend date, the taxpayer owns stock of such corporation— "(i) possessing at least 50 percent of the total voting Mb /I *3. i power of the stock of such corporation, and "(ii) having a value equal to at least 50 percent of the total value of the stock of such corporation, or "(B) as of the beginning of the ex-dividend date— "(i) the taxpayer owns stock of such corporation which would meet the requirements of subparagraph (A) if '20 percent' were substituted for '50 percent' each place it appears in such subparagraph, and "(ii) stock meeting the requirements of subparagraph (A) is owned by 5 or fewer corporate shareholders. "(3) SPECIAL RULE FOR STOCK IN A BANK OR BANK HOLDING COMPANY.—


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"(A) IN GENERAL.—If, as of the beginning of the exdividend date, the taxpayer owns stock of any bank or bank

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