Page:United States Statutes at Large Volume 98 Part 1.djvu/613

 PUBLIC LAW 98-369—JULY 18, 1984 m et

"(B) after the application of section 246 (but without regard to subsection (b) thereof), and "(C) after the appHcation of section 246A."

98 STAT. 5(35

Ante, p. 562.

(c) GROSS INCOME INCLUDES N E T SHORT-TERM CAPITAL GAIN.—

Paragraph (3)(A) of section 854(b) is amended to read as follows: "(A) In the case of 1 or more sales or other dispositions of stock and securities, the term 'gross income' includes only the excess of^ "(i) the net short-term capital gain from such sales or g,,. dispositions, over "(ii) the net long-term capital loss from such sales or dispositions." (d) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years of regulated investment companies beginning after the date of the enactment of this Act.

26 USC 854.

26 USC 854 note.

PART II—TREATMENT OF CERTAIN DISTRIBUTIONS SEC. 53. CORPORATE SHAREHOLDER'S BASIS IN STOCK REDUCED BY NONTAXED PORTION OF EXTRAORDINARY DIVIDENDS.

(a) GENERAL RULE.—Part IV of subchapter O of chapter 1 (relating to special rules for gain or loss on disposition of property) is amended by redesignating section 1059 as section 1060 and by inserting after section 1058 the following new section: "SEC. 1059. CORPORATE SHAREHOLDER'S BASIS IN STOCK REDUCED BY NONTAXED PORTION OF EXTRAORDINARY DIVIDENDS.

"(a) GENERAL RULE.—If any corporation— "(1) receives an extraordinary dividend with respect to any share of stock, and "(2) sells or otherwise disposes of such stock before such stock has been held for more than 1 year, the basis of such corporation in such stock shall be reduced by the nontaxed portion of such dividend. If the nontaxed portion of such dividend exceeds such basis, such excess shall be treated as gain from the sale or exchange of such stock. "(b) NONTAXED PORTION.—For purposes of this section— "(1) IN GENERAL.—The nontaxed portion of any dividend is the excess (if any) of— "(A) the amount of such dividend, over "(B) the taxable portion of such dividend. "(2) TAXABLE PORTION.—The taxable portion of any dividend

is— "(A) the portion of such dividend includible in gross income, reduced by "(B) the amount of any deduction allowable with respect to such dividend under section 243, 244, or 245. "(c) EXTRAORDINARY DIVIDEND DEFINED.—For purposes of this section— "(1) IN GENERAL.—The term 'extraordinary dividend' means any dividend with respect to a share of stock if the amount of such dividend equals or exceeds the threshold percentage of the taxpayer's adjusted basis in such share of stock (determined without regard to this section). I "(2) THRESHOLD PERCENTAGE.—The term 'threshold percentage' means—

26 USC 1060. 26 USC 1059.

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