Page:United States Statutes at Large Volume 98 Part 1.djvu/622

 98 STAT. 574

PUBLIC LAW 98-369—JULY 18, 1984 "(6) APPLICATION OF THIS SUBSECTION WITH SUBSECTION (g).—

In the case of any short sale, this subsection shall be applied before subsection (g)." (b) INVESTMENT INTEREST TO INCLUDE CERTAIN EXPENSES INVOLV-

26 USC 163.

iNG SHORT SALES.—Subparagraph (D) of section 163(d)(3) (defining investment interest) is amended to read as follows: "(D) INVESTMENT INTEREST.— "(i) IN GENERAL.—The term 'investment interest' means interest paid or accrued on indebtedness incurred or continued to purchase or carry property held for investment. "(ii) CERTAIN EXPENSES INCURRED IN CONNECTION

26 USC 265.

WITH SHORT SALES.—For purposes of clause (i), the term 'interest' includes any amount allowable as a deduction in connection with personal property used in a short sale." (c) APPLICATION OF SECTION 265(2) TO SHORT SALES.—Section 265 (relating to denial of deduction of interest relating to tax-exempt income) is amended by adding at the end thereof the following new paragraph: "(5) SPECIAL RULES FOR APPLICATION OF PARAGRAPH (2) IN THE

CASE OF SHORT SALES.—For purposes of paragraph (2)—

"(A) IN GENERAL.—The term 'interest' includes any amount paid or incurred— "(i) by any person making a short sale in connection with personal property used in such short sale, or "(ii) by any other person for the use of any collateral with respect to such short sale.

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"(B) EXCEPTION WHERE NO RETURN ON CASH COLLATERAL.—

If— "(i) the taxpayer provides cash as collateral for any short sale, and "(ii) the taxpayer receives no material earnings on such cash during the period of the sale, subparagraph (A)(i) shall not apply to such short sale." 26 USC 163 note. (d) EFFECTIVE DATE.—The amendments made by this section shall apply to short sales after the date of the enactment of this Act in taxable years ending after such date.

26 USC 1032.

26 USC 1032 ^°^^-

26 USC 532.

SEC. 57. NONRECOGNITION OF GAIN OR LOSS BY CORPORATION ON OPTIONS WITH RESPECT TO ITS STOCK. (a) GENERAL RULE.—Subsection (a) of section 1032 (relating to exchange of stock of property) is amended by adding at the end thereof the following new sentence: "No gain or loss shall be recognized by a corporation with respect to any lapse or acquisition of an option to buy or sell its stock (including treasury stock)." (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to options acquired or lapsed after the date of the enactment of this Act in taxable years ending after such date. SEC. 58. AMENDMENTS TO ACCUMULATED EARNINGS TAX. (a) CLARIFICATION THAT TAX APPLIES TO CORPORATIONS WHICH ARE NOT CLOSELY HELD.—Section 532 (relating to corporations subject to

accumulated earnings tax) is amended by adding at the end thereof the following new subsection: "(c) APPLICATION DETERMINED WITHOUT REGARD TO NUMBER OF

SHAREHOLDERS.—The application of this part to a corporation shall

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