Page:United States Statutes at Large Volume 98 Part 1.djvu/623

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 575

be determined without regard to the number of shareholders of such corporation." (b) TREATMENT OF CAPITAL GAINS AND LOSSES.—Subsection (b) of

section 535 (defining accumulated taxable income) is amended by striking out paragraphs (5), (6), and (7) and inserting in lieu thereof the following:

26 USC 535.

"(5) CAPITAL LOSSES.—

"(A) IN GENERAL.—Except as provided in subparagraph (B), there shall be allowed as a deduction an amount equal to the net capital loss for the taxable year (determined without regard to paragraph (7)(A)).

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"(B) RECAPTURE OF PREVIOUS DEDUCTIONS FOR CAPITAL

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GAINS.—The aggregate amount allowable as a deduction under subparagraph (A) for any taxable year shall be reduced by the lesser of— "(i) the nonrecaptured capital gains deductions, or "(ii) the amount of the accumulated earnings and profits of the corporation as of the close of the preceding taxable year. "(C)

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NONRECAPTURED CAPITAL GAINS DEDUCTIONS.—For

purposes of subparagraph (B), the term 'nonrecaptured capital gains deductions' means the excess of— "(i) the aggregate amount allowable as a deduction under paragraph (6) for preceding taxable years beginning after the date of the enactment of the Tax Reform ' ' Act of 1984, over >irate, p. 494. "(ii) the aggregate of the reductions under subparagraph (B) for preceding taxable years.

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"(6) NET CAPITAL GAINS.—

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"(A) IN GENERAL.—There shall be allowed as a deduction— "(i) the net capital gain for the taxable year (determined with the application of paragraph (7)), reduced by '(ii) the taxes attributable to such net capital gain.

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"(B) ATTRIBUTABLE TAXES.—For purposes of subparagraph

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(A), the taxes attributable to the net capital gain shall be an amount equal to the difference between— "(i) the taxes imposed by this subtitle (except the tax imposed by this part) for the taxable year, and tc.:,;.',, "(ii) such taxes computed for such year without including in taxable income the net capital gain for the taxable year (determined without the application of I paragraph (7)). "(7) CAPITAL LOSS CARRYOVERS.— "(A) UNLIMITED CARRYFORWARD.—The net capital loss for

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any taxable year shall be treated as a short-term capital loss in the next taxable year. "(B) SECTION 1212 INAPPLICABLE.—No allowance shall be made for the capital loss carryback or carryforward provided in section 1212. "(8) SPECIAL RULES FOR MERE HOLDING OR INVESTMENT COMPA-

NIES.—In the case of a mere holding or investment company— "(A) CAPITAL LOSS DEDUCTION, ETC., NOT ALLOWED.—Para-

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graphs (5) and (7)(A) shall not apply. "(B) DEDUCTION FOR CERTAIN OFFSETS.—There shall be allowed as a deduction the net short-term capital gain for

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