Page:United States Statutes at Large Volume 98 Part 1.djvu/695

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 647

"(2) TRANSPORTATION BETWEEN UNITED STATES AND ANY POSSESSION.—

"(A) IN GENERAL.—50 percent of all transportation income attributable to transportation which— "(i) begins in the United States and ends in a possession of the United States, or "(ii) begins in a possession of the United States and ends in the United States, shall be treated as derived from sources within the United States.

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"(B) SPECIAL RULE FOR CERTAIN LESSORS OF AIRCRAFT.—If—

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"(i) the taxpayer owns an aircraft which is section 38 property and leases such aircraft to a United States person (other than a member of the same controlled fone group of corporations (as defined in section 1563) as the taxpayer), and "(ii) such United States person is a regularly scheduled air carrier, subparagraph (A) shall be applied by substituting '100 percent'for'50 percent'. "(3) TRANSPORTATION INCOME.—For purposes of this subsection, the term 'transportation income' means any income derived from, or in connection with— "(A) the use (or hiring or leasing for use) of a vessel or aircraft, or "(B) the performance of services directly related to the use of a vessel or aircraft. For purposes of the preceding sentence, the term 'vessel or aircraft' includes any container used in connection with a vessel or aircraft." (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply with respect to transportation beginning after the date of the enactment of this Act in taxable years ending after such date.

Post, p. 827.

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26 USC 863 note.

SEC. 125. TREATMENT OF CERTAIN DISTRIBUTIONS RECEIVED BY UNITED STATES-OWNED FOREIGN CORPORATIONS. (a) GENERAL RULE.—Section 535 (defining accumulated taxable 26 USC 535. income) is amended by adding at the end thereof the following new subsection: "(d) INCOME DISTRIBUTED TO UNITED STATES-OWNED FOREIGN CORPORATION RETAINS UNITED STATES CONNECTION.—

"(1) IN GENERAL.—For purposes of this part, if 10 percent or more of the earnings and profits of any foreign corporation for any taxable year— '"(A) is derived from sources within the United States, or ^ "(B) is effectively connected with the conduct of a trade or business within the United States, any distribution out of such earnings and profits (and any interest payment) received (directly or through 1 or more other entities) by a United States-owned foreign corporation shall be treated as derived by such corporation from sources within the United States. "(2) UNITED STATES-OWNED FOREIGN CORPORATION.—The term 'United States-owned foreign corporation' has the meaning given to such term by section 904(g)(6)." Ante, p. 638. (b) EFFECTIVE DATE.— 26 USC 535 note.

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