SEC. 312-Continued (c)(3)—Continued Do.. Do (in part) (k).. (1) (added) Feb. 26, 1964, H.R. 8363, P.L. 88-272, § 231(b) (3), 78 Stat. 105: Amended Sec. 312(c) (3) (as amended by P.L. 87-834, § 13(f) (3)) by striking out "or under section 1245(a)" and inserting in lieu thereof "or under section 1245(a) or 1250 (a)". Applicability: Dispositions after December 31, 1963, in taxable years ending after such date. (Id., § 231(c), 78 Stat. 105.) Aug. 22, 1964, H.R. 7301, P.L. 88-484, § 1(b) (1), 78 Stat. 597: Amended Sec. 312(c) (3) (as amended by P.L. 87-834, § 13 (f) (3) and by P.L. 88-272, § 231(b) (3)) by striking out "section 311" and inserting in lieu thereof "section 311, under section 341 (f),". Applicability: Transactions after the date of enactment (August 22, 1964) in taxable years ending after such date. (Id., § 2, 78 Stat. 597.) Feb. 2, 1962, H.R. 8847, P.L. 87-403, § 3(a), 76 Stat. 6: Amended Sec. 312 (effect on earnings and profits) by inserting after subsection (j) (distribution of proceeds of loan insured by the United States) a new subsection (k), as follows: "(k) SPECIAL ADJUSTMENT ON DISPOSITION OF ANTITRUST STOCK RECEIVED AS A DIVIDEND.-If a corporation received antitrust stock (as defined in section 301 (f)) in a distribution to which section 301 applied, and the amount of the distribution determined under section 301 (f) (2) exceeded the basis of the stock determined under section 301(f) (3), then proper adjustment shall be made, under regulations prescribed by the Secretary or his delegate, to the earnings and profits of such corporation at the time such stock (or other property the basis of which is determined by reference to the basis of such stock) is disposed of by such corporation." Applicability: Only distributions made after February 2, 1962-the date of enactment. (Id., § 3(g), 76 Stat. 8.) Oct. 16, 1962, H.R. 10650, P.L. 87-834, § 14(b)(1), 76 Stat. 1040: Amended Sec. 312 (relating to effect on earnings and profits) by adding after subsection (k) (as added by P.L. 87-403, § 3(a)) the following new subsection: "(1) EARNINGS AND PROFITS OF FOREIGN INVESTMENT COM PANIES. "(1) ALLOCATION WITHIN AFFILIATED GROUP.-In the case of a sale or exchange of stock in a foreign investment company (as defined in section 1246(b)) by a United States person (as defined in section 7701(a)(30)), if such company is a member of an affiliated group, then the accumulated earnings and profits of all members of such affiliated group shall be allocated, under regulations prescribed by the Secretary or his delegate, in such manner as is proper to carry out the purposes of section 1246. "(2) AFFILIATED GROUP DEFINED. For purposes of paragraph (1) of this subsection, the term 'affiliated group' has the meaning SEC. 312-Continued (1) (added 1962)-Continued assigned to such term by section 1504(a); except that (A) 'more than 50 percent' shall be substituted for '80 percent or more', and (B) all corporations shall be treated as includible corporations (without regard to the provisions of section 1504(b)). "(3) PARTIAL LIQUIDATIONS AND REDEMPTIONS. "(A) IN GENERAL.-If a foreign investment company (as defined in section 1246) distributes amounts in partial liquidation or in a redemption to which section 302(a) or 303 applies, the part of such distribution which is properly chargeable to earnings and profits shall be an amount which is not in excess of the ratable share of the earnings and profits of the company accumulated after February 28, 1913, attributable to the stock so redeemed. "(B) EFFECTIVE DATE. Subparagraph (A) shall apply only with respect to distributions made after December 31, 1962." CH. 1, SUBCH. C, PART I, SUBPART C-DEFINITIONS; CON- "Sec. 316. Dividend defined. "Sec. 317. Other definitions. "Sec. 318. Constructive ownership of stock." This table has not been amended. SEC. 316. DIVIDEND DEFINED (68A Stat. 98-99): Mar. 13, 1956, H.R. 7201, P.L. 84-429, § 5(1), 70 Stat. 49: 88 "(1) CERTAIN INSURANCE COMPANY DIVIDENDS. The definition in subsection (a) shall not apply to the term 'dividend' as used in subchapter L in any case where the reference is to dividends of insurance companies paid to policyholders as such." Applicability: Only taxable years beginning after December 31, 1954. 88 Subsection (b) of section 316 originally read as follows (68A Stat. 99): "(b) SPECIAL RULES.— "(1) CERTAIN INSURANCE COMPANY DIVIDENDS.-The definition in subsection (a) shall not apply to the term 'dividend' as used in sections 803 (e), 821 (a) (2), 823 (2), and 832 (c) (11) (where the reference is to dividends of insurance companies paid to policyholders). "(2) DISTRIBUTIONS BY PERSONAL HOLDING COMPANIES.-In the case of a corporation which "(A) under the law applicable to the taxable year in which the distribution is made, is a personal holding company (as defined in section 542), or "(B) for the taxable year in respect of which the distribution is made under section 563 (b) (relating to dividends paid after the close of the taxable year), or section 547 (relating to deficiency dividends), or the corresponding provisions of prior law, is a personal holding company under the law applicable to such taxable year. the term 'dividend' also means any distribution of property (whether or not a dividend as defined in subsection (a)) made by the corporation to its shareholders, to the extent of its undistributed personal holding company income (determined under section 545 without regard to distributions under this paragraph) for such year." SEC. 316 (b) (2) (in full) Continued Feb. 26, 1964, H.R. 8363, P.L. 88-272, § 225(f) (1), 78 Stat. 87-88: "(i) under the law applicable to the taxable year in which the distribution is made, is a personal holding company (as defined in section 542), or "(ii) for the taxable year in respect of which the distribution is made under section 563(b) (relating to dividends paid after the close of the taxable year), or section 547 (relating to deficiency dividends), or the corresponding provisions of prior law, is a personal holding company under the law applicable to such taxable year, the term 'dividend' also means any distribution of property (whether or not a dividend as defined in subsection (a)) made by the corporation to its shareholders, to the extent of its undistributed personal holding company income (determined under section 545 without regard to distributions under this paragraph) for such year. (B) For purposes of subparagraph (A), the term distribution of property' includes a distribution in complete liquidation occurring within 24 months after the adoption of a plan of liquidation, but— (i) only to the extent of the amounts distributed to distributees other than corporate shareholders, and (ii) only to the extent that the corporation designates such amounts as a dividend distribution and duly notifies such distributees of such designation, under regulations prescribed by the Secretary or his delegate, but (iii) not in excess of the sum of such distributees' allocable share of the undistributed personal holding company income for such year, computed without regard to this subparagraph or section 562(b).” Applicability: Distributions made in any taxable year of the distributing corporation beginning after December 31, 1963. (Id., § 225(1)(3), 78 Stat. 94.) 89 For exception in the case of certain corporations, see n. 93, p. 170 below. Subsection (1) of section 225 of P.L. 88-272 provided as follows: "(1) EFFECTIVE DATES. "(1) The amendments made by this section (other than by subsections (c) (1), (f), (g), and (j)) shall apply to taxable years beginning after December 31, 1963. "(2) The amendment made by subsection (c) (1) shall apply to taxable years beginning after October 16, 1962. "(3) The amendments made by subsections (f) and (g) shall apply to distributions made in any taxable year of the distributing corporation beginning after December 31, 1963. "(4) The amendments made by subsection (j) shall apply in respect of decedents dying after December 31, 1963. "(5) Subsection (h) shall apply to taxable years beginning after December 31, 1963." The amendments made by the several subsections of section 225 of P.L. 88-272 were as follows: (a)-amended Code section 541. (b)-amended Code section 542(a)(1). (c) (1) amended Code section 542(c) (2). (2)—amended Code section 542(a) by striking out paragraphs (6)–(9), renumbering paragraphs (10) and (11) as (7) and (8), and inserting new paragraph (6). (3)-amended Code section 542 by adding new subsection (d). (d)-amended Code section 543(a) and (b) in full. (e)-amended Code sections 553 and 554 in full. [Footnote 89 continued on following page] SEC. 318. CONSTRUCTIVE OWNERSHIP OF STOCK (68A Stat. 99-101): (a). Aug. 31, 1964, H.R. 10467, P.L. 88-554, § 4(a), 78 Stat. 762-763: Amended Sec. 318(a) 90 by striking out paragraphs (2), (3), and (4) and inserting in lieu thereof the following new paragraphs (2), (2)-(5) added) (3), (4), and (5): Footnote 89—Continued (f) (1) amended Code section 316(b)(2) in full [the above amendment]. (2)-amended Code section 331(b). (3)-amended Code section 562(b) in full. (4)-amended Code section 551(b). (g)-amended Code section 333 by adding new subsection (g). (h)-provided for exceptions as to applicability of amendments made by section 225 of P.L. 88-272. See "Applicability" under amendment to Code section 333(g), and n. 89, p. - below. (i) (1)-amended Code section 545(a). (2)-amended Code section 545 by adding new subsection (c). (3)-amended Code section 381(c)(15) in full. (j) (1)—added new Code section 1022. (2)-amended Code section 1016(a) by adding new paragraph (21). (3) -amended table of sections for Part II of Subchapter O of Chapter 1. (k) (1)—amended Code section 542(b). (2)-amended Code section 543 by striking out subsection (d). (3)-amended Code section 544. (4)-amended Code section 856(a)(6). (5)-amended Code section 1361(i) in full. (6)-amended Code section 6501(f). (1)-provided effective dates, as indicated above. Each of the above amendments is set forth in its proper context. 90 Subsection (a) of section 318 originally read as follows (68A Stat. 99-101): "(a) GENERAL RULE.-For purposes of those provisions of this subchapter to which the rules contained in this section are expressly made applicable "(1) MEMBERS OF FAMILY. "(A) IN GENERAL.—An individual shall be considered as owning the stock owned, directly or indirectly, by or for "(i) his spouse (other than a spouse who is legally separated from the individual under a decree of divorce or separate maintenance), and (ii) his children, grandchildren, and parents. "(B) EFFECT OF ADOPTION.-For purposes of subparagraph (A)(ii), a legally adopted child of an individual shall be treated as a child of such individual by blood. "(2) PARTNERSHIPS, ESTATES, TRUSTS, AND CORPORATIONS. "(A) PARTNERSHIPS AND ESTATES.-Stock owned, directly or indirectly, by or for a partnership or estate shall be considered as being owned proportionately by its partners or beneficiaries. Stock owned, directly or indirectly, by or for a partner or a beneficiary of an estate shall be considered as being owned by the partnership or estate. "(B) TRUSTS.-Stock owned, directly or indirectly, by or for a trust shall be considered as being owned by its beneficiaries in proportion to the actuarial interest of such beneficiaries in such trust. Stock owned, directly or indirectly, by or for a beneficiary of a trust shall be considered as being owned by the trust, unless such beneficiary's interest in the trust is a remote contingent interest. For purposes of the preceding sentence, a contingent interest of a beneficiary in a trust shall be considered remote if, under the maximum exercise of discretion by the trustee in favor of such beneficiary, the value of such interest, computed actuarially, is 5 percent or less of the value of the trust property. Stock owned, directly or indirectly, by or for any portion of a trust of which a person is considered the owner under subpart E of part I of subchapter J (relating to grantors and others treated as substantial owners) shall be considered as being owned by such person; and such trust shall be treated as owning the stock owned, directly or indirectly, by or for that person. This subparagraph shall not apply with respect to any employees' trust described in section 401(a) which is exempt from tax under section 501(a). "(C) CORPORATIONS.-If 50 percent or more in value of the stock in a corporation is owned, directly or indirectly, by or for any person, then— "(i) such person shall be considered as owning the stock owned, directly or indirectly, by or for that corporation, in that proportion which the value of the stock which such person so owns bears to the value of all the stock in such corporation; and "(ii) such corporation shall be considered as owning the stock owned, directly or indirectly, by or for that person. [Footnote 90 continued on following page] SEC. 318-Continued (a) (amended 1964)—Continued "(2) ATTRIBUTION FROM PARTNERSHIPS, ESTATES, TRUSTS, AND CORPORATIONS. "(A) FROM PARTNERSHIPS AND ESTATES. Stock owned, directly or indirectly, by or for a partnership or estate shall be considered as owned proportionately by its partners or beneficiaries. "(B) FROM TRUSTS.— "(i) Stock owned, directly or indirectly, by or for a trust (other than an employees' trust described in section 401(a) which is exempt from tax under section 501 (a)) shall be considered as owned by its beneficiaries in proportion to the actuarial interest of such beneficiaries in such trust. "(ii) Stock owned, directly or indirectly, by or for any portion of a trust of which a person is considered the owner under subpart E of part I of subchapter J (relating to grantors and others treated as substantial owners) shall be considered as owned by such person. "(C) FROM CORPORATIONS.-If 50 percent or more in value of the stock in a corporation is owned, directly or indirectly, by or for any person, such person shall be considered as owning the stock owned, directly or indirectly, by or for such corporation, in that proportion which the value of the stock which such person so owns bears to the value of all stock in such corporation. "(3) ATTRIBUTION TO PARTNERSHIPS, ESTATES, TRUSTS, and cor PORATIONS. "(A) TO PARTNERSHIPS AND ESTATES.-Stock owned, directly or indirectly, by or for a partner or a beneficiary of an estate shall be considered as owned by the partnership or estate. "(B) TO TRUSTS. Footnote 90-Continued "(i) Stock owned, directly or indirectly, by or for a beneficiary of a trust (other than an employees' trust described in section 401 (a) which is exempt from tax under section 501 (a)) shall be considered as owned by the trust, unless such beneficiary's interest in the trust is a remote contingent interest. For purposes of this clause, a contingent interest of a beneficiary in a trust shall be considered remote if, under the maximum exercise of discretion by the trustee in favor of such beneficiary, the value of such interest, computed actuarially, is 5 percent or less of the value of the trust property. "(ii) Stock owned, directly or indirectly, by or for a person who is considered the owner of any portion of a trust under subpart E of part I of subchapter J (relating to grantors and "(3) OPTIONS.-If any person has an option to acquire stock, such stock shall be considered as owned by such person. For purposes of this paragraph, an option to acquire such an option, and each one of a series of such options, shall be considered as an option to acquire such stock. "(4) CONSTRUCTIVE OWNERSHIP AS ACTUAL OWNERSHIP.— "(A) IN GENERAL.-Except as provided in subparagraph (B), stock constructively owned by a person by reason of the application of paragraph (1), (2), or (3) shall, for purposes of applying paragraph (1), (2), or (3), be treated as actually owned by such person. (B) MEMBERS OF FAMILY.-Stock constructively owned by an individual by reason of the application of paragraph (1) shall not be treated as owned by him for purposes of again applying paragraph (1) in order to make another the constructive owner of such stock. (C) OPTION RULE IN LIEU OF FAMILY RULE. For purposes of this paragraph, if stock may be considered as owned by an individual under paragraph (1) or (3), it shall be considered as owned by him under paragraph (3).” |