SEC. 554. STOCK OWNERSHIP (Revised 1964-78 Stat. 86-87): "SEC. 554. STOCK OWNERSHIP. "(a) CONSTRUCTIVE OWNERSHIP.-For purposes of determining whether a corporation is a foreign personal holding company, insofar as such determination is based on stock ownership under section 552(a)(2), section 553 (a) (5), or section 553 (a) (6)— "(1) STOCK NOT OWNED BY INDIVIDUAL. Stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust shall be considered as being owned proportionately by its shareholders, partners, or beneficiaries. "(2) FAMILY AND PARTNERSHIP OWNERSHIP.-An individual shall be considered as owning the stock owned, directly or indirectly, by or for his family or by or for his partner. For purposes of this paragraph, the family of an individual includes only his brothers and sisters (whether by the whole or half blood), spouse, ancestors, and lineal descendants. "(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) APPLICATION OF FAMILY-PARTNERSHIP AND OPTION RULES.Paragraphs (2) and (3) shall be applied "(A) for purposes of the stock ownership requirement provided in section 552 (a) (2), if, but only if, the effect is to make the corporation a foreign personal holding company; "(B) for purposes of section 553 (a) (5) (relating to personal service contracts) or of section 553 (a) (6) (relating to the use of property by shareholders), if, but only if, the effect is to make the amounts therein referred to includible under such paragraph as foreign personal holding company income. "(5) CONSTRUCTIVE OWNERSHIP AS ACTUAL OWNERSHIP.-Stock constructively owned by a person by reason of the application of paragraph (1) or (3) shall, for purposes of applying paragraph (1) or (2), be treated as actually owned by such person; but stock constructively owned by an individual by reason of the application of paragraph (2) shall not be treated as owned by him for purposes of again applying such paragraph in order to make another the constructive owner of such stock. "(6) OPTION RULE IN LIEU OF FAMILY AND PARTNERSHIP RULE.— If stock may be considered as owned by an individual under either paragraph (2) or (3) it shall be considered as owned by him under paragraph (3). "(b) CONVERTIBLE SECURITIES.-Outstanding securities convertible into stock (whether or not convertible during the taxable year) shall be considered as outstanding stock "(1) for purposes of the stock ownership requirement provided in section 552(a)(2), but only if the effect of the inclusion of all 13 Section 554 originally read as follows (68A Stat. 196): "SEC. 554. STOCK OWNERSHIP. "For purposes of determining whether a foreign corporation is a foreign personal holding company, insofar as such determination is based on stock ownership, the rules provided in section 544 shall be applicable as if any reference in such section to a personal holding company was a reference to a foreign personal holding company and as if any reference in such section to a provision of Part II (relating to personal holding companies) was a reference to the corresponding provision of this part." SEC. 554 (revised 1964)-Continued such securities is to make the corporation a foreign personal holding company; "(2) for purposes of section 553(a) (5) (relating to personal service contracts), but only if the effect of the inclusion of all such securities is to make the amounts therein referred to includible under such paragraph as foreign personal holding company income; and "(3) for purposes of section 553 (a) (6) (relating to the use of property by shareholders), but only if the effect of the inclusion of all such securities is to make the amounts therein referred to includible under such paragraph as foreign personal holding company income. The requirement in paragraphs (1), (2), and (3) that all convertible securities must be included if any are to be included shall be subject to the exception that, where some of the outstanding securities are convertible only after a later date than in the case of others, the class having the earlier conversion date may be included although the others are not included, but no convertible securities shall be included unless all outstanding securities having a prior conversion date are also included." SEC. 556. UNDISTRIBUTED FOREIGN PERSONAL HOLDING COMPANY INCOME (68A Stat. 196-198): (b) (1) Feb. 26, 1964, H.R. 8363, P.L. 88-272, § 207(b)(6), 78 Stat. 42: Amended the first sentence of paragraph (1) 164 of Sec. 556 (b) relating to adjustments to taxable income for purposes of undistributed foreign personal holding company income) by striking out 164 Paragraph (1) of section 556(b) originally read as follows (68A Stat. 197): "(1) TAXES.-There shall be allowed as a deduction Federal income and excess profits taxes (other than the excess profits tax imposed by subchapter E of chapter 2 of the Internal Revenue Code of 1939 for taxable years beginning after December 31, 1940) and income, war profits, and excess-profits taxes of foreign countries and possessions of the United States (to the extent not allowable as a deduction under section 164 (b)(6)), accrued during the taxable year, but not including the accumulated earnings tax imposed by section 531, the personal holding company tax imposed by section 541, or the taxes imposed by corresponding sections of a prior income tax law. A taxpayer which, for each taxable year in which it was subject to the provisions of supplement P of the Internal Revenue Code of 1939, deducted Federal income and excess profits taxes when paid for the purpose of computing undistributed supplement P net income under such code, shall deduct taxes under this paragraph when paid, unless the corporation elects, under regulations prescribed by the Secretary or his delegate, after the date of enactment of this title to deduct the taxes described in this paragraph when accrued. Such election shall be irrevocable and shall apply to the taxable year for which the election is made and to all subsequent taxable years." SEC. 556-Continued (b) (2)__ (in part) Do... (in part) (b) (3) Sept. 2, 1958, H.R. 8381, P.L. 85-866, § 33(a)(1), (2), 72 Stat. 1632: (1) by amending the first sentence to read as follows: (2) by striking out in the second sentence "the taxable income computed with the adjustments provided in section 170(b)(2)” and inserting in lieu thereof "the taxable income computed with the adjustments (other than the 5-percent limitation) provided in the first sentence of section 170(b) (2)". Applicability: Taxable years beginning after December 31, 1953, and ending after August 16, 1954. (Id., § 1(c)(1), 72 Stat. 1606. See n. 36, p. 79 above.) Feb. 26, 1964, H.R. 8363, P.L. 88-272, § 209 (c) (2), 78 Stat. 46: Amended Sec. 556 (b) (2) (as amended by P.L. 85-866, § 33(a)) by striking out "section 170 (b)(2)” and inserting in lieu thereof "section 170(b) (2) and (5)". Applicability: Contributions which are paid in taxable years beginning after December 31, 1963. (Id., § 209 (f) (1), 78 Stat. 47.) Sept. 2, 1958, H.R. 8381, P.L. 85-866, § 33(b) (1), 72 Stat. 1632: Amended Sec. 556 (b) (3) 166 (special deductions disallowed) by striking out 165 Paragraph (2) of section 556(b) originally read as follows (68A Stat. 197): "(2) CHARITABLE CONTRIBUTIONS.-The deduction for charitable contributions provided under section 170 shall be allowed, but with the limitation in section 170(b)(1)(A) and (B) (in lieu of the limitation in section 170(b)(2)). For purposes of this paragraph, the term 'adjusted gross income' when used in section 170(b) (1) means the taxable income computed with the adjustments provided in section 170(b)(2) and without the deduction of the amounts disallowed under paragraphs (5) and (6) of this subsection or the inclusion in gross income of the amounts includible therein as dividends by reason of the application of the provisions of section 555 (b) (relating to the inclusion in gross income of a foreign personal holding company of its distributive share of the undistributed foreign personal holding company income of another company in which it is a shareholder).” 166 Paragraph (3) of section 556(b) originally read as follows (68A Stat. 197): "(3) SPECIAL DEDUCTIONS DISALLOWED.-The special deductions for corporations provided in part VIII (except sections 242 and 248) of subchapter B (section 241 and following, relating to the deduction for dividends received by corporations, etc.) shall not be allowed." SEC. 556-Continued (b) (4) . (b)(7), (8)....... (added) Sept. 2, 1958, H.R. 8381, P.L. 85-866, § 33(c) (1), 72 Stat. 1632: Amended Sec. 556 (b) (4) 167 (net operating income) by inserting before the period at the end "computed without the deductions provided in part VIII (except section 248) of subchapter B". Applicability: Adjustments under Sec. 556(b) (4) for taxable years ending after December 31, 1957. (Id., § 33(c) (2), 72 Stat. 1632.) Feb. 2, 1962, H.R. 8847, P.L. 87-403, § 3(e), 76 Stat. 7: Amended Sec. 556(b) (undistributed foreign personal holding company income, adjustments to taxable income as amended by P.L. 85-866, § 33(a) (1) and (2), (b)(1), (c) (1)) by inserting after paragraph (6) (taxes and contributions to pension trusts) two new paragraphs, as follows: "(7) DISTRIBUTIONS OF DIVESTED STOCK.-There shall be allowed as a deduction the amount of any income attributable to the receipt of a distribution of divested stock (as defined in subsection (e) of section 1111), minus the taxes imposed by this subtitle attributable to such receipt, but only if the stock with respect to which the distribution is made was owned by the distributee on September 6, 1961, or was owned by the distributee for at least 2 years prior to the date on which the antitrust order (as defined in subsection (d) of section 1111) was entered. "(8) SPECIAL ADJUSTMENT ON DISPOSITION OF ANTITRUST STOCK RECEIVED AS A DIVIDEND.-If "(A) a corporation received antitrust stock (as defined in section 301 (f)) in a distribution to which section 301 applied, "(B) the amount of the distribution determined under section 301(f) (2) exceeded the basis of the stock determined under section 301 (f) (3), and "(C) paragraph (7) did not apply in respect of such distribution, then proper adjustment shall be made, under regulations prescribed by the Secretary or his delegate, if such stock (or other property the basis of which is determined by reference to the basis of such stock) is sold or exchanged." Applicability: Only distributions made after February 2, 1962---the date of enact ment. (Id., § 3(g), 76 Stat. 8.) SEC. 558. RETURNS OF OFFICERS, DIRECTORS, AND SHAREHOLDERS OF FOREIGN PERSONAL HOLDING COMPANIES (Added 1958-72 Stat. 1632): Added... Sept. 2, 1958, H.R. 8381, P.L. 85–866, § 33(d) (1), 72 Stat. 1632: Amended Part III (foreign personal holding companies) of Subchapter G (corporations used to avoid income tax on shareholders) of 167 Paragraph (4) of section 556(b) originally read as follows (68A Stat. 197): "(4) NET OPERATING LOSS.-The net operating loss deduction provided in section 172 shall not be allowed, but there shall be allowed as a deduction the amount of the net operating loss (as defined in section 172(c)) for the preceding taxable year." SEC. 558 (added 1958)—Continued Chapter 1 by inserting after section 557 (income not placed on annual basis) a new section 558, as follows: "SEC. 558. RETURNS OF OFFICERS, DIRECTORS, AND SHAREHOLDERS OF FOREIGN PERSONAL HOLDING COMPANIES. "For provisions relating to returns of officers, directors, and shareholders of foreign personal holding companies, see section 6035." Applicability: Taxable years beginning after December 31, 1953, and ending after after August 16, 1954. (Id., § 1(c)(1), 72 Stat. 1606. See n. 36, p. 79 above.) CH. 1, SUBCH. G, PART IV DEDUCTION FOR DIVIDENDS PAID (68A Stat. 198–201): NOTE: The table of sections for Part IV of Subchapter G of Chapter 1 reads as follows (68A Stat. 198): "Sec. 561. Definition of deduction for dividends paid. "Sec. 562. Rules applicable in determining dividends eligible for dividends paid deduction. "Sec. 563. Rules relating to dividends paid after close of taxable year. "Sec. 564. Dividend carryover. "Sec. 565. Consent dividends." This table has not been amended. SEC. 561. DEFINITION OF DEDUCTION FOR DIVIDENDS PAID (68A Stat. 198): (b).. (in full) Feb. 2, 1962, H.R. 8847, P. L. 87-403, §3(f), 76 Stat. 8: Amended Sec. 561 (b) 188 (special rules applicable to definition of deduction for dividends paid), to read as follows: "(b) SPECIAL RULES APPLICABLE (1) In determining the deduction for dividends paid, the rules provided in section 562 (relating to rules applicable in determining dividends eligible for dividends paid deduction) and section 563 (relating to dividends paid after the close of the taxable year) shall be applicable. "(2) If a coporation received antitrust stock (as defined in section 301 (f)) in a distribution to which section 301 applied and such corporation distributes such stock (or other property the basis of which is determined by reference to the basis of such stock) to its shareholders, proper adjustment shall be made, under regulations prescribed by the Secretary or his delegate, to the amount of the deduction provided for in subsection (a).' Applicability: Only distributions made after February 2, 1962-the date of enact ment. (Id., §3(g), 76 Stat. 8.) 168 Subsection (b) of section 561 originally read as follows (68A Stat. 198): "(b) SPECIAL RULES APPLICABLE.-In determining the deduction for dividends paid, the rules provided in section 562 (relating to rules applicable in determining dividends eligible for dividends paid'deduction) and section 563 (relating to dividends paid after the close of the taxable year) shall be applicable.' |