SEC. 163-Continued (c)..... (redesig nated, added) (d)(5). (added) Apr. 10, 1963, H.R. 1597, P.L. 88-9, § 1(a), 77 Stat. 6: "(c) REDEEMABLE GROUND RENTS.-For purposes of this sub- "The amendments made by subsection (a) of the first section of this Act [the above amendment] shall take effect as of January 1, 1962, and shall apply with respect to taxable years ending on or after such date . (Id., § 2, 77 Stat. 8.) - Apr. 10, 1963, H.R. 1597, P.L. 88-9, § 1(c), 77 Stat. 7: Amended subsection (d) of Sec. 163 (former subsection (c)" redesignated by P.L. 88-9, § 1(a)) by adding at the end thereof, after paragraph (4), the following new paragraph (5): "(5) For treatment of redeemable ground rents and real property held subject to liabilities under redeemable ground rents, see section 1055." Effective Date: April 11, 1963-the day after the date of enactment. (Id., § 2, 77 Stat. 8.) See "Effective Date" and "Applicability" of amendment adding new section 1055, p. 439 below. SEC. 164. TAXES (68A Stat. 47): (a), (b), (c). Feb. 26, 1964, H.R. 8363, P.L. 88-272, § 207(a), 78 Stat. 40-41: (in full) Amended subsections (a), (b), and (c) of Sec. 16445 to read as follows: "The original subsection (c) of section 163 read as follows (68A Stat. 46): "(1) For disallowance of certain amounts paid in connection with insurance, endowment, or annuity contracts, see section 264. "(2) For disallowance of deduction for interest relating to tax-exempt income, see section 265(2). "(3) For disallowance of deduction for carrying charges chargeable to capital account, see section 266. “(4) For disallowance of interest with respect to transactions between related taxpayers, see section 267.” 45 Subsections (a), (b), and (c) of section 164 originally read as follows (68A Stat. 47-48): "(a) GENERAL RULE.-Except as otherwise provided in this section, there shall be allowed as a deduction taxes paid or accrued within the taxable year. "(b) DEDUCTION DENIED IN CASE OF CERTAIN TAXES.-No deduction shall be allowed for the following taxes: "(1) Federal income taxes, including "(A) the tax imposed by section 3101 (relating to the tax on employees under the Federal Insurance Contributions Act); "(B) the taxes imposed by sections 3201 and 3211 (relating to the taxes on railroad employees and railroad employee representatives); and (C) the tax withheld at source on wages under section 3402, and corresponding provisions of prior revenue laws. "(2) Federal war profits and excess profits taxes. "(3) Federal import duties, and Federal excise and stamp taxes (not described in paragraph (1), (2), (4), or (5)); but this paragraph shall not prevent such duties and taxes from being deducted under section 162 (relating to trade or business expenses) or section 212 (relating to expenses for the production of income). "(4) Estate, inheritance, legacy, succession, and gift taxes. "(5) Taxes assessed against local benefits of a kind tending to increase the value of the property assessed; but this paragraph shall not prevent "(A) the deduction of so much of such taxes as is properly allocable to maintenance or interest charges; or [Footnote 45 continued on following page] SEC. 164-Continued (a), (b), (c) (revised 1964)-Continued "(a) GENERAL RULE.-Except as otherwise provided in this section, the following taxes shall be allowed as a deduction for the taxable year within which paid or accrued: "(1) State and local, and foreign, real property taxes. "(2) State and local personal property taxes. "(3) State and local, and foreign, income, war profits, and excess profits taxes. "(4) State and local general sales taxes. "(5) State and local taxes on the sale of gasoline, diesel fuel, and other motor fuels. In addition, there shall be allowed as a deduction State and local, and foreign, taxes not described in the preceding sentence which are paid or accrued within the taxable year in carrying on a trade or business or an activity described in section 212 (relating to expenses for production of income). "(b) DEFINITIONS AND SPECIAL RULES.-For purposes of this section "(1) PERSONAL PROPERTY TAXES.-The term 'personal property tax' means an ad valorem tax which is imposed on an annual basis in respect of personal property. Footnote 45-Continued "(2) GENERAL SALES TAXES. "(A) IN GENERAL.-The term 'general sales tax' means a tax imposed at one rate in respect of the sale at retail of a broad range of classes of items. "(B) SPECIAL RULES FOR FOOD, ETC.-In the case of items of food, clothing, medical supplies, and motor vehicles— "(i) the fact that the tax does not apply in respect of some or all of such items shall not be taken into account in determining whether the tax applies in respect of a broad range of classes of items, and "(ii) the fact that the rate of tax applicable in respect of some or all of such items is lower than the general rate of tax shall not be taken into account in determining whether the tax is imposed at one rate. "(B) the deduction of taxes levied by a special taxing district if— "(i) the district covers the whole of at least one county; "(ii) at least 1,000 persons are subject to the taxes levied by the district; and "(iii) the district levies its assessments annually at a uniform rate on the same assessed value of real property, including improvements, as is used for purposes of the real property tax generally. "(6) Income, war profits, and excess profits taxes imposed by the authority of any foreign country or possession of the United States, if the taxpayer chooses to take to any extent the benefits of section 901 (relating to the foreign tax credit). "(7) Taxes on real property, to the extent that subsection (d) requires such taxes to be treated as imposed on another taxpayer. "(c) CERTAIN RETAIL SALES TAXES AND GASOLINE TAXES. "(1) GENERAL RULE.-In the case of any State or local sales tax, if the amount of the tax is separately stated, then, to the extent that the amount so stated is paid by the consumer (otherwise than in connection with the consumer's trade or business) to his seller, such amount shall be allowed as a deduction to the consumer as if it constituted a tax imposed on, and paid by, such consumer. "(2) DEFINITION.-For purposes of paragraph (1), the term 'State or local sales tax' means a tax imposed by a State, a Territory, a possession of the United States, or a political subdivision of any of the foregoing, or by the District of Columbia, which tax "(A) is imposed on persons engaged in selling tangible personal property at retail (or on persons selling gasoline or other motor vehicle fuels at wholesale or retail) and is a stated sum per unit of property sold or is measured either by the gross sales price or by the gross receipts from the sale; or "(B) is imposed on persons engaged in furnishing services at retail and is measured by the gross receipts for furnishing such services." SEC 164-Continued (a), (b), (c) (revised 1964)-Continued (f) ... added) "(C) ITEMS TAXED AT DIFFERENT RATES.-Except in the case of a lower rate of tax applicable in respect of an item described in subparagraph (B), no deduction shall be allowed under this section for any general sales tax imposed in respect of an item at a rate other than the general rate of tax. "(D) COMPENSATING USE TAXES.-A compensating use tax in respect of an item shall be treated as a general sales tax. For purposes of the preceding sentence, the term 'compensating use tax' means, in respect, of any item, a tax which "(i) is imposed on the use, storage, or consumption of such item, and "(ii) is complementary to a general sales tax, but only if a deduction is allowable under subsection (a) (4) in respect of items sold at retail in the taxing jurisdiction which are similar to such item. "(3) STATE OR LOCAL TAXES.-A State or local tax includes only a tax imposed by a State, a possession of the United States, or a political subdivision of any of the foregoing, or by the District of Columbia. "(4) FOREIGN TAXES. A foreign tax includes only a tax imposed by the authority of a foreign country. "(5) SEPARATELY STATED GENERAL SALES TAXES AND GASOLINE TAXES.-If the amount of any general sales tax or of any tax on the sale of gasoline, diesel fuel, or other motor fuel is separately stated, then, to the extent that the amount so stated is paid by the consumer (otherwise than in connection with the consumer's trade or business) to his seller, such amount shall be treated as a tax imposed on, and paid by, such consumer. "(c) DEDUCTION DENIED IN CASE OF CERTAIN TAXES.-No deduction shall be allowed for the following taxes: "(1) Taxes assessed against local benefits of a kind tending to increase the value of the property assessed; but this paragraph shall not prevent the deduction of so much of such taxes as is properly allocable to maintenance or interest charges. (2) Taxes on real property, to the extent that subsection (d) requires such taxes to be treated as imposed on another taxpayer." Applicability: "(1) GENERAL RULE. Except as provided in paragraph (2), the amendments made by this section [including the above amendment to subsections (a), (b), and (c) of section 164] shall apply to taxable years beginning after December 31, 1963. "(2) SPECIAL TAXING DISTRICTS.-Section 164 (c)(1) of the Internal Revenue Code of 1954 (as amended by subsection (a)) shall not prevent the deduction under section 164 of such Code (as so amended) of taxes levied by a special taxing district which is described in section 164 (b) (5) of such Code (as in effect for a taxable year ending on December 31, 1963) and which was in existence on December 31, 1963, for the purpose of retiring indebtedness existing on such date." (Id., § 207 (c) (1), (2), 78 Stat. 43.) Sept. 2, 1958, H.R. 8381, P.L. 85-866, § 6(a), 72 Stat. 1608: Amended Sec. 164 (relating to deduction for taxes) by redesignating subsection (f) (cross reference) as subsection (g), and by inserting after subsection (e) (taxes of shareholder paid by corporation) the following new subsection: "(f) PAYMENTS FOR MUNICIPAL SERVICES IN ATOMIC ENERGY COMMUNITIES. For purposes of this section, amounts paid or ac SEC. 164-Continued (f) (added 1958)-Continued Do.... (in part) (g) SEC. 165. crued, to compensate the Atomic Energy Commission for municipaltype services, by any owner of real property within any community (within the meaning of section 21 b of the Atomic Energy Community Act of 1955) shall be treated as real property taxes paid or accrued. For purposes of this subsection, the term 'owner' includes a person who holds the real property under a leasehold of 40 or more years and a person who has entered into a contract to purchase under section 61 of the Atomic Energy Community Act of 1955. Subsection (d) of this section shall not apply to a sale by the United States of property with respect to which this subsection applies." Applicability: Taxable years beginning after December 31, 1957. (Id., § 6(b), 72 Stat. 1608.) Feb. 26, 1964, H.R. 8363, P.L. 88-272, § 207(b)(1), 78 Stat. 41: Taxable years beginning after December 31, 1963. (Id., § 207 (c) (1), 78 Stat. 43.) Feb. 26, 1964, H.R. 8363, P.L. 88-272, § 207(b) (2), 78 Stat. 42: "(g) CROSS REFERENCES. "(1) For provisions disallowing any deduction for the payment of the tax imposed by subchapter В of chapter 3 (relating to tax-free covenant bonds), see section 1451. "(2) For provisions disallowing any deduction for certain taxes, see section 275." Applicability: Taxable years beginning after December 31, 1963. LOSSES (68A Stat. 49-50): Feb. 26, 1964, H.R. 8363, P.L. 88-272, § 208(a), 78 Stat. 43: "(3) losses of property not connected with a trade or business, if such losses arise from fire, storm, shipwreck, or other casualty, or from theft. A loss described in this paragraph shall be allowed only to the extent that the amount of loss to such individual arising from each casualty, or from each theft, exceeds $100. For purposes of the $100 limitation of the preceding sentence, a husband and wife making a joint return under section 6013 for the taxable year in which the loss is allowed as a deduction shall be treated as one ** The original subsection (f) of section 164 read as follows (68A Stat. 49): "(f) CROSS REFERENCE. "For provisions disallowing any deduction for the payment of the tax imposed by subchapter B of chapter 3 (relating to tax-free covenant bonds) see section 1451(f).” Subsection (c) of section 165 originally read as follows (68A Stat. 49): "(c) LIMITATION ON LOSSES OF INDIVIDUALS.-In the case of an individual, the deduction under subsection (a) shall be limited to "(1) losses incurred in a trade or business; "(2) losses incurred in any transaction entered into for profit, though not connected with a trade or business; and "(3) losses of property not connected with a trade or business, if such losses arise from fire, storm, shipwreck, or other casualty, or from theft. No loss described in this paragraph shall be allowed if, at the time of the filing of the return, such loss has been claimed for estate tax purposes in the estate tax return." 60-448-67-7 SEC. 165-Continued (c) (3) (revised 1964)-Continued (g) (3) (B)... (correction) (h) (3), (4).. (added) (h) (5) (added) individual. No loss described in this paragraph shall be allowed if, at the time of filing the return, such loss has been claimed for estate tax purposes in the estate tax return." Applicability: Losses sustained after December 31, 1963, in taxable years ending after such date. (Id., § 208(b), 78 Stat. 43.) Sept. 2, 1958, H.R. 8381, P.L. 85-866, § 7, 72 Stat. 1608: 48 Amended subparagraph (B) of Sec. 165 (g) (3) 8 by striking out— "rental from" and inserting in lieu thereof "rental of". 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,) Sept. 2, 1958, H.R. 8381, P.L. 85–866, § 57(c) (1), 72 Stat. 1646: Amended Sec. 165 (h) 49 by adding at the end thereof, after paragraph (2), the following new paragraphs (3) and (4): "(3) For special rule for losses on stock in a small business investment company, see section 1242. "(4) For special rule for losses of a small business investment company, see section 1243." Applicability: Taxable years beginning after September 2, 1958-the date of enactment. (Id., § 57(d), 72 Stat. 1646). -- Sept. 2, 1958, H.R. 8381, P.L. 85-866, § 202(a), 72 Stat. 1676: Amended Sec. 165 (h) by adding at the end thereof, after the new paragraph (4) (as added by P.L. 85-866, § 57 (c) (1)) the following new paragraph (5): (5) For special rule for losses on small business stock, see section 1244.” Effective Date: September 2, 1958-the date of enactment. 48 Paragraph (3) of Section 165(g) (worthless securities) originally read as follows (68A Stat. 50) "(3) SECURITIES IN AFFILIATED CORPORATION.-For purposes of paragraph (1), any security: in a corporation affiliated with a taxpayer which is a domestic oroporation shall not be treated as a capital asset. For purposes of the preceding sentence, a corporation shall be treated as affiliated with the taxpayer only if "(A) At least 95 percent of each class of its stock is owned directly by the taxpayer, and "(B) more than 90 percent of the aggregate of its gross receipts for all taxable years has been from sources other than royalties, rents (except rents derived from rental from properties to employees of the corporation in the ordinary course of its operating business), dividends interest (except interest received on deferred purchase price of operating assets sold), annuities, and gains from sales or exchanges of stocks and securities. In computing gross receipts for purposes of the preceding sentence, gross receipts from sales or exchanges of stocks and securities shall be taken into account only to the extent of gains therefrom." 49 The original subsection (h) of section 165 read as follows (68A Stat. 50): "(h) CROSS REFERENCES. "(1) For special rule for banks with respect to worthless securities, see section 582. "(2) For disallowance of deduction for worthlessness of securities to which subsection (g) (2) (C) applies, if issued by a political party or similar organization, see section 271." It was successively redesignated as follows: As subsection (i), by P.L. 87-426, § 2(a), 76 Stat. 51. As subsection (j), by P.L. 88-272, § 238, 78 Stat. 128. |