r/title-26-INTERNAL-REVENUE-CODE wiki — defined terms

“United States shareholder” applies throughout this title

the term “United States shareholder” means, with respect to any foreign corporation, a United States person (as defined in section 957(c)) who owns (within the meaning of section 958(a)), or is considered as owning by applying the rules of ownership of section 958(b), 10 percent or more of the total combined voting power of all classes of stock entitled to vote of such foreign corporation, or 10 percent or more of the total value of shares of all classes of stock of such foreign corporation.

“net CFC tested income” applies in that section

The term “net CFC tested income” means, with respect to any United States shareholder for any taxable year of such United States shareholder, the excess (if any) of— (A) the aggregate of such shareholder’s pro rata share of the tested income of each controlled foreign corporation with respect to which such shareholder is a United States shareholder for such taxable year of such United States shareholder, over (B) the aggregate of such shareholder’s pro rata share of the tested loss of each controlled foreign corporation with respect to which such shareholder is a United States shareholder for such taxable year of such United States shareholder.

“tested income” applies in that section

The term “tested income” means, with respect to any controlled foreign corporation for any taxable year of such controlled foreign corporation, the excess (if any) of— (i) the gross income of such corporation determined without regard to— (I) any item of income described in section 952(b), (II) any gross income taken into account in determining the subpart F income of such corporation, (III) any gross income excluded from the foreign base company income (as defined in section 954) and the insurance income (as defined in section 953) of such corporation by reason of section 954(b)(4), (IV) any dividend received from a related person (as defined in section 954(d)(3)), and (V) any foreign oil …

“tested loss” applies in that section

The term “tested loss” means, with respect to any controlled foreign corporation for any taxable year of such controlled foreign corporation, the excess (if any) of the amount described in subparagraph (A)(ii) over the amount described in subparagraph (A)(i). (ii) Coordination with subpart F to deny double benefit of losses Section 952(c)(1)(A) shall be applied by increasing the earnings and profits of the controlled foreign corporation by the tested loss of such corporation. (c) Determination of pro rata share, etc.

“foreign controlled foreign corporation” applies in that section

the term “foreign controlled foreign corporation” means a foreign corporation, other than a controlled foreign corporation, which would be a controlled foreign corporation if section 957(a) were applied— (1) by substituting “foreign controlled United States shareholders” for “United States shareholders”, and (2) by substituting “section 958(b) (other than paragraph (4) thereof)” for “section 958(b)”.

“foreign controlled United States shareholder” applies in that section

the term “foreign controlled United States shareholder” means, with respect to any foreign corporation, any United States person which would be a United States shareholder with respect to such foreign corporation if— (1) section 951(b) were applied by substituting “more than 50 percent” for “10 percent or more”, and (2) section 958(b) were applied without regard to paragraph (4) thereof. (c) Foreign controlled foreign corporation For purposes of this section,

“qualified activity” applies in that section

the term “qualified activity” means any activity giving rise to— (I) foreign base company sales income, (II) foreign base company services income, (III) in the case of a qualified insurance company, insurance income or foreign personal holding company income, or (IV) in the case of a qualified financial institution, foreign personal holding company income.

“qualified chain member” applies throughout this title

the term “qualified chain member” means, with respect to any controlled foreign corporation, any other corporation which is created or organized under the laws of the same foreign country as the controlled foreign corporation but only if— (I) all the stock of such other corporation (other than directors’ qualifying shares) is owned at all times during the taxable year in which the deficit arose (directly or through 1 or more corporations other than the common parent) by such controlled foreign corporation, or (II) all the stock of such controlled foreign corporation (other than directors’ qualifying shares) is owned at all times during the taxable year in which the deficit arose (directly …

“qualified deficit” applies in that section

The term “qualified deficit” means any deficit in earnings and profits of the controlled foreign corporation for any prior taxable year which began after December 31, 1986 , and for which the controlled foreign corporation was a controlled foreign corporation; but only to the extent such deficit— (I) is attributable to the same qualified activity as the activity giving rise to the income being offset, and (II) has not previously been taken into account under this subparagraph.

“qualified financial institution” applies in that section

the term “qualified financial institution” means any controlled foreign corporation predominantly engaged in the active conduct of a banking, financing, or similar business in the taxable year and in the prior taxable year in which the deficit arose. (vii) Special rules for insurance income (I) In general An election may be made under this clause to have section 953(a) applied for purposes of this title without regard to the same country exception under paragraph (1)(A) thereof. Such election, once made, may be revoked only with the consent of the Secretary.

“qualified insurance company” applies in that section

the term “qualified insurance company” means any controlled foreign corporation predominantly engaged in the active conduct of an insurance business in the taxable year and in the prior taxable years in which the deficit arose. (vi) Qualified financial institution For purposes of this paragraph,

“subpart F income” applies throughout its subpart

the term “subpart F income” means, in the case of any controlled foreign corporation, the sum of— (1) insurance income (as defined under section 953), (2) the foreign base company income (as determined under section 954), (3) an amount equal to the product of— (A) the income of such corporation other than income which— (i) is attributable to earnings and profits of the foreign corporation included in the gross income of a United States person under section 951 (other than by reason of this paragraph), or (ii) is described in subsection (b), multiplied by (B) the international boycott factor (as determined under section 999), (4) the sum of the amounts of any illegal bribes, kickbacks, or …

“applicable home country risks” applies in that section

The term “applicable home country risks” means risks in connection with property in, liability arising out of activity in, or the lives or health of residents of, the home country of the qualifying insurance company or qualifying insurance company branch, as the case may be, issuing or reinsuring the contract covering the risks.

“controlled foreign corporation” applies in that section

the term “controlled foreign corporation” has the meaning given to such term by section 957(a) determined by substituting “25 percent or more” for “more than 50 percent”, and (C) the pro rata share referred to in section 951(a)(1)(A) shall be determined under paragraph (5) of this subsection. (2) Related person insurance income For purposes of this subsection,

“disqualified corporation” applies in that section

the term “disqualified corporation” means, with respect to any taxable year, any foreign corporation which is a controlled foreign corporation for an uninterrupted period of 30 days or more during such taxable year (determined without regard to this subsection) but only if a United States shareholder (determined without regard to this subsection) owns (within the meaning of section 958(a)) stock in such corporation at some time during such taxable year.

“exempt contract” applies in that section

The term “exempt contract” means an insurance or annuity contract issued or reinsured by a qualifying insurance company or qualifying insurance company branch in connection with property in, liability arising out of activity in, or the lives or health of residents of, a country other than the United States.

“exempt insurance income” applies in that section

The term “exempt insurance income” means income derived by a qualifying insurance company which— (i) is attributable to the issuing (or reinsuring) of an exempt contract by such company or a qualifying insurance company branch of such company, and (ii) is treated as earned by such company or branch in its home country for purposes of such country’s tax laws.

“home country” applies in that section

The term “home country” means, with respect to a controlled foreign corporation, the country in which such corporation is created or organized. (B) Qualified business unit

“insurance income” applies in that section

the term “insurance income” means any income which— (A) is attributable to the issuing (or reinsuring) of an insurance or annuity contract, and (B) would (subject to the modifications provided by subsection (b)) be taxed under subchapter L of this chapter if such income were the income of a domestic insurance company. (2) Exception Such term shall not include any exempt insurance income (as defined in subsection (e)). (b) Special rules For purposes of subsection (a)— (1) The following provisions of subchapter L shall not apply: (A) So much of section 805(a)(8) as relates to the deduction allowed under section 172. (B) Section 832(c)(5) (relating to certain capital losses).

“qualifying insurance company” applies in that section

The term “qualifying insurance company” means any controlled foreign corporation which— (A) is subject to regulation as an insurance (or reinsurance) company by its home country, and is licensed, authorized, or regulated by the applicable insurance regulatory body for its home country to sell insurance, reinsurance, or annuity contracts to persons other than related persons (within the meaning of section 954(d)(3)) in such home country, (B) derives more than 50 percent of its aggregate net written premiums from the issuance or reinsurance by such controlled foreign corporation and each of its qualifying insurance company branches of contracts— (i) covering applicable home country risks (as …

“qualifying insurance company branch” applies in that section

The term “qualifying insurance company branch” means a qualified business unit (within the meaning of section 989(a)) of a controlled foreign corporation if— (A) such unit is licensed, authorized, or regulated by the applicable insurance regulatory body for its home country to sell insurance, reinsurance, or annuity contracts to persons other than related persons (within the meaning of section 954(d)(3)) in such home country, and (B) such controlled foreign corporation is a qualifying insurance company, determined under paragraph (3) as if such unit were a qualifying insurance company branch.

“related person” applies in that section

the term “related person” has the meaning given such term by section 954(d)(3). (B) Treatment of certain liability insurance policies In the case of any policy of insurance covering liability arising from services performed as a director, officer, or employee of a corporation or as a partner or employee of a partnership, the person performing such services and the entity for which such services are performed shall be treated as related persons.

“related person insurance income” applies in that section

the term “related person insurance income” means any insurance income (within the meaning of subsection (a)) attributable to a policy of insurance or reinsurance with respect to which the person (directly or indirectly) insured is a United States shareholder in the foreign corporation or a related person to such a shareholder.

“United States shareholder” applies in that section

the term “United States shareholder” means, with respect to any foreign corporation, a United States person (as defined in section 957(c)) who owns (within the meaning of section 958(a)) any stock of the foreign corporation;

“25-percent owner” applies in that section

the term “25-percent owner” means a controlled foreign corporation which owns directly 25 percent or more of the capital or profits interest in a partnership. For purposes of the preceding sentence, if a controlled foreign corporation is a shareholder or partner of a corporation or partnership, the controlled foreign corporation shall be treated as owning directly its proportionate share of any such capital or profits interest held directly or indirectly by such corporation or partnership.

“commodity hedging transaction” applies in that section

the term “commodity hedging transaction” means any transaction with respect to a commodity if such transaction— (i) is a hedging transaction as defined in section 1221(b)(2), determined— (I) without regard to subparagraph (A)(ii) thereof, (II) by applying subparagraph (A)(i) thereof by substituting “ordinary property or property described in section 1231(b)” for “ordinary property”, and (III) by substituting “controlled foreign corporation” for “taxpayer” each place it appears, and (ii) is clearly identified as such in accordance with section 1221(a)(7).

“customer” applies in that section

The term “customer” means, with respect to any controlled foreign corporation or qualified business unit, any person which has a customer relationship with such corporation or unit and which is acting in its capacity as such. (B) Home country Except as provided in regulations— (i) Controlled foreign corporation

“eligible controlled foreign corporation” applies in that section

The term “eligible controlled foreign corporation” means a controlled foreign corporation which— (i) is predominantly engaged in the active conduct of a banking, financing, or similar business, and (ii) conducts substantial activity with respect to such business.

“foreign base company income” applies in that section

the term “foreign base company income” means for any taxable year the sum of— (1) the foreign personal holding company income for the taxable year (determined under subsection (c) and reduced as provided in subsection (b)(5)), (2) the foreign base company sales income for the taxable year (determined under subsection (d) and reduced as provided in subsection (b)(5)), and (3) the foreign base company services income for the taxable year (determined under subsection (e) and reduced as provided in subsection (b)(5)). (b) Exclusion and special rules [(1) Repealed. Pub. L. 94–12, title VI, § 602(c)(1) , Mar. 29, 1975 , 89 Stat. 58 ] [(2) Repealed. Pub. L. 99–514, title XII, § 1221(c)(1) , Oct.

“foreign base company sales income” applies in that section

the term “foreign base company sales income” means income (whether in the form of profits, commissions, fees, or otherwise) derived in connection with the purchase of personal property from a related person and its sale to any person, the sale of personal property to any person on behalf of a related person, the purchase of personal property from any person and its sale to a related person, or the purchase of personal property from any person on behalf of a related person where— (A) the property which is purchased (or in the case of property sold on behalf of a related person, the property which is sold) is manufactured, produced, grown, or extracted outside the country under the laws of …

“foreign base company services income” applies in that section

the term “foreign base company services income” means income (whether in the form of compensation, commissions, fees, or otherwise) derived in connection with the performance of technical, managerial, engineering, architectural, scientific, skilled, industrial, commercial, or like services which— (A) are performed for or on behalf of any related person (within the meaning of subsection (d)(3)), and (B) are performed outside the country under the laws of which the controlled foreign corporation is created or organized.

“foreign personal holding company income” applies in that section

the term “foreign personal holding company income” means the portion of the gross income which consists of: (A) Dividends, etc. Dividends, interest, royalties, rents, and annuities. (B) Certain property transactions The excess of gains over losses from the sale or exchange of property— (i) which gives rise to income described in subparagraph (A) (after application of paragraph (2)(A)) other than property which gives rise to income not treated as foreign personal holding company income by reason of subsection (h) or (i) for the taxable year, (ii) which is an interest in a trust, partnership, or REMIC, or (iii) which does not give rise to any income.

“gross insurance income” applies in that section

the term “gross insurance income” means any item of gross income taken into account in determining insurance income under section 953. (4) Exception for certain income subject to high foreign taxes For purposes of subsection (a) and section 953, foreign base company income and insurance income shall not include any item of income received by a controlled foreign corporation if the taxpayer establishes to the satisfaction of the Secretary that such income was subject to an effective rate of income tax imposed by a foreign country greater than 90 percent of the maximum rate of tax specified in section 11.

“home country” applies in that section

The term “home country” means, with respect to any controlled foreign corporation, the country under the laws of which the corporation was created or organized. (ii) Qualified business unit

“lending or finance business” applies in that section

the term “lending or finance business” means the business of— (A) making loans, (B) purchasing or discounting accounts receivable, notes, or installment obligations, (C) engaging in leasing (including entering into leases and purchasing, servicing, and disposing of leases and leased assets), (D) issuing letters of credit or providing guarantees, (E) providing charge and credit card services, or (F) rendering services or making facilities available in connection with activities described in subparagraphs (A) through (E) carried on by— (i) the corporation (or qualified business unit) rendering services or making facilities available, or (ii) another corporation (or qualified business unit of …

“qualified banking or financing income” applies in that section

The term “qualified banking or financing income” means income of an eligible controlled foreign corporation which— (i) is derived in the active conduct of a banking, financing, or similar business by— (I) such eligible controlled foreign corporation, or (II) a qualified business unit of such eligible controlled foreign corporation, (ii) is derived from one or more transactions— (I) with customers located in a country other than the United States, and (II) substantially all of the activities in connection with which are conducted directly by the corporation or unit in its home country, and (iii) is treated as earned by such corporation or unit in its home country for purposes of such …

“qualified business unit” applies in that section

The term “qualified business unit” has the meaning given such term by section 989(a). (E) Related person

“qualified insurance income” applies in that section

The term “qualified insurance income” means income of a qualifying insurance company which is— (A) received from a person other than a related person (within the meaning of subsection (d)(3)) and derived from the investments made by a qualifying insurance company or a qualifying insurance company branch of its reserves allocable to exempt contracts or of 80 percent of its unearned premiums from exempt contracts (as both are determined in the manner prescribed under paragraph (4)), or (B) received from a person other than a related person (within the meaning of subsection (d)(3)) and derived from investments made by a qualifying insurance company or a qualifying insurance company branch of …

“related person” applies in that section

The term “related person” has the meaning given such term by subsection (d)(3). (6) Coordination with exception for dealers Paragraph (1) shall not apply to income described in subsection (c)(2)(C)(ii) of a dealer in securities (within the meaning of section 475) which is an eligible controlled foreign corporation described in paragraph (2)(B)(iii).

“applicable earnings” applies in that section

the term “applicable earnings” means, with respect to any controlled foreign corporation, the sum of— (A) the amount (not including a deficit) referred to in section 316(a)(1) to the extent such amount was accumulated in prior taxable years, and (B) the amount referred to in section 316(a)(2), but reduced by distributions made during the taxable year and by earnings and profits described in section 959(c)(1). (2) Special rule for U.S.

“dealer in commodities” applies in that section

the term “dealer in commodities” has the meaning given such term by section 475(e), except that such term shall include a futures commission merchant. (3) Certain trade or service receivables acquired from related United States persons (A) In general Notwithstanding paragraph (2) (other than subparagraph (H) thereof),

“dealer in securities” applies in that section

the term “dealer in securities” has the meaning given such term by section 475(c)(1), and

“United States property” applies in that section

the term “United States property” means any property acquired after December 31, 1962 , which is— (A) tangible property located in the United States; (B) stock of a domestic corporation; (C) an obligation of a United States person; or (D) any right to the use in the United States of— (i) a patent or copyright, (ii) an invention, model, or design (whether or not patented), (iii) a secret formula or process, or (iv) any other similar right, which is acquired or developed by the controlled foreign corporation for use in the United States.

“controlled foreign corporation” applies throughout this title

the term “controlled foreign corporation” means any foreign corporation if more than 50 percent of— (1) the total combined voting power of all classes of stock of such corporation entitled to vote, or (2) the total value of the stock of such corporation, is owned (within the meaning of section 958(a)), or is considered as owned by applying the rules of ownership of section 958(b), by United States shareholders on any day during the taxable year of such foreign corporation. (b) Special rule for insurance For purposes only of taking into account income described in section 953(a) (relating to insurance income),

“United States person” applies throughout its subpart

the term “United States person” has the meaning assigned to it by section 7701(a)(30) except that— (1) with respect to a corporation organized under the laws of the Commonwealth of Puerto Rico, such term does not include an individual who is a bona fide resident of Puerto Rico, if a dividend received by such individual during the taxable year from such corporation would, for purposes of section 933(1), be treated as income derived from sources within Puerto Rico, and (2) with respect to a corporation organized under the laws of Guam, American Samoa, or the Northern Mariana Islands— (A) 80 percent or more of the gross income of which for the 3-year period ending at the close of the taxable …

“stock” applies throughout its subpart

the term “stock” shall include any certificate entitling the holder to voting power in the corporation. (b) Constructive ownership For purposes of sections 951(b), 954(d)(3), 956(c)(2), and 957, section 318(a) (relating to constructive ownership of stock) shall apply to the extent that the effect is to treat any United States person as a United States shareholder within the meaning of section 951(b), to treat a person as a related person within the meaning of section 954(d)(3), to treat the stock of a domestic corporation as owned by a United States shareholder of the controlled foreign corporation for purposes of section 956(c)(2), or to treat a foreign corporation as a controlled foreign …

“foreign income taxes” applies in that section

The term “foreign income taxes” means any income, war profits, or excess profits taxes paid or accrued to any foreign country or possession of the United States. (f) Regulations The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the provisions of this section.

“inclusion percentage” applies in that section

the term “inclusion percentage” means, with respect to any domestic corporation, the ratio (expressed as a percentage) of— (A) such corporation’s net CFC tested income (as defined in section 951A(b)), divided by (B) the aggregate amount described in section 951A(b)(1)(A) with respect to such corporation. (3) Tested foreign income taxes For purposes of paragraph (1),

“tested foreign income taxes” applies in that section

the term “tested foreign income taxes” means, with respect to any domestic corporation which is a United States shareholder of a controlled foreign corporation, the foreign income taxes paid or accrued by such foreign corporation which are properly attributable to the tested income of such foreign corporation taken into account by such domestic corporation under section 951A.

“qualified insurance branch” applies throughout its chapter

the term “qualified insurance branch” means any branch of a controlled foreign corporation which is licensed and predominantly engaged on a permanent basis in the active conduct of an insurance business in a foreign country if— (A) separate books and accounts are maintained for such branch, (B) the principal place of business of such branch is in such foreign country, (C) such branch would be taxable under subchapter L if it were a separate domestic corporation, and (D) an election under this paragraph applies to such branch. An election under this paragraph shall apply to the taxable year for which made and all subsequent taxable years unless revoked with the consent of the Secretary.

“15.5 percent rate equivalent percentage” applies in that section

The term “15.5 percent rate equivalent percentage” means, with respect to any United States shareholder for any taxable year, the percentage determined under subparagraph (A) applied by substituting “15.5 percent rate of tax” for “8 percent rate of tax”. (3) Aggregate foreign cash position For purposes of this subsection— (A) In general

“8 percent rate equivalent percentage” applies in that section

The term “8 percent rate equivalent percentage” means, with respect to any United States shareholder for any taxable year, the percentage which would result in the amount to which such percentage applies being subject to a 8 percent rate of tax determined by only taking into account a deduction equal to such percentage of such amount and the highest rate of tax specified in section 11 for such taxable year.

“accumulated post-1986 deferred foreign income” applies in that section

The term “accumulated post-1986 deferred foreign income” means the post-1986 earnings and profits except to the extent such earnings— (A) are attributable to income of the specified foreign corporation which is effectively connected with the conduct of a trade or business within the United States and subject to tax under this chapter, or (B) in the case of a controlled foreign corporation, if distributed, would be excluded from the gross income of a United States shareholder under section 959.

“aggregate foreign cash position” applies in that section

The term “aggregate foreign cash position” means, with respect to any United States shareholder, the greater of— (i) the aggregate of such United States shareholder’s pro rata share of the cash position of each specified foreign corporation of such United States shareholder determined as of the close of the last taxable year of such specified foreign corporation which begins before January 1, 2018 , or (ii) one half of the sum of— (I) the aggregate described in clause (i) determined as of the close of the last taxable year of each such specified foreign corporation which ends before November 2, 2017 , plus (II) the aggregate described in clause (i) determined as of the close of the taxable …

“aggregate foreign E&P deficit” applies in that section

The term “aggregate foreign E&P deficit” means, with respect to any United States shareholder, the lesser of— (I) the aggregate of such shareholder’s pro rata shares of the specified E&P deficits of the E&P deficit foreign corporations of such shareholder, or (II) the amount determined under paragraph (2)(B).

“aggregate unused E&P deficit” applies in that section

The term “aggregate unused E&P deficit” means, with respect to any affiliated group, the lesser of— (I) the sum of the excesses described in subparagraph (C), determined with respect to each E&P net deficit shareholder in such group, or (II) the amount determined under subparagraph (E)(ii).

“applicable percentage” applies in that section

the term “applicable percentage” means the amount (expressed as a percentage) equal to the sum of— (A) 0.771 multiplied by the ratio of— (i) the excess to which subsection (c)(1)(A) applies, divided by (ii) the sum of such excess plus the amount to which subsection (c)(1)(B) applies, plus (B) 0.557 multiplied by the ratio of— (i) the amount to which subsection (c)(1)(B) applies, divided by (ii) the sum described in subparagraph (A)(ii).

“applicable share” applies in that section

the term “applicable share” means, with respect to any E&P net surplus shareholder in any affiliated group, the amount which bears the same proportion to such group’s aggregate unused E&P deficit as— (i) the product of— (I) such shareholder’s group ownership percentage, multiplied by (II) the amount which would (but for this paragraph) be taken into account under section 951(a)(1) by reason of subsection (a) by such shareholder, bears to (ii) the aggregate amount determined under clause (i) with respect to all E&P net surplus shareholders in such group. (F) Group ownership percentage For purposes of this paragraph,

“deferred foreign income corporation” applies in that section

The term “deferred foreign income corporation” means, with respect to any United States shareholder, any specified foreign corporation of such United States shareholder which has accumulated post-1986 deferred foreign income (as of the date referred to in paragraph (1) or (2) of subsection (a)) greater than zero. (2) Accumulated post-1986 deferred foreign income

“deferred net tax liability” applies in that section

the term “deferred net tax liability” means, with respect to any taxable year, the amount of net tax liability payment of which has been deferred under paragraph (1) and which has not been assessed on a return of tax for any prior taxable year. (C) Failure to report In the case of any failure to report any amount required to be reported under subparagraph (A) with respect to any taxable year before the due date for the return of tax for such taxable year, there shall be assessed on such return as an addition to tax 5 percent of such amount.

“E&P deficit foreign corporation” applies in that section

The term “E&P deficit foreign corporation” means, with respect to any taxpayer, any specified foreign corporation with respect to which such taxpayer is a United States shareholder, if, as of November 2, 2017 — (i) such specified foreign corporation has a deficit in post-1986 earnings and profits, (ii) such corporation was a specified foreign corporation, and (iii) such taxpayer was a United States shareholder of such corporation. (C) Specified E&P deficit

“E&P net deficit shareholder” applies in that section

the term “E&P net deficit shareholder” means any United States shareholder if— (i) the aggregate foreign E&P deficit with respect to such shareholder (as defined in paragraph (3)(A) without regard to clause (i)(II) thereof), exceeds (ii) the amount which would (but for this subsection) be taken into account by such shareholder under section 951(a)(1) by reason of subsection (a). (D) Aggregate unused E&P deficit For purposes of this paragraph— (i) In general

“E&P net surplus shareholder” applies in that section

the term “E&P net surplus shareholder” means any United States shareholder which would (determined without regard to this paragraph) take into account an amount greater than zero under section 951(a)(1) by reason of subsection (a). (C) E&P net deficit shareholder For purposes of this paragraph,

“expatriated entity” applies in that section

the term “expatriated entity” has the same meaning given such term under section 7874(a)(2), except that such term shall not include an entity if the surrogate foreign corporation with respect to the entity is treated as a domestic corporation under section 7874(b). (3) Surrogate foreign corporation For purposes of this subsection,

“group ownership percentage” applies in that section

the term “group ownership percentage” means, with respect to any United States shareholder in any affiliated group, the percentage of the value of the stock of such United States shareholder which is held by other includible corporations in such affiliated group. Notwithstanding the preceding sentence, the group ownership percentage of the common parent of the affiliated group is 100 percent. Any term used in this subparagraph which is also used in section 1504 shall have the same meaning as when used in such section.

“net accounts receivable” applies in that section

the term “net accounts receivable” means, with respect to any specified foreign corporation, the excess (if any) of— (i) such corporation’s accounts receivable, over (ii) such corporation’s accounts payable (determined consistent with the rules of section 461).

“net income tax” applies in that section

The term “net income tax” means the regular tax liability reduced by the credits allowed under subparts A, B, and D of part IV of subchapter A. (i) Special rules for S corporation shareholders (1) In general In the case of any S corporation which is a United States shareholder of a deferred foreign income corporation, each shareholder of such S corporation may elect to defer payment of such shareholder’s net tax liability under this section with respect to such S corporation until the shareholder’s taxable year which includes the triggering event with respect to such liability.

“post-1986 earnings and profits” applies in that section

The term “post-1986 earnings and profits” means the earnings and profits of the foreign corporation (computed in accordance with sections 964(a) and 986, and by only taking into account periods when the foreign corporation was a specified foreign corporation) accumulated in taxable years beginning after December 31, 1986 , and determined— (A) as of the date referred to in paragraph (1) or (2) of subsection (a), whichever is applicable with respect to such foreign corporation, and (B) without diminution by reason of dividends distributed during the taxable year described in subsection (a) other than dividends distributed to another specified foreign corporation.

“specified E&P deficit” applies in that section

The term “specified E&P deficit” means, with respect to any E&P deficit foreign corporation, the amount of the deficit referred to in subparagraph (B). (4) Treatment of earnings and profits in future years (A) Reduced earnings and profits treated as previously taxed income when distributed For purposes of applying section 959 in any taxable year beginning with the taxable year described in subsection (a), with respect to any United States shareholder of a deferred foreign income corporation, an amount equal to such shareholder’s reduction under paragraph (1) which is allocated to such deferred foreign income corporation under this subsection shall be treated as an amount which was included …

“specified foreign corporation” applies in that section

the term “specified foreign corporation” means— (A) any controlled foreign corporation, and (B) any foreign corporation with respect to which one or more domestic corporations is a United States shareholder. (2) Application to certain foreign corporations For purposes of sections 951 and 961, a foreign corporation described in paragraph (1)(B) shall be treated as a controlled foreign corporation solely for purposes of taking into account the subpart F income of such corporation under subsection (a) (and for purposes of applying subsection (f)).

“surrogate foreign corporation” applies in that section

the term “surrogate foreign corporation” has the meaning given such term in section 7874(a)(2)(B). (m) Special rules for United States shareholders which are real estate investment trusts (1) In general If a real estate investment trust is a United States shareholder in 1 or more deferred foreign income corporations— (A) any amount required to be taken into account under section 951(a)(1) by reason of this section shall not be taken into account as gross income of the real estate investment trust for purposes of applying paragraphs (2) and (3) of section 856(c) to any taxable year for which such amount is taken into account under section 951(a)(1), and (B) if the real estate investment …

“export promotion expenses” applies throughout its subpart

the term “export promotion expenses” means the following expenses paid or incurred in the receipt or production of export trade income— (1) a reasonable allowance for salaries or other compensation for personal services actually rendered for such purpose, (2) rentals or other payments for the use of property actually used for such purpose, (3) a reasonable allowance for the exhaustion, wear and tear, or obsolescence of property actually used for such purpose, and (4) any other ordinary and necessary expenses of the corporation to the extent reasonably allocable to the receipt or production of export trade income.

“export property” applies throughout its subpart

the term “export property” means any property or any interest in property manufactured, produced, grown, or extracted in the United States. (f) Unrelated person For purposes of this subpart,

“export trade assets” applies throughout its subpart

the term “export trade assets” means— (1) working capital reasonably necessary for the production of export trade income, (2) inventory of export property held for use, consumption, or disposition outside the United States, (3) facilities located outside the United States for the storage, handling, transportation, packaging, or servicing of export property, and (4) evidences of indebtedness executed by persons, other than related persons, in connection with payment for purchases of export property for use, consumption, or disposition outside the United States, or in connection with the payment for services described in subsections (b)(2) and (3).

“export trade corporation” applies throughout its subpart

the term “export trade corporation” means— (1) In general A controlled foreign corporation (as defined in section 957) which satisfies the following conditions: (A) 90 percent or more of the gross income of such corporation for the 3–year period immediately preceding the close of the taxable year (or such part of such period subsequent to the effective date of this subpart during which the corporation was in existence) was derived from sources without the United States, and (B) 75 percent or more of the gross income of such corporation for such period constituted gross income in respect of which such corporation derived export trade income.

“export trade income” applies throughout its subpart

the term “export trade income” means net income from— (1) the sale to an unrelated person for use, consumption, or disposition outside the United States of export property (as defined in subsection (e)), or from commissions, fees, compensation, or other income from the performance of commercial, industrial, financial, technical, scientific, managerial, engineering, architectural, skilled, or other services in respect to such sales or in respect of the installation or maintenance of such export property; (2) commissions, fees, compensation, or other income from commercial, industrial, financial, technical, scientific, managerial, engineering, architectural, skilled, or other services …

“unrelated person” applies throughout its subpart

the term “unrelated person” means a person other than a related person as defined in section 954(d)(3).

“documentation” applies in that section

The term “documentation” includes books and records. (3) Authority to extend 90-day period The Secretary, and any court having jurisdiction over a proceeding under subsection (c)(2), may extend the 90-day period referred to in subsection (a). (e) Suspension of statute of limitations If any person takes any action as provided in subsection (c)(2), the running of any period of limitations under section 6501 (relating to the assessment and collection of tax) or under section 6531 (relating to criminal prosecutions) with respect to such person shall be suspended for the period during which the proceeding under such subsection, and appeals therein, are pending.

“foreign-based documentation” applies in that section

The term “foreign-based documentation” means any documentation which is outside the United States and which may be relevant or material to the tax treatment of the examined item. (2) Documentation

“formal document request” applies in that section

The term “formal document request” means any request (made after the normal request procedures have failed to produce the requested documentation) for the production of foreign-based documentation which is mailed by registered or certified mail to the taxpayer at his last known address and which sets forth— (A) the time and place for the production of the documentation, (B) a statement of the reason the documentation previously produced (if any) is not sufficient, (C) a description of the documentation being sought, and (D) the consequences to the taxpayer of the failure to produce the documentation described in subparagraph (C).

“functional currency” applies in that section

the term “functional currency” means— (A) except as provided in subparagraph (B), the dollar, or (B) in the case of a qualified business unit, the currency of the economic environment in which a significant part of such unit’s activities are conducted and which is used by such unit in keeping its books and records. (2) Functional currency where activities primarily conducted in dollars The functional currency of any qualified business unit shall be the dollar if activities of such unit are primarily conducted in dollars.

“foreign income taxes” applies in that section

the term “foreign income taxes” means any income, war profits, or excess profits taxes paid or accrued to any foreign country or to any possession of the United States. (b) Earnings and profits and distributions For purposes of determining the tax under this subtitle— (1) of any shareholder of any foreign corporation, the earnings and profits of such corporation shall be determined in the corporation’s functional currency, and (2) in the case of any United States person, the earnings and profits determined under paragraph (1) (when distributed, deemed distributed, or otherwise taken into account under this subtitle) shall (if necessary) be translated into dollars using the appropriate …

“10-percent owned foreign corporation” applies throughout its subpart

The term “10-percent owned foreign corporation” means any foreign corporation in which the United States person owns directly or indirectly at least 10 percent of the voting stock. (b) Foreign currency gain or loss For purposes of this section— (1) Foreign currency gain

“988 hedging transaction” applies in that section

the term “988 hedging transaction” means any transaction— (A) entered into by the taxpayer primarily— (i) to manage risk of currency fluctuations with respect to property which is held or to be held by the taxpayer, or (ii) to manage risk of currency fluctuations with respect to borrowings made or to be made, or obligations incurred or to be incurred, by the taxpayer, and (B) identified by the Secretary or the taxpayer as being a 988 hedging transaction. (e) Application to individuals (1) In general The preceding provisions of this section shall not apply to any section 988 transaction entered into by an individual which is a personal transaction.

“booking date” applies in that section

The term “booking date” means— (A) in the case of a transaction described in paragraph (1)(B)(i), the date of acquisition or on which the taxpayer becomes the obligor, or (B) in the case of a transaction described in paragraph (1)(B)(ii), the date on which accrued or otherwise taken into account. (3) Payment date

“debt instrument” applies in that section

The term “debt instrument” means a bond, debenture, note, or certificate or other evidence of indebtedness. To the extent provided in regulations, such term shall include preferred stock. (5) Special rules where taxpayer takes or makes delivery If the taxpayer takes or makes delivery in connection with any section 988 transaction described in paragraph (1)(B)(iii), any gain or loss (determined as if the taxpayer sold the contract, option, or instrument on the date on which he took or made delivery for its fair market value on such date) shall be recognized in the same manner as if such contract, option, or instrument were so sold.

“foreign currency gain” applies in that section

The term “foreign currency gain” means any gain from a section 988 transaction to the extent such gain does not exceed gain realized by reason of changes in exchange rates on or after the booking date and before the payment date. (2) Foreign currency loss

“foreign currency loss” applies in that section

The term “foreign currency loss” means any loss from a section 988 transaction to the extent such loss does not exceed the loss realized by reason of changes in exchange rates on or after the booking date and before the payment date. (3) Special rule for certain contracts, etc. In the case of any section 988 transaction described in subsection (c)(1)(B)(iii), any gain or loss from such transaction shall be treated as foreign currency gain or loss (as the case may be). (c) Other definitions For purposes of this section— (1) Section 988 transaction (A) In general

“nonfunctional currency” applies in that section

the term “nonfunctional currency” includes coin or currency, and nonfunctional currency denominated demand or time deposits or similar instruments issued by a bank or other financial institution. (D) Exception for certain instruments marked to market (i) In general Clause (iii) of subparagraph (B) shall not apply to any regulated futures contract or nonequity option which would be marked to market under section 1256 if held on the last day of the taxable year. (ii) Election out (I) In general The taxpayer may elect to have clause (i) not apply to such taxpayer.

“payment date” applies in that section

The term “payment date” means the date on which the payment is made or received. (4) Debt instrument

“personal transaction” applies in that section

the term “personal transaction” means any transaction entered into by an individual, except that such term shall not include any transaction to the extent that expenses properly allocable to such transaction meet the requirements of— (A) section 162 (other than traveling expenses described in subsection (a)(2) thereof), or (B) section 212 (other than that part of section 212 dealing with expenses incurred in connection with taxes).

“qualified fund” applies in that section

the term “qualified fund” means any partnership if— (I) at all times during the taxable year (and during each preceding taxable year to which an election under subclause (V) applied), such partnership has at least 20 partners and no single partner owns more than 20 percent of the interests in the capital or profits of the partnership, (II) the principal activity of such partnership for such taxable year (and each such preceding taxable year) consists of buying and selling options, futures, or forwards with respect to commodities, (III) at least 90 percent of the gross income of the partnership for the taxable year (and for each such preceding taxable year) consisted of income or gains …

“related person” applies throughout its subpart

the term “related person” has the meaning given such term by section 954(d)(3), except that such section shall be applied by substituting “United States person” for “controlled foreign corporation” each place such term appears. (D) 10-percent owned foreign corporation

“section 988 transaction” applies in that section

The term “section 988 transaction” means any transaction described in subparagraph (B) if the amount which the taxpayer is entitled to receive (or is required to pay) by reason of such transaction— (i) is denominated in terms of a nonfunctional currency, or (ii) is determined by reference to the value of 1 or more nonfunctional currencies. (B) Description of transactions For purposes of subparagraph (A), the following transactions are described in this subparagraph: (i) The acquisition of a debt instrument or becoming the obligor under a debt instrument.

“appropriate exchange rate” applies throughout its subpart

the term “appropriate exchange rate” means— (1) in the case of an actual distribution of earnings and profits, the spot rate on the date such distribution is included in income, (2) in the case of an actual or deemed sale or exchange of stock in a foreign corporation treated as a dividend under section 1248, the spot rate on the date the deemed dividend is included in income, (3) in the case of any amounts included in income under section 951(a)(1)(A) or 1293(a), the average exchange rate for the taxable year of the foreign corporation, or (4) in the case of any other qualified business unit of a taxpayer, the average exchange rate for the taxable year of such qualified business unit.

“qualified business unit” applies throughout its subpart

the term “qualified business unit” means any separate and clearly identified unit of a trade or business of a taxpayer which maintains separate books and records. (b) Appropriate exchange rate Except as provided in regulations, for purposes of this subpart,

“DISC” applies throughout this title

the term “DISC” means, with respect to any taxable year, a corporation which is incorporated under the laws of any State and satisfies the following conditions for the taxable year: (A) 95 percent or more of the gross receipts (as defined in section 993(f)) of such corporation consist of qualified export receipts (as defined in section 993(a)), (B) the adjusted basis of the qualified export assets (as defined in section 993(b)) of the corporation at the close of the taxable year equals or exceeds 95 percent of the sum of the adjusted basis of all assets of the corporation at the close of the taxable year, (C) such corporation does not have more than one class of stock and the par or stated …

“former DISC” applies throughout this title

the term “former DISC” means, with respect to any taxable year, a corporation which is not a DISC for such year but was a DISC in a preceding taxable year and at the beginning of the taxable year has undistributed previously taxed income or accumulated DISC income. (b) Election (1) Election (A) An election by a corporation to be treated as a DISC shall be made by such corporation for a taxable year at any time during the 90–day period immediately preceding the beginning of the taxable year, except that the Secretary may give his consent to the making of an election at such other times as he may designate.

“controlled group” applies throughout its part

the term “controlled group” has the meaning assigned to the term “controlled group of corporations” by section 1563(a), except that the phrase “more than 50 percent” shall be substituted for the phrase “at least 80 percent” each place it appears therein, and section 1563(b) shall not apply.

“export property” applies throughout its part

the term “export property” means property— (A) manufactured, produced, grown, or extracted in the United States by a person other than a DISC, (B) held primarily for sale, lease, or rental, in the ordinary course of trade or business, by, or to, a DISC, for direct use, consumption, or disposition outside the United States, and (C) not more than 50 percent of the fair market value of which is attributable to articles imported into the United States. In applying subparagraph (C), the fair market value of any article imported into the United States shall be its appraised value, as determined by the Secretary under section 402 of the Tariff Act of 1930 ( 19 U.S.C.

“gross receipts” applies throughout its part

the term “gross receipts” means the total receipts from the sale, lease, or rental of property held primarily for sale, lease, or rental in the ordinary course of trade or business, and gross income from all other sources. In the case of commissions on the sale, lease, or rental of property, the amount taken into account for purposes of this part as gross receipts shall be the gross receipts on the sale, lease, or rental of the property on which such commissions arose. (g) United States defined For purposes of this part,

“United States” applies throughout its part

the term “United States” includes the Commonwealth of Puerto Rico and the possessions of the United States.

“unprocessed timber” applies throughout its part

the term “unprocessed timber” means any log, cant, or similar form of timber. (3) Property in short supply If the President determines that the supply of any property described in paragraph (1) is insufficient to meet the requirements of the domestic economy, he may by Executive order designate the property as in short supply. Any property so designated shall be treated as property not described in paragraph (1) during the period beginning with the date specified in the Executive order and ending with the date specified in an Executive order setting forth the President’s determination that the property is no longer in short supply.

“export promotion expenses” applies in that section

the term “export promotion expenses” means those expenses incurred to advance the distribution or sale of export property for use, consumption, or distribution outside of the United States, but does not include income taxes. Such expenses shall also include freight expenses to the extent of 50 percent of the cost of shipping export property aboard airplanes owned and operated by United States persons or ships documented under the laws of the United States in those cases where law or regulations does not require that such property be shipped aboard such airplanes or ships.

“base period T-bill rate” applies in that section

the term “base period T-bill rate” means the annual rate of interest determined by the Secretary to be equivalent to the average of the 1-year constant maturity Treasury yields, as published by the Board of Governors of the Federal Reserve System, for the 1-year period ending on September 30 of the calendar year ending with (or of the most recent calendar year ending before) the close of the taxable year of the shareholder. (5) Short years The Secretary shall prescribe such regulations as may be necessary for the application of this subsection to short years of the DISC, the shareholder, or both.

“deferred DISC income” applies in that section

The term “deferred DISC income” means, with respect to any taxable year of a shareholder, the excess of— (i) the shareholder’s pro rata share of accumulated DISC income (for periods after 1984) of the DISC as of the close of the computation year, over (ii) the amount of the distributions-in-excess-of-income for the taxable year of the DISC following the computation year.

“DISC” applies in that section

the term “DISC” includes a former DISC. (g) Treatment of tax-exempt shareholders If any organization described in subsection (a)(2) or (b)(2) of section 511 (or any other person otherwise subject to tax under section 511) is a shareholder in a DISC— (1) any amount deemed distributed to such shareholder under subsection (b), (2) any actual distribution to such shareholder which under section 996 is treated as out of accumulated DISC income, and (3) any gain which is treated as a dividend under subsection (c), shall be treated as derived from the conduct of an unrelated trade or business (and the modifications of section 512(b) shall not apply).

“distributions-in-excess-of-income” applies in that section

the term “distributions-in-excess-of-income” means, with respect to any taxable year of a DISC, the excess (if any) of— (i) the amount of actual distributions to the shareholder out of accumulated DISC income, over (ii) the shareholder’s pro rata share of the DISC income for such taxable year. (4) Base period T-bill rate For purposes of this subsection,

“domestic member” applies in that section

the term “domestic member” means a domestic corporation which is a member of a controlled group (as defined in section 993(a)(3)), and

“foreign member” applies in that section

the term “foreign member” means a foreign corporation which is a member of such a controlled group. (4) Uncommitted transitional funds The uncommitted transitional funds of the group shall be an amount equal to the sum of— (A) the excess of— (i) the amount of stock or debt obligations of domestic members of such group outstanding on December 31, 1971 , and issued on or after January 1, 1968 , to persons other than United States persons or any members of such group, but only to the extent the taxpayer establishes that such amount constitutes a long-term borrowing for purposes of the foreign direct investment program, over (ii) the net amount of actual foreign investment by domestic members …

“liquid assets” applies in that section

the term “liquid assets” means money, bank deposits (not including time deposits), and indebtedness of 2 years or less to maturity on the date of acquisition; and the actual foreign investment shall be determined under paragraph (3) without regard to the date in subparagraph (A) of such paragraph and without regard to subparagraph (D) of such paragraph. (5) Special rule Under regulations prescribed by the Secretary the determinations under this subsection shall be made on a cumulative basis with proper adjustments for amounts previously taken into account.

“military property” applies in that section

the term “military property” means any property which is an arm, ammunition, or implement of war designated in the munitions list published pursuant to section 38 of the Arms Export Control Act ( 22 U.S.C. 2778 ). (4) Aggregation of qualified export receipts (A) In general For purposes of applying paragraph (1)(E), all DISC’s which are members of the same controlled group shall be treated as a single corporation. (B) Allocation The dollar amount under paragraph (1)(E) shall be allocated among the DISC’s which are members of the same controlled group in a manner provided in regulations prescribed by the Secretary.

“shareholder’s DISC-related deferred tax liability” applies in that section

The term “shareholder’s DISC-related deferred tax liability” means, with respect to any taxable year of a shareholder of a DISC, the excess of— (i) the amount which would be the tax liability of the shareholder for the taxable year if the deferred DISC income of such shareholder for such taxable year were included in gross income as ordinary income, over (ii) the actual amount of the tax liability of such shareholder for such taxable year. Determinations under the preceding sentence shall be made without regard to carrybacks to such taxable year.

“tax liability” applies in that section

The term “tax liability” means the amount of the tax imposed by this chapter for the taxable year reduced by credits allowable against such tax (other than credits allowable under sections 31, 32, and 34). (3) Deferred DISC income For purposes of this subsection— (A) In general

“world-wide operations” applies in that section

the term “world-wide operations” means operations in or related to countries other than the United States. (d) Determination with respect to particular operations Upon a request made by the taxpayer, the Secretary shall issue a determination with respect to whether a particular operation of a person, or of a member of a controlled group which includes that person, constitutes participation in or cooperation with an international boycott. The Secretary may issue such a determination in advance of such operation in cases which are of such a nature that an advance determination is possible and appropriate under the circumstances.

“term interest in property” applies in that section

the term “term interest in property” means— (A) a life interest in property, (B) an interest in property for a term of years, or (C) an income interest in a trust. (3) Exception Paragraph (1) shall not apply to a sale or other disposition which is a part of a transaction in which the entire interest in property is transferred to any person or persons.

“dividend reinvestment plan” applies in that section

The term “dividend reinvestment plan” means any arrangement under which dividends on any stock are reinvested in stock identical to the stock with respect to which the dividends are paid. (B) Initial stock acquisition treated as acquired in connection with plan Stock shall be treated as acquired in connection with a dividend reinvestment plan if such stock is acquired pursuant to such plan or if the dividends paid on such stock are subject to such plan.

“appreciated property” applies in that section

The term “appreciated property” means any property if the fair market value of such property on the day it was transferred to the decedent by gift exceeds its adjusted basis. (B) Treatment of certain property sold by estate In the case of any appreciated property described in subparagraph (A) of paragraph (1) sold by the estate of the decedent or by a trust of which the decedent was the grantor, rules similar to the rules of paragraph (1) shall apply to the extent the donor of such property (or the spouse of such donor) is entitled to the proceeds from such sale.

“partial disposition” applies in that section

the term “partial disposition” means any disposition or cessation to which subsection (c)(2)(D), (h)(1)(B), or (i)(1)(B) of section 2032A applies. (3) Time adjustment made Any increase in basis under this subsection shall be deemed to have occurred immediately before the disposition or cessation resulting in the imposition of the tax under section 2032A(c)(1).

“depreciable property” applies in that section

the term “depreciable property” means any property of a character subject to the allowance for depreciation, but only if a basis reduction under subsection (a) will reduce the amount of depreciation or amortization which otherwise would be allowable for the period immediately following such reduction. (C) Special rule for partnership interests For purposes of this section, any interest of a partner in a partnership shall be treated as depreciable property to the extent of such partner’s proportionate interest in the depreciable property held by such partnership.

“qualified property” applies in that section

the term “qualified property” has the meaning given to such term by section 108(g)(3)(C). (C) Certain rules made applicable Rules similar to the rules of subparagraphs (C), (D), and (E) of paragraph (3) shall apply for purposes of this paragraph and section 108(g). (c) Special rules (1) Reduction not to be made in exempt property In the case of an amount excluded from gross income under section 108(a)(1)(A), no reduction in basis shall be made under this section in the basis of property which the debtor treats as exempt property under section 522 of title 11 of the United States Code.

“related person” applies in that section

the term “related person” means any person bearing a relationship to the taxpayer described in section 267(b) or 707(b)(1). (4) Treatment of certain transactions This section shall not apply to any exchange which is part of a transaction (or series of transactions) structured to avoid the purposes of this subsection. (g) Special rule where substantial diminution of risk (1) In general If paragraph (2) applies to any property for any period, the running of the period set forth in subsection (f)(1)(C) with respect to such property shall be suspended during such period.

“control” applies in that section

The term “control” means the ownership of stock possessing at least 80 percent of the total combined voting power of all classes of stock entitled to vote and at least 80 percent of the total number of shares of all other classes of stock of the corporation. (ii) Disposition of the converted property

“disposition of the converted property” applies in that section

The term “disposition of the converted property” means the destruction, theft, seizure, requisition, or condemnation of the converted property, or the sale or exchange of such property under threat or imminence of requisition or condemnation.

“outdoor advertising display” applies in that section

the term “outdoor advertising display” means a rigidly assembled sign, display, or device permanently affixed to the ground or permanently attached to a building or other inherently permanent structure constituting, or used for the display of, a commercial or other advertisement to the public.

“principal residence” applies in that section

the term “principal residence” has the same meaning as when used in section 121, except that such term shall include a residence not treated as a principal residence solely because the taxpayer does not own the residence. (i) Replacement property must be acquired from unrelated person in certain cases (1) In general If the property which is involuntarily converted is held by a taxpayer to which this subsection applies, subsection (a) shall not apply if the replacement property or stock is acquired from a related person.

“control” applies in that section

the term “control” has the meaning given such term by section 304(c). In determining control, there shall be disregarded any qualified replacement property of the taxpayer with respect to the section 1042 sale being tested. (D) Security defined For purposes of this paragraph,

“eligible farmers’ cooperative” applies in that section

the term “eligible farmers’ cooperative” means an organization to which part I of subchapter T applies and which is engaged in the marketing of agricultural or horticultural products. (4) Special rules In applying this section to a sale to which paragraph (1) applies— (A) the eligible farmers’ cooperative shall be treated in the same manner as a cooperative described in subsection (b)(1)(B), (B) subsection (b)(2) shall be applied by substituting “100 percent” for “30 percent” each place it appears, (C) the determination as to whether any stock in the domestic corporation is a qualified security shall be made without regard to whether the stock is an employer security or to subsection …

“eligible worker-owned cooperative” applies in that section

The term “eligible worker-owned cooperative” means any organization— (A) to which part I of subchapter T applies, (B) a majority of the membership of which is composed of employees of such organization, (C) a majority of the voting stock of which is owned by members, (D) a majority of the board of directors of which is elected by the members on the basis of 1 person 1 vote, and (E) a majority of the allocated earnings and losses of which are allocated to members on the basis of— (i) patronage, (ii) capital contributions, or (iii) some combination of clauses (i) and (ii). (3) Replacement period

“operating corporation” applies in that section

The term “operating corporation” means a corporation more than 50 percent of the assets of which were, at the time the security was purchased or before the close of the replacement period, used in the active conduct of the trade or business. (ii) Financial institutions and insurance companies

“qualified refiner or processor” applies in that section

the term “qualified refiner or processor” means a domestic corporation— (A) substantially all of the activities of which consist of the active conduct of the trade or business of refining or processing agricultural or horticultural products, and (B) which, during the 1-year period ending on the date of the sale, purchases more than one-half of such products to be refined or processed from— (i) farmers who make up the eligible farmers’ cooperative which is purchasing stock in the corporation in a transaction to which this subsection is to apply, or (ii) such cooperative. (3) Eligible farmers’ cooperative For purposes of this section,

“qualified replacement property” applies in that section

The term “qualified replacement property” means any security issued by a domestic operating corporation which— (i) did not, for the taxable year preceding the taxable year in which such security was purchased, have passive investment income (as defined in section 1362(d)(3)(C)) in excess of 25 percent of the gross receipts of such corporation for such preceding taxable year, and (ii) is not the corporation which issued the qualified securities which such security is replacing or a member of the same controlled group of corporations (within the meaning of section 1563(a)(1)) as such corporation.

“qualified securities” applies in that section

The term “qualified securities” means employer securities (as defined in section 409( l )) which— (A) are issued by a domestic C corporation that has no stock outstanding that is readily tradable on an established securities market, and (B) were not received by the taxpayer in— (i) a distribution from a plan described in section 401(a), or (ii) a transfer pursuant to an option or other right to acquire stock to which section 83, 422, or 423 applied (or to which section 422 or 424 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) applied). (2) Eligible worker-owned cooperative

“replacement period” applies in that section

The term “replacement period” means the period which begins 3 months before the date on which the sale of qualified securities occurs and which ends 12 months after the date of such sale. (4) Qualified replacement property (A) In general

“security” applies in that section

the term “security” has the meaning given such term by section 165(g)(2), except that such term shall not include any security issued by a government or political subdivision thereof. (5) Securities sold by underwriter No sale of securities by an underwriter to an employee stock ownership plan or eligible worker-owned cooperative in the ordinary course of his trade or business as an underwriter, whether or not guaranteed, shall be treated as a sale for purposes of subsection (a).

“certificate of divestiture” applies in that section

The term “certificate of divestiture” means any written determination— (A) that states that divestiture of specific property is reasonably necessary to comply with any Federal conflict of interest statute, regulation, rule, judicial canon, or executive order (including section 208 of title 18 , United States Code), or requested by a congressional committee as a condition of confirmation, (B) that has been issued by the President or the Director of the Office of Government Ethics, in the case of executive branch officers or employees, or by the Judicial Conference of the United States (or its designee), in the case of judicial officers, and (C) that identifies the specific property to be …

“eligible person” applies in that section

The term “eligible person” means— (A) an officer or employee of the executive branch, or a judicial officer, of the Federal Government, but does not mean a special Government employee as defined in section 202 of title 18 , United States Code, and (B) any spouse or minor or dependent child whose ownership of any property is attributable under any statute, regulation, rule, judicial canon, or executive order referred to in paragraph (2) to a person referred to in subparagraph (A). (2) Certificate of divestiture

“judicial officer” applies in that section

The term “judicial officer” means the Chief Justice of the United States, the Associate Justices of the Supreme Court, and the judges of the United States courts of appeals, United States district courts, including the district courts in Guam, the Northern Mariana Islands, and the Virgin Islands, Court of Appeals for the Federal Circuit, Court of International Trade, Tax Court, Court of Federal Claims, Court of Appeals for Veterans Claims, United States Court of Appeals for the Armed Forces, and any court created by Act of Congress, the judges of which are entitled to hold office during good behavior.

“permitted property” applies in that section

The term “permitted property” means any obligation of the United States or any diversified investment fund approved by regulations issued by the Office of Government Ethics. (4) Purchase The taxpayer shall be considered to have purchased any permitted property if, but for subsection (c), the unadjusted basis of such property would be its cost within the meaning of section 1012.

“qualified small business stock” applies in that section

The term “qualified small business stock” has the meaning given such term by section 1202(c). (2) Purchase A taxpayer shall be treated as having purchased any property if, but for paragraph (3), the unadjusted basis of such property in the hands of the taxpayer would be its cost (within the meaning of section 1012). (3) Basis adjustments If gain from any sale is not recognized by reason of subsection (a), such gain shall be applied to reduce (in the order acquired) the basis for determining gain or loss of any qualified small business stock which is purchased by the taxpayer during the 60-day period described in subsection (a).

“redeemable ground rent” applies in that section

the term “redeemable ground rent” means only a ground rent with respect to which— (1) there is a lease of land which is assignable by the lessee without the consent of the lessor and which (together with periods for which the lease may be renewed at the option of the lessee) is for a term in excess of 15 years, (2) the leaseholder has a present or future right to terminate, and to acquire the entire interest of the lessor in the land, by payment of a determined or determinable amount, which right exists by virtue of State or local law and not because of any private agreement or privately created condition, and (3) the lessor’s interest in the land is primarily a security interest to protect …

“disqualified preferred stock” applies in that section

the term “disqualified preferred stock” means any stock which is preferred as to dividends if— (A) when issued, such stock has a dividend rate which declines (or can reasonably be expected to decline) in the future, (B) the issue price of such stock exceeds its liquidation rights or its stated redemption price, or (C) such stock is otherwise structured— (i) to avoid the other provisions of this section, and (ii) to enable corporate shareholders to reduce tax through a combination of dividend received deductions and loss on the disposition of the stock.

“dividend announcement date” applies in that section

The term “dividend announcement date” means, with respect to any dividend, the date on which the corporation declares, announces, or agrees to the amount or payment of such dividend, whichever is the earliest.

“ex-dividend date” applies in that section

The term “ex-dividend date” means the date on which the share of stock becomes ex-dividend. (5) Dividend announcement date

“extraordinary dividend” applies in that section

The term “extraordinary dividend” means any dividend with respect to a share of stock if the amount of such dividend equals or exceeds the threshold percentage of the taxpayer’s adjusted basis in such share of stock. (2) Threshold percentage

“qualified corporation” applies in that section

the term “qualified corporation” means any corporation (including a predecessor corporation)— (i) with respect to which the taxpayer holds directly or indirectly during the entire period of such corporation’s existence at least the same ownership interest as the taxpayer holds in the corporation distributing the extraordinary dividend, and (ii) which has no earnings and profits— (I) which were earned by, or (II) which are attributable to gain on property which accrued during a period the corporation holding the property was, a corporation not described in clause (i).

“qualified preferred dividend” applies in that section

The term “qualified preferred dividend” means any fixed dividend payable with respect to any share of stock which— (I) provides for fixed preferred dividends payable not less frequently than annually, and (II) is not in arrears as to dividends at the time the taxpayer acquires the stock. Such term shall not include any dividend payable with respect to any share of stock if the actual rate of return on such stock exceeds 15 percent. (ii) Holding period In determining the holding period for purposes of subparagraph (A)(ii), subsection (d)(3) shall be applied by substituting “5 years” for “2 years”.

“threshold percentage” applies in that section

The term “threshold percentage” means— (A) 5 percent in the case of stock which is preferred as to dividends, and (B) 10 percent in the case of any other stock. (3) Aggregation of dividends (A) Aggregation within 85-day period All dividends— (i) which are received by the taxpayer (or a person described in subparagraph (C)) with respect to any share of stock, and (ii) which have ex-dividend dates within the same period of 85 consecutive days, shall be treated as 1 dividend.

“customs value” applies in that section

The term “customs value” means the value taken into account for purposes of determining the amount of any customs duties or any other duties which may be imposed on the importation of any property. (2) Import Except as provided in regulations,

“import” applies in that section

the term “import” means the entering, or withdrawal from warehouse, for consumption.