S 1984 — Support Our Start-Ups Act

(a) Adjustments applicable to all taxpayers In determining the amount of the alternative minimum taxable income for any taxable year the following treatment shall apply (in lieu of the treatment applicable for purposes of computing the regular tax): (1) Depreciation (A) In general (i) Property other than certain personal property Except as provided in clause (ii), the depreciation deduction allowable under section 167 with respect to any tangible property placed in service after December 31, 1986, shall be determined under the alternative system of section 168(g). In the case of property placed in service after December 31, 1998, the preceding sentence shall not apply but clause (ii) shall continue to apply. (ii) 150-percent declining balance method for certain property The method of depreciation used shall be— (I) the 150 percent declining balance method, (II) switching to the straight line method for the 1st taxable year for which using the straight line method with respect to the adjusted basis as of the beginning of the year will yield a higher allowance.  The preceding sentence shall not apply to any section 1250 property (as defined in section 1250(c)) (and the straight line method shall be used for such section 1250 property) or to any other property if the depreciation deduction determined under section 168 with respect to such other property for purposes of the regular tax is determined by using the straight line method. (B) Exception for certain property This paragraph shall not apply to property described in paragraph (1), (2), (3), or (4) of section 168(f), or in section 168(e)(3)(C)(iv). (C) Coordination with transitional rules (i) In general This paragraph shall not apply to property placed in service after December 31, 1986, to which the amendments made by section 201 of the Tax Reform Act of 1986 do not apply by reason of section 203, 204, or 251(d) of such Act. (ii) Treatment of certain property placed in service before 1987 This paragraph shall apply to any property to which the amendments made by section 201 of the Tax Reform Act of 1986 apply by reason of an election under section 203(a)(1)(B) of such Act without regard to the requirement of subparagraph (A) that the property be placed in service after December 31, 1986. (D) Normalization rules With respect to public utility property described in section 168(i)(10), the Secretary shall prescribe the requirements of a normalization method of accounting for this section. (2) Mining exploration and development costs (A) In general With respect to each mine or other natural deposit (other than an oil, gas, or geothermal well) of the taxpayer, the amount allowable as a deduction under section 616(a) or 617(a) (determined without regard to section 291(b)) in computing the regular tax for costs paid or incurred after December 31, 1986, shall be capitalized and amortized ratably over the 10-year period beginning with the taxable year in which the expenditures were made. (B) Loss allowed If a loss is sustained with respect to any property described in subparagraph (A), a deduction shall be allowed for the expenditures described in subparagraph (A) for the taxable year in which such loss is sustained in an amount equal to the lesser of— (i) the amount allowable under section 165(a) for the expenditures if they had remained capitalized, or (ii) the amount of such expenditures which have not previously been amortized under subparagraph (A). (3) Treatment of certain long-term contracts In the case of any long-term contract entered into by the taxpayer on or after March 1, 1986, the taxable income from such contract shall be determined under the percentage of completion method of accounting (as modified by section 460(b)). For purposes of the preceding sentence, in the case of a contract described in section 460(e)(1), the percentage of the contract completed shall be determined under section 460(b)(1) by using the simplified procedures for allocation of costs prescri...

(a) Allowance of deduction (1) General rule There shall be allowed as a deduction any charitable contribution (as defined in subsection (c)) payment of which is made within the taxable year. A charitable contribution shall be allowable as a deduction only if verified under regulations prescribed by the Secretary. (2) Corporations on accrual basis In the case of a corporation reporting its taxable income on the accrual basis, if— (A) the board of directors authorizes a charitable contribution during any taxable year, and (B) payment of such contribution is made after the close of such taxable year and on or before the 15th day of the fourth month following the close of such taxable year, then the taxpayer may elect to treat such contribution as paid during such taxable year. The election may be made only at the time of the filing of the return for such taxable year, and shall be signified in such manner as the Secretary shall by regulations prescribe. (3) Future interests in tangible personal property For purposes of this section, payment of a charitable contribution which consists of a future interest in tangible personal property shall be treated as made only when all intervening interests in, and rights to the actual possession or enjoyment of, the property have expired or are held by persons other than the taxpayer or those standing in a relationship to the taxpayer described in section 267(b) or 707(b). For purposes of the preceding sentence, a fixture which is intended to be severed from the real property shall be treated as tangible personal property. (b) Percentage limitations (1) Individuals In the case of an individual, the deduction provided in subsection (a) shall be limited as provided in the succeeding subparagraphs. (A) General rule Any charitable contribution to— (i) a church or a convention or association of churches, (ii) an educational organization which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on, (iii) an organization the principal purpose or functions of which are the providing of medical or hospital care or medical education or medical research, if the organization is a hospital, or if the organization is a medical research organization directly engaged in the continuous active conduct of medical research in conjunction with a hospital, and during the calendar year in which the contribution is made such organization is committed to spend such contributions for such research before January 1 of the fifth calendar year which begins after the date such contribution is made, (iv) an organization which normally receives a substantial part of its support (exclusive of income received in the exercise or performance by such organization of its charitable, educational, or other purpose or function constituting the basis for its exemption under section 501(a)) from the United States or any State or political subdivision thereof or from direct or indirect contributions from the general public, and which is organized and operated exclusively to receive, hold, invest, and administer property and to make expenditures to or for the benefit of a college or university which is an organization referred to in clause (ii) of this subparagraph and which is an agency or instrumentality of a State or political subdivision thereof, or which is owned or operated by a State or political subdivision thereof or by an agency or instrumentality of one or more States or political subdivisions, (v) a governmental unit referred to in subsection (c)(1), (vi) an organization referred to in subsection (c)(2) which normally receives a substantial part of its support (exclusive of income received in the exercise or performance by such organization of its charitable, educational, or other purpose or function constituting the basis for its exemption under section 501(a)) from a governme...

(a) Capitalization of expenditures Except as otherwise provided in this section, no deduction shall be allowed for start-up expenditures. (b) Election to deduct (1) Allowance of deduction If a taxpayer elects the application of this subsection with respect to any start-up expenditures— (A) the taxpayer shall be allowed a deduction for the taxable year in which the active trade or business begins in an amount equal to the lesser of— (i) the amount of start-up expenditures with respect to the active trade or business, or (ii) $5,000, reduced (but not below zero) by the amount by which such start-up expenditures exceed $50,000, and (B) the remainder of such start-up expenditures shall be allowed as a deduction ratably over the 180-month period beginning with the month in which the active trade or business begins. (2) Dispositions before close of amortization period In any case in which a trade or business is completely disposed of by the taxpayer before the end of the period to which paragraph (1) applies, any deferred expenses attributable to such trade or business which were not allowed as a deduction by reason of this section may be deducted to the extent allowable under section 165. (3) Special rule for taxable years beginning in 2010 In the case of a taxable year beginning in 2010, paragraph (1)(A)(ii) shall be applied— (A) by substituting “$10,000” for “$5,000”, and (B) by substituting “$60,000” for “$50,000”. (c) Definitions For purposes of this section— (1) Start-up expenditures The term “start-up expenditure” means any amount— (A) paid or incurred in connection with— (i) investigating the creation or acquisition of an active trade or business, or (ii) creating an active trade or business, or (iii) any activity engaged in for profit and for the production of income before the day on which the active trade or business begins, in anticipation of such activity becoming an active trade or business, and (B) which, if paid or incurred in connection with the operation of an existing active trade or business (in the same field as the trade or business referred to in subparagraph (A)), would be allowable as a deduction for the taxable year in which paid or incurred. The term “start-up expenditure” does not include any amount with respect to which a deduction is allowable under section 163(a), 164, 174, or 174A. (2) Beginning of trade or business (A) In general Except as provided in subparagraph (B), the determination of when an active trade or business begins shall be made in accordance with such regulations as the Secretary may prescribe. (B) Acquired trade or business An acquired active trade or business shall be treated as beginning when the taxpayer acquires it. (d) Election (1) Time for making election An election under subsection (b) shall be made not later than the time prescribed by law for filing the return for the taxable year in which the trade or business begins (including extensions thereof). (2) Scope of election The period selected under subsection (b) shall be adhered to in computing taxable income for the taxable year for which the election is made and all subsequent taxable years.

(a) General rule Except as otherwise provided in this section, on the distribution of property by a corporation with respect to its stock, the earnings and profits of the corporation (to the extent thereof) shall be decreased by the sum of— (1) the amount of money, (2) the principal amount of the obligations of such corporation (or, in the case of obligations having original issue discount, the aggregate issue price of such obligations), and (3) the adjusted basis of the other property, so distributed. (b) Distributions of appreciated property On the distribution by a corporation, with respect to its stock, of any property (other than an obligation of such corporation) the fair market value of which exceeds the adjusted basis thereof— (1) the earnings and profits of the corporation shall be increased by the amount of such excess, and (2) subsection (a)(3) shall be applied by substituting “fair market value” for “adjusted basis”. For purposes of this subsection and subsection (a), the adjusted basis of any property is its adjusted basis as determined for purposes of computing earnings and profits. (c) Adjustments for liabilities In making the adjustments to the earnings and profits of a corporation under subsection (a) or (b), proper adjustment shall be made for— (1) the amount of any liability to which the property distributed is subject, and (2) the amount of any liability of the corporation assumed by a shareholder in connection with the distribution. (d) Certain distributions of stock and securities (1) In general The distribution to a distributee by or on behalf of a corporation of its stock or securities, of stock or securities in another corporation, or of property, in a distribution to which this title applies, shall not be considered a distribution of the earnings and profits of any corporation— (A) if no gain to such distributee from the receipt of such stock or securities, or property, was recognized under this title, or (B) if the distribution was not subject to tax in the hands of such distributee by reason of section 305(a). (2) Stock or securities For purposes of this subsection, the term “stock or securities” includes rights to acquire stock or securities. [(e) Repealed. Pub. L. 98–369, div. A, title I, § 61(a)(2)(B), July 18, 1984, 98 Stat. 581] (f) Effect on earnings and profits of gain or loss and of receipt of tax-free distributions (1) Effect on earnings and profits of gain or loss The gain or loss realized from the sale or other disposition (after February 28, 1913) of property by a corporation— (A) for the purpose of the computation of the earnings and profits of the corporation, shall (except as provided in subparagraph (B)) be determined by using as the adjusted basis the adjusted basis (under the law applicable to the year in which the sale or other disposition was made) for determining gain, except that no regard shall be had to the value of the property as of March 1, 1913; but (B) for purposes of the computation of the earnings and profits of the corporation for any period beginning after February 28, 1913, shall be determined by using as the adjusted basis the adjusted basis (under the law applicable to the year in which the sale or other disposition was made) for determining gain. Gain or loss so realized shall increase or decrease the earnings and profits to, but not beyond, the extent to which such a realized gain or loss was recognized in computing taxable income under the law applicable to the year in which such sale or disposition was made. Where, in determining the adjusted basis used in computing such realized gain or loss, the adjustment to the basis differs from the adjustment proper for the purpose of determining earnings and profits, then the latter adjustment shall be used in determining the increase or decrease above provided. For purposes of this subsection, a loss with respect to which a deduction is disallowed under section 1091 (relating to wash sales of stock or securities), o...

(a) Definition For purposes of this subtitle, the term “accumulated taxable income” means the taxable income, adjusted in the manner provided in subsection (b), minus the sum of the dividends paid deduction (as defined in section 561) and the accumulated earnings credit (as defined in subsection (c)). (b) Adjustments to taxable income For purposes of subsection (a), taxable income shall be adjusted as follows: (1) Taxes There shall be allowed as a deduction Federal income and excess profits taxes and income, war profits, and excess profits taxes of foreign countries and possessions of the United States (to the extent not allowable as a deduction under section 275(a)(4)), accrued during the taxable year or deemed to be paid by a domestic corporation under section 960 for the taxable year, but not including the accumulated earnings tax imposed by section 531 or the personal holding company tax imposed by section 541. (2) Charitable contributions The deduction for charitable contributions provided under section 170 shall be allowed without regard to section 170(b)(2). (3) Special deductions disallowed The special deductions for corporations provided in part VIII (except section 248) of subchapter B (section 241 and following, relating to the deduction for dividends received by corporations, etc.) shall not be allowed. (4) Net operating loss The net operating loss deduction provided in section 172 shall not be allowed. (5) Capital losses (A) In general Except as provided in subparagraph (B), there shall be allowed as a deduction an amount equal to the net capital loss for the taxable year (determined without regard to paragraph (7)(A)). (B) Recapture of previous deductions for capital gains The aggregate amount allowable as a deduction under subparagraph (A) for any taxable year shall be reduced by the lesser of— (i) the nonrecaptured capital gains deductions, or (ii) the amount of the accumulated earnings and profits of the corporation as of the close of the preceding taxable year. (C) Nonrecaptured capital gains deductions For purposes of subparagraph (B), the term “nonrecaptured capital gains deductions” means the excess of— (i) the aggregate amount allowable as a deduction under paragraph (6) for preceding taxable years beginning after July 18, 1984, over (ii) the aggregate of the reductions under subparagraph (B) for preceding taxable years. (6) Net capital gains (A) In general There shall be allowed as a deduction— (i) the net capital gain for the taxable year (determined with the application of paragraph (7)), reduced by (ii) the taxes attributable to such net capital gain. (B) Attributable taxes For purposes of subparagraph (A), the taxes attributable to the net capital gain shall be an amount equal to the difference between— (i) the taxes imposed by this subtitle (except the tax imposed by this part) for the taxable year, and (ii) such taxes computed for such year without including in taxable income the net capital gain for the taxable year (determined without the application of paragraph (7)). (7) Capital loss carryovers (A) Unlimited carryforward The net capital loss for any taxable year shall be treated as a short-term capital loss in the next taxable year. (B) Section 1212 inapplicable No allowance shall be made for the capital loss carryback or carryforward provided in section 1212. (8) Special rules for mere holding or investment companies In the case of a mere holding or investment company— (A) Capital loss deduction, etc., not allowed Paragraphs (5) and (7)(A) shall not apply. (B) Deduction for certain offsets There shall be allowed as a deduction the net short-term capital gain for the taxable year to the extent such gain does not exceed the amount of any capital loss carryover to such taxable year under section 1212 (determined without regard to paragraph (7)(B)). (C) Earnings and profits For purposes of subchapter C, the accumulated earnings and profits at any time shall not be less than they would be if thi...

(a) Definition For purposes of this part, the term “undistributed personal holding company income” means the taxable income of a personal holding company adjusted in the manner provided in subsections (b), (c), and (d), minus the dividends paid deduction as defined in section 561. In the case of a personal holding company which is a foreign corporation, not more than 10 percent in value of the outstanding stock of which is owned (within the meaning of section 958(a)) during the last half of the taxable year by United States persons, the term “undistributed personal holding company income” means the amount determined by multiplying the undistributed personal holding company income (determined without regard to this sentence) by the percentage in value of its outstanding stock which is the greatest percentage in value of its outstanding stock so owned by United States persons on any one day during such period. (b) Adjustments to taxable income For the purposes of subsection (a), the taxable income shall be adjusted as follows: (1) Taxes There shall be allowed as a deduction Federal income and excess profits taxes and income, war profits and excess profits taxes of foreign countries and possessions of the United States (to the extent not allowable as a deduction under section 275(a)(4)), accrued during the taxable year or deemed to be paid by a domestic corporation under section 960 for the taxable year, but not including the accumulated earnings tax imposed by section 531 or the personal holding company tax imposed by section 541. (2) Charitable contributions The deduction for charitable contributions provided under section 170 shall be allowed, but in computing such deduction the limitations in section 170(b)(1)(A), (B), (D), and (E) shall apply, and section 170(b)(2) and (d)(1) shall not apply. For purposes of this paragraph, the term “contribution base” when used in section 170(b)(1) means the taxable income computed with the adjustments (other than the 10-percent limitation) provided in section 170(b)(2) and (d)(1) and without deduction of the amount disallowed under paragraph (6) of this subsection. (3) Special deductions disallowed The special deductions for corporations provided in part VIII (except section 248) of subchapter B (section 241 and following, relating to the deduction for dividends received by corporations, etc.) shall not be allowed. (4) Net operating loss The net operating loss deduction provided in section 172 shall not be allowed, but there shall be allowed as a deduction the amount of the net operating loss (as defined in section 172(c)) for the preceding taxable year computed without the deductions provided in part VIII (except section 248) of subchapter B. (5) Net capital gains There shall be allowed as a deduction the net capital gain for the taxable year, minus the taxes imposed by this subtitle attributable to such net capital gain. The taxes attributable to such net capital gain shall be an amount equal to the difference between— (A) the taxes imposed by this subtitle (except the tax imposed by this part) for such year, and (B) such taxes computed for such year without including such excess in taxable income. (6) Expenses and depreciation applicable to property of the taxpayer The aggregate of the deductions allowed under section 162 (relating to trade or business expenses) and section 167 (relating to depreciation), which are allocable to the operation and maintenance of property owned or operated by the corporation, shall be allowed only in an amount equal to the rent or other compensation received for the use of, or the right to use, the property, unless it is established (under regulations prescribed by the Secretary) to the satisfaction of the Secretary— (A) that the rent or other compensation received was the highest obtainable, or, if none was received, that none was obtainable; (B) that the property was held in the course of a business carried on bona fide for profit; and (C) either that...

(a) General rule For purposes of section 831(b), the term “taxable investment income” means the gross investment income, minus the deductions provided in subsection (c). (b) Gross investment income For purposes of subsection (a), the term “gross investment income” means the sum of the following: (1) The gross amount of income during the taxable year from— (A) interest, dividends, rents, and royalties, (B) the entering into of any lease, mortgage, or other instrument or agreement from which the insurance company derives interest, rents, or royalties, (C) the alteration or termination of any instrument or agreement described in subparagraph (B), and (D) gains from sales or exchanges of capital assets to the extent provided in subchapter P (relating to capital gains and losses). (2) The gross income during the taxable year from any trade or business (other than an insurance business) carried on by the insurance company, or by a partnership of which the insurance company is a partner. In computing gross income under this paragraph, there shall be excluded any item described in paragraph (1). (c) Deductions In computing taxable investment income, the following deductions shall be allowed: (1) Tax-free interest The amount of interest which under section 103 is excluded for the taxable year from gross income. (2) Investment expenses Investment expenses paid or accrued during the taxable year. If any general expenses are in part assigned to or included in the investment expenses, the total deduction under this paragraph shall not exceed one-fourth of 1 percent of the mean of the book value of the invested assets held at the beginning and end of the taxable year plus one-fourth of the amount by which taxable investment income (computed without any deduction for investment expenses allowed by this paragraph, for tax-free interest allowed by paragraph (1), or for dividends received allowed by paragraph (7)), exceeds 3¾ percent of the book value of the mean of the invested assets held at the beginning and end of the taxable year. (3) Real estate expenses Taxes (as provided in section 164), and other expenses, paid or accrued during the taxable year exclusively on or with respect to the real estate owned by the company. No deduction shall be allowed under this paragraph for any amount paid out for new buildings, or for permanent improvements or betterments made to increase the value of any property. (4) Depreciation The depreciation deduction allowed by section 167. (5) Interest paid or accrued All interest paid or accrued within the taxable year on indebtedness, except on indebtedness incurred or continued to purchase or carry obligations the interest on which is wholly exempt from taxation under this subtitle. (6) Capital losses Capital losses to the extent provided in subchapter P (sec. 1201 and following) plus losses from capital assets sold or exchanged in order to obtain funds to meet abnormal insurance losses and to provide for the payment of dividends and similar distributions to policyholders. Capital assets shall be considered as sold or exchanged in order to obtain funds to meet abnormal insurance losses and to provide for the payment of dividends and similar distributions to policyholders to the extent that the gross receipts from their sale or exchange are not greater than the excess, if any, for the taxable year of the sum of dividends and similar distributions paid to policyholders, losses paid, and expenses paid over the sum of the items described in subsection (b) (other than paragraph (1)(D) thereof) and net premiums received. In the application of section 1212 for purposes of this section, the net capital loss for the taxable year shall be the amount by which losses for such year from sales or exchanges of capital assets exceeds the sum of the gains from such sales or exchanges and whichever of the following amounts is the lesser: (A) the taxable investment income (computed without regard to gains or losses from sales...

(a) Requirements applicable to regulated investment companies The provisions of this part (other than subsection (c) of this section) shall not be applicable to a regulated investment company for a taxable year unless— (1) the deduction for dividends paid during the taxable year (as defined in section 561, but without regard to capital gain dividends) equals or exceeds the sum of— (A) 90 percent of its investment company taxable income for the taxable year determined without regard to subsection (b)(2)(D); and (B) 90 percent of the excess of (i) its interest income excludable from gross income under section 103(a) over (ii) its deductions disallowed under sections 265 and 171(a)(2), and (2) either— (A) the provisions of this part applied to the investment company for all taxable years ending on or after November 8, 1983, or (B) as of the close of the taxable year, the investment company has no earnings and profits accumulated in any taxable year to which the provisions of this part (or the corresponding provisions of prior law) did not apply to it. The Secretary may waive the requirements of paragraph (1) for any taxable year if the regulated investment company establishes to the satisfaction of the Secretary that it was unable to meet such requirements by reason of distributions previously made to meet the requirements of section 4982. (b) Method of taxation of companies and shareholders (1) Imposition of tax on regulated investment companies There is hereby imposed for each taxable year upon the investment company taxable income of every regulated investment company a tax computed as provided in section 11, as though the investment company taxable income were the taxable income referred to in section 11. (2) Investment company taxable income The investment company taxable income shall be the taxable income of the regulated investment company adjusted as follows: (A) There shall be excluded the amount of the net capital gain, if any. (B) The net operating loss deduction provided in section 172 shall not be allowed. (C) The deductions for corporations provided in part VIII (except section 248) in subchapter B (section 241 and following, relating to the deduction for dividends received, etc.) shall not be allowed. (D) The deduction for dividends paid (as defined in section 561) shall be allowed, but shall be computed without regard to capital gain dividends and exempt-interest dividends. (E) The taxable income shall be computed without regard to section 443(b) (relating to computation of tax on change of annual accounting period). (F) The taxable income shall be computed without regard to section 454(b) (relating to short-term obligations issued on a discount basis) if the company so elects in a manner prescribed by the Secretary. (G) There shall be deducted an amount equal to the tax imposed by subsections (d)(2) and (i) of section 851 for the taxable year. (3) Capital gains (A) Imposition of tax There is hereby imposed for each taxable year in the case of every regulated investment company a tax, determined as provided in section 11(b), on the excess, if any, of the net capital gain over the deduction for dividends paid (as defined in section 561) determined with reference to capital gain dividends only. (B) Treatment of capital gain dividends by shareholders A capital gain dividend shall be treated by the shareholders as a gain from the sale or exchange of a capital asset held for more than 1 year. (C) Definition of capital gain dividend For purposes of this part— (i) In general Except as provided in clause (ii), a capital gain dividend is any dividend, or part thereof, which is reported by the company as a capital gain dividend in written statements furnished to its shareholders. (ii) Excess reported amounts If the aggregate reported amount with respect to the company for any taxable year exceeds the net capital gain of the company for such taxable year, a capital gain dividend is the excess of— (I) the reported capital ...

(a) Requirements applicable to real estate investment trusts The provisions of this part (other than subsection (d) of this section and subsection (g) of section 856) shall not apply to a real estate investment trust for a taxable year unless— (1) the deduction for dividends paid during the taxable year (as defined in section 561, but determined without regard to capital gains dividends) equals or exceeds— (A) the sum of— (i) 90 percent of the real estate investment trust taxable income for the taxable year (determined without regard to the deduction for dividends paid (as defined in section 561) and by excluding any net capital gain); and (ii) 90 percent of the excess of the net income from foreclosure property over the tax imposed on such income by subsection (b)(4)(A); minus (B) any excess noncash income (as determined under subsection (e)); and (2) either— (A) the provisions of this part apply to the real estate investment trust for all taxable years beginning after February 28, 1986, or (B) as of the close of the taxable year, the real estate investment trust has no earnings and profits accumulated in any non-REIT year. For purposes of the preceding sentence, the term “non-REIT year” means any taxable year to which the provisions of this part did not apply with respect to the entity. The Secretary may waive the requirements of paragraph (1) for any taxable year if the real estate investment trust establishes to the satisfaction of the Secretary that it was unable to meet such requirements by reason of distributions previously made to meet the requirements of section 4981. (b) Method of taxation of real estate investment trusts and holders of shares or certificates of beneficial interest (1) Imposition of tax on real estate investment trusts There is hereby imposed for each taxable year on the real estate investment trust taxable income of every real estate investment trust a tax computed as provided in section 11, as though the real estate investment trust taxable income were the taxable income referred to in section 11. (2) Real estate investment trust taxable income For purposes of this part, the term “real estate investment trust taxable income” means the taxable income of the real estate investment trust, adjusted as follows: (A) The deductions for corporations provided in part VIII (except section 248) of subchapter B (section 241 and following, relating to the deduction for dividends received, etc.) shall not be allowed. (B) The deduction for dividends paid (as defined in section 561) shall be allowed, but shall be computed without regard to that portion of such deduction which is attributable to the amount excluded under subparagraph (D). (C) The taxable income shall be computed without regard to section 443(b) (relating to computation of tax on change of annual accounting period). (D) There shall be excluded an amount equal to the net income from foreclosure property. (E) There shall be deducted an amount equal to the tax imposed by paragraphs (5) and (7) of this subsection, section 856(c)(7)(C), and section 856(g)(5) for the taxable year. (F) There shall be excluded an amount equal to any net income derived from prohibited transactions. (3) Capital gains (A) Treatment of capital gain dividends by shareholders A capital gain dividend shall be treated by the shareholders or holders of beneficial interests as a gain from the sale or exchange of a capital asset held for more than 1 year. (B) Definition of capital gain dividend For purposes of this part, a capital gain dividend is any dividend, or part thereof, which is designated by the real estate investment trust as a capital gain dividend in a written notice mailed to its shareholders or holders of beneficial interests at any time before the expiration of 30 days after the close of its taxable year (or mailed to its shareholders or holders of beneficial interests with its annual report for the taxable year); except that, if there is an increase in the excess de...

(a) General rule Except as otherwise provided in this subchapter, an S corporation shall not be subject to the taxes imposed by this chapter. (b) Computation of corporation’s taxable income The taxable income of an S corporation shall be computed in the same manner as in the case of an individual, except that— (1) the items described in section 1366(a)(1)(A) shall be separately stated, (2) the deductions referred to in section 703(a)(2) shall not be allowed to the corporation, (3) section 248 shall apply, and (4) section 291 shall apply if the S corporation (or any predecessor) was a C corporation for any of the 3 immediately preceding taxable years. (c) Elections of the S corporation (1) In general Except as provided in paragraph (2), any election affecting the computation of items derived from an S corporation shall be made by the corporation. (2) Exceptions In the case of an S corporation, elections under the following provisions shall be made by each shareholder separately— (A) section 617 (relating to deduction and recapture of certain mining exploration expenditures), and (B) section 901 (relating to taxes of foreign countries and possessions of the United States). (d) Recapture of LIFO benefits (1) In general If— (A) an S corporation was a C corporation for the last taxable year before the first taxable year for which the election under section 1362(a) was effective, and (B) the corporation inventoried goods under the LIFO method for such last taxable year, the LIFO recapture amount shall be included in the gross income of the corporation for such last taxable year (and appropriate adjustments to the basis of inventory shall be made to take into account the amount included in gross income under this paragraph). (2) Additional tax payable in installments (A) In general Any increase in the tax imposed by this chapter by reason of this subsection shall be payable in 4 equal installments. (B) Date for payment of installments The first installment under subparagraph (A) shall be paid on or before the due date (determined without regard to extensions) for the return of the tax imposed by this chapter for the last taxable year for which the corporation was a C corporation and the 3 succeeding installments shall be paid on or before the due date (as so determined) for the corporation’s return for the 3 succeeding taxable years. (C) No interest for period of extension Notwithstanding section 6601(b), for purposes of section 6601, the date prescribed for the payment of each installment under this paragraph shall be determined under this paragraph. (3) LIFO recapture amount For purposes of this subsection, the term “LIFO recapture amount” means the amount (if any) by which— (A) the inventory amount of the inventory asset under the first-in, first-out method authorized by section 471, exceeds (B) the inventory amount of such assets under the LIFO method. For purposes of the preceding sentence, inventory amounts shall be determined as of the close of the last taxable year referred to in paragraph (1). (4) Other definitions For purposes of this subsection— (A) LIFO method The term “LIFO method” means the method authorized by section 472. (B) Inventory assets The term “inventory assets” means stock in trade of the corporation, or other property of a kind which would properly be included in the inventory of the corporation if on hand at the close of the taxable year. (C) Method of determining inventory amount The inventory amount of assets under a method authorized by section 471 shall be determined— (i) if the corporation uses the retail method of valuing inventories under section 472, by using such method, or (ii) if clause (i) does not apply, by using cost or market, whichever is lower. (D) Not treated as member of affiliated group Except as provided in regulations, the corporation referred to in paragraph (1) shall not be treated as a member of an affiliated group with respect to the amount included in gross income under paragra...

(a) General rule If for the taxable year an S corporation has— (1) accumulated earnings and profits at the close of such taxable year, and (2) gross receipts more than 25 percent of which are passive investment income, then there is hereby imposed a tax on the income of such corporation for such taxable year. Such tax shall be computed by multiplying the excess net passive income by the highest rate of tax specified in section 11(b). (b) Definitions For purposes of this section— (1) Excess net passive income (A) In general Except as provided in subparagraph (B), the term “excess net passive income” means an amount which bears the same ratio to the net passive income for the taxable year as— (i) the amount by which the passive investment income for the taxable year exceeds 25 percent of the gross receipts for the taxable year, bears to (ii) the passive investment income for the taxable year. (B) Limitation The amount of the excess net passive income for any taxable year shall not exceed the amount of the corporation’s taxable income for such taxable year as determined under section 63(a)— (i) without regard to the deductions allowed by part VIII of subchapter B (other than the deduction allowed by section 248, relating to organization expenditures), and (ii) without regard to the deduction under section 172. (2) Net passive income The term “net passive income” means— (A) passive investment income, reduced by (B) the deductions allowable under this chapter which are directly connected with the production of such income (other than deductions allowable under section 172 and part VIII of subchapter B). (3) Passive investment income, etc. The terms “passive investment income” and “gross receipts” have the same respective meanings as when used in paragraph (3) of section 1362(d). (4) Coordination with section 1374 Notwithstanding paragraph (3), the amount of passive investment income shall be determined by not taking into account any recognized built-in gain or loss of the S corporation for any taxable year in the recognition period. Terms used in the preceding sentence shall have the same respective meanings as when used in section 1374. (c) Credits not allowable No credit shall be allowed under part IV of subchapter A of this chapter (other than section 34) against the tax imposed by subsection (a). (d) Waiver of tax in certain cases If the S corporation establishes to the satisfaction of the Secretary that— (1) it determined in good faith that it had no accumulated earnings and profits at the close of a taxable year, and (2) during a reasonable period of time after it was determined that it did have accumulated earnings and profits at the close of such taxable year such earnings and profits were distributed, the Secretary may waive the tax imposed by subsection (a) for such taxable year.