Ill STAT. 910 PUBLIC LAW 105-34—AUG. 5, 1997 (1) IN GENERAL,— Paragraph (1) of section 1234A (relating to gains and losses from certain terminations) is amended by striking "personal property (as defined in section 1092(d)(1))" and inserting "property". 26 USC 1234A (2) EFFECTIVE DATE. —The amendment made by paragraph i^ote. (1) shall apply to terminations more than 30 days after the date of the enactment of this Act. (b) TREATMENT OF SHORT SALES OF PROPERTY WHICH BECOMES SUBSTANTIALLY WORTHLESS.— (1) IN GENERAL. — Section 1233 is amended by adding at the end the following new subsection: "(h) SHORT SALES OF PROPERTY WHICH BECOMES SUBSTAN- TIALLY WORTHLESS.— "(1) IN GENERAL.—I f— "(A) the taxpayer enters into a short sale of property, and "(B) such property becomes substantially worthless, the taxpayer shall recognize gain in the same manner as if the short sale were closed when the property becomes substantially worthless. To the extent provided in regulations prescribed by the Secretary, the preceding sentence also shall apply with respect to any option with respect to property, any offsetting notional principal contract with respect to property, any futures or forward contract to deliver any property, and any other similar transaction. "(2) STATUTE OF LIMITATIONS.— If property becomes substantially worthless during a taxable year and any short sale of such property remains open at the time such property becomes substantially worthless, then— "(A) the statutory period for the assessment of any deficiency attributable to any part of the gain on such transaction shall not expire before the earlier of— "(i) the date which is 3 years after the date the Secretary is notified by the taxpayer (in such manner as the Secretary may by regulations prescribe) of the substantial worthlessness of such property, or "(ii) the date which is 6 years after the date the return for such taxable year is filed, and "(B) such deficiency may be assessed before the date applicable under subparagraph (A) notwithstanding the provisions of any other law or rule of law which would otherwise prevent such assessment.". 26 USC 1233 (2) EFFECTIVE DATE.— The amendment made by paragraph "lote. (1) shall apply to property which becomes substantially worthless after the date of the enactment of this Act. (c) APPLICATION OF CAPITAL TREATMENT, ETC. TO OBLIGATIONS ISSUED BY NATURAL PERSONS. — (1) IN GENERAL.— Section 1271(b) is amended to read as follows: "(b) EXCEPTION FOR CERTAIN OBLIGATIONS.— "(1) IN GENERAL.—T h is section shall not apply to— "(A) any obligation issued by a natural person before June 9, 1997, and "(B) any obligation issued before July 2, 1982, by an issuer which is not a corporation and is not a government or political subdivision thereof.