Page:United States Statutes at Large Volume 111 Part 1.djvu/964

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Ill STAT. 940 PUBLIC LAW 105-34—AUG. 5, 1997 Subtitle F—Foreign Provisions SEC. 1051. DEFINITION OF FOREIGN PERSONAL HOLDING COMPANY INCOME. (a) INCOME FROM NOTIONAL PRINCIPAL CONTRACTS AND PAY- MENTS IN LIEU OF DIVIDENDS. — (1) IN GENERAL.— Paragraph (1) of section 954(c) (defining foreign personal holding company income) is amended by adding at the end the following new subparagraphs: "(F) INCOME FROM NOTIONAL PRINCIPAL CONTRACTS. — Net income from notional principal contracts. Any item of income, gain, deduction, or loss from a notional principal contract entered into for purposes of hedging any item described in any preceding subparagraph shall not be taken into account for purposes of this subparagraph but shall be taken into account under such other subparagraph. "(G) PAYMENTS IN LIEU OF DIVIDENDS.— Payments in lieu of dividends which are made pursuant to an agreement to which section 1058 applies.". (2) CONFORMING AMENDMENT.—Subparagraph (B) of section 954(c)(1) is amended— (A) by striking the second sentence, and (B) by striking "also" in the last sentence. (b) EXCEPTION FOR DEALERS. — Paragraph (2) of section 954(c) is amended by adding at the end the following new subparagraph: "(C) EXCEPTION FOR DEALERS.— Except as provided in subparagraph (A), (E), or (G) of paragraph (1) or by regulations, in the case of a regular dealer in property (within the meaning of paragraph (1)(B)), forward contracts, option contracts, or similar financial instruments (including notional principal contracts and all instruments referenced to commodities), there shall not be taken into account in computing foreign personal holding income any item of income, gain, deduction, or loss from any transaction (including hedging transactions) entered into in the ordinary course of such dealer's trade or business as such a dealer.". 26 USC 954 note. (c) EFFECTIVE DATE. —The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act. SEC. 1052. PERSONAL PROPERTY USED PREDOMINANTLY IN THE UNITED STATES TREATED AS NOT PROPERTY OF A LIKE KIND WITH RESPECT TO PROPERTY USED PREDOMI- NANTLY OUTSIDE THE UNITED STATES. (a) IN GENERAL.— Subsection (h) of section 1031 (relating to exchange of property held for productive use or investment) is amended to read as follows: "(h) SPECIAL RULES FOR FOREIGN REAL AND PERSONAL PROP- ERTY.— For purposes of this section— "(1) REAL PROPERTY. —Real property located in the United States and real property located outside the United States are not property of a like kind. " (2) PERSONAL PROPERTY.— "(A) IN GENERAL.—Personal property used predominantly within the United States and personal property