Page:United States Statutes at Large Volume 113 Part 3.djvu/414

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113 STAT. 1932 PUBLIC LAW 106-170—DEC. 17, 1999 imposed by this chapter for such taxable year shall be increased by the amount of interest determined under paragraph (2) with respect to each prior taxable year during any portion of which the constructive ownership transaction was open. Any amount payable under this paragraph shall be taken into account in computing the amount of any deduction allowable to the taxpayer for interest paid or accrued during such taxable year. "(2) AMOUNT OF INTEREST.— The amount of interest determined under this paragraph with respect to a prior taxable year is the amount of interest which would have been imposed under section 6601 on the underpayment of tax for such year which would have resulted if the gain (which is treated as ordinary income by reason of subsection (a)(1)) had been included in gross income in the taxable years in which it accrued (determined by treating the income as accruing at a constant rate equal to the applicable Federal rate as in effect on the day the transaction closed). The period during which such interest shall accrue shall end on the due date (without extensions) for the return of tax imposed by this chapter for the taxable year in which such transaction closed. "(3) APPLICABLE FEDERAL RATE.— For purposes of paragraph (2), the applicable Federal rate is the applicable Federal rate determined under section 1274(d) (compounded semiannually) which would apply to a debt instrument with a term equal to the period the transaction was open. " (4) No CREDITS AGAINST INCREASE IN TAX. —Any increase in tax under paragraph (1) shall not be treated as tax imposed by this chapter for purposes of determining— "(A) the amount of any credit allowable under this chapter, or "(B) the amount of the tax imposed by section 55. "(c) FINANCIAL ASSET.— For purposes of this section— "(1) IN GENERAL.— The term 'financial asset' means— "(A) any equity interest in any pass-thru entity, and "(B) to the extent provided in regulations— "(i) any debt instrument, and "(ii) any stock in a corporation which is not a pass-thru entity. "(2) PASS-THRU ENTITY.— For purposes of paragraph (1), the term 'pass-thru entity' means— "(A) a regulated investment company, "(B) a real estate investment trust, "(C) an S corporation, "(D) a partnership, "(E) a trust, "(F) a common trust fund, "(G) a passive foreign investment company (as defined in section 1297 without regard to subsection (e) thereof), "(H) a foreign personal holding company, "(I) a foreign investment company (as defined in section 1246(b)), and "(J) a REMIC. "(d) CONSTRUCTIVE OWNERSHIP TRANSACTION. — For purposes of this section—