118 STAT. 1435 PUBLIC LAW 108–357—OCT. 22, 2004 (e) EFFECTIVE DATE.—The amendments made by this section shall take effect on the date of the enactment of this Act. SEC. 234. DISREGARD OF UNEXERCISED POWERS OF APPOINTMENT IN DETERMINING POTENTIAL CURRENT BENEFICIARIES OF ESBT. (a) IN GENERAL.—Section 1361(e)(2) (defining potential current beneficiary) is amended— (1) by inserting ‘‘(determined without regard to any power of appointment to the extent such power remains unexercised at the end of such period)’’ after ‘‘of the trust’’ in the first sentence, and (2) by striking ‘‘60 day’’ in the second sentence and inserting ‘‘1 year’’. (b) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 2004. SEC. 235. TRANSFER OF SUSPENDED LOSSES INCIDENT TO DIVORCE, ETC. (a) IN GENERAL.—Section 1366(d)(2) (relating to indefinite carryover of disallowed losses and deductions) is amended to read as follows: ‘‘(2) INDEFINITE CARRYOVER OF DISALLOWED LOSSES AND DEDUCTIONS.— ‘‘(A) IN GENERAL.—Except as provided in subparagraph (B), any loss or deduction which is disallowed for any taxable year by reason of paragraph (1) shall be treated as incurred by the corporation in the succeeding taxable year with respect to that shareholder. ‘‘(B) TRANSFERS OF STOCK BETWEEN SPOUSES OR INCIDENT TO DIVORCE.—In the case of any transfer described in section 1041(a) of stock of an S corporation, any loss or deduction described in subparagraph (A) with respect such stock shall be treated as incurred by the corporation in the succeeding taxable year with respect to the transferee.’’. (b) EFFECTIVE DATE.—The amendment made by this section shall apply to taxable years beginning after December 31, 2004. SEC. 236. USE OF PASSIVE ACTIVITY LOSS AND AT RISK AMOUNTS BY QUALIFIED SUBCHAPTER S TRUST INCOME BENE FICIARIES. (a) IN GENERAL.—Section 1361(d)(1) (relating to special rule for qualified subchapter S trust) is amended— (1) by striking ‘‘and’’ at the end of subparagraph (A), (2) by striking the period at the end of subparagraph (B) and inserting ‘‘, and’’, and (3) by adding at the end the following new subparagraph: ‘‘(C) for purposes of applying sections 465 and 469 to the beneficiary of the trust, the disposition of the S corporation stock by the trust shall be treated as a disposi tion by such beneficiary.’’. (b) EFFECTIVE DATE.—The amendments made by this section shall apply to transfers made after December 31, 2004. 26 USC 1361 note. 26 USC 1366 note. 26 USC 1361 note. 26 USC 512 note.
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