1036
PUBLIC LAW 87-834-OCT. 16, 1962
[76 STAT.
made by subsection (c) shall apply to taxable years beginning after December 31, 1961, and ending after the date of the enactment of this Act. SEC. 14. FOREIGN INVESTMENT COMPANIES. (a) TREATMENT OF SALE COMPANIES.—
26 USC 1231-^
1244
Ante. p. 1032.
OF STOCK OF FOREIGN INVESTMENT
(1) IN GENERAL.—Part IV of subchapter P of chapter 1 (relating to special rules for determining capital gains and losses) is amended by adding after section 1245 (as added by section 13 of this Act) the following new sections: "SEC. 1246. GAIN ON FOREIGN INVESTMENT COMPANY STOCK. " (a) T R E A T M E N T OF G A I N AS ORDINARY INCOME.— "(1) GENERAL RULE.—In the case of a sale or
Ante. p. 1006. Ante, p. 1019.
exchange (or a distribution which, under section 302 or 331, is treated as an exchange of stock) after December 31, 1962, of stock in a foreign corporation which was a foreign investment company (as defined in subsection (b)) at any time during the period during which the taxpayer held such stock, any gain shall be treated as gain from the sale or exchange of property which is not a capital asset, to the extent of the taxpayer's ratable share of the earnings and profits of such corporation accumulated for taxable years beginning after December 31, 1962. "(2) EATABLE SHARE.—For purposes of this section, the taxpayer's ratable share shall be determined under regulations prescribed by the Secretary or his delegate, but shall include only his ratable share of the accumulated earnings and profits of such corporation— " (A) for the period during which the taxpayer held such stock, but " (B) excluding such earnings and profits attributable to any amount previously included in the gross income of such taxpayer under section 951 (but only to the extent the inclusion of such amount did not result in an exclusion of any Other amouut from gross income under section 959). "(3)
TAXPAYER TO ESTABLISH EARNINGS AND PROFITS.—Unless
the taxpayer establishes the amount of the accumulated earnings and profits of the foreign investment company and the ratable share thereof for the period during which the taxpayer held such stock, all the gain from the sale or exchaiige of stock in such company shall be considered as gain from the sale or exchange of property which is not a capital asset. " (4)
54 Stat. 789.
HOLDING PERIOD OF STOCK MUST BE MORE THAN 6 MONTHS.—
This section shall not apply with respect to the. sale or exchange of stock where the holding period of such stock as of the date of such sale or exchange is 6 months or less. " (b) DEFINITION OF FOREIGN INVESTMENT COMPANY.—For purposes of this section, the term 'foreign investment company' means any foreign corporation which, for any taxable year beginning after December 31, 1962, is— "(1) registered under the Investment Company Act of 1940, as amended (15 U.S.C. 80a-l to 80b-2), either as a management company or as a unit investment trust, or "(2) fengaged (or holding itself out as being engaged) primarily in the business of investing, reinvesting, or trading in securities (within the meaning of section 3(a)(1) of such Act, as limited by paragraphs (2) through (10) (except paragraph (6)(C)) and paragraphs (12) through (15) of section 3(c) of such Act) at a time when more than 50 percent of the total com-
�
