PUBLIC LAW 104-188—AUG. 20, 1996 110 STAT. 1829 recent 5 taxable years ending before October 14, 1995, then, in lieu of applying subparagraph (A), the term 'base period year' means only those taxable years (of such 5 taxable years) for which the corporation has significant possession income; except that, if such corporation has significant possession income for 4 of such 5 taxable years, the rule of subparagraph (A)(ii) shall apply. "(ii) SPECIAL RULE. —I f there is no year (of such 5 tsixable years) for which a corporation has significant possession income— "(I) the term 'base period year' means the first taxable year ending on or after October 14, 1995, but "(II) the amount of possession income for such year which is taken into account under paragraph (4) shall be the amount which would be determined if such year were a short taxable year ending on September 30, 1995. "(iii) SIGNIFICANT POSSESSION INCOME.— For purposes of this subparagraph, the term 'significant possession income' means possession income which exceeds 2 percent of the possession income of the taxpayer for the taxable year (of the period of 6 taxable years ending with the first taxable year ending on or after October 14, 1995) having the greatest possession income. "(C) ELECTION TO USE ONE BASE PERIOD YEAR. — "(i) IN GENERAL.— At the election of the taxpayer, the term 'base period year' means— "(I) only the last taxable year of the corporation ending in calendar year 1992, or "(II) a deemed taxable year which includes the first ten months of calendar year 1995. "(ii) BASE PERIOD INCOME FOR 1995. —In determining the adjusted base period income of the corporation for the deemed taxable year under clause (i)(II), the possession income shall be annualized and shall be determined without regard to any extraordinary item, "(iii) ELECTION. —An election under this subparagraph by any possession corporation may be made only for the corporation's first taxable year beginning after December 31, 1995, for which it is a possession corporation. The rules of subclauses (II) and (III) of subsection (a)(4)(B)(iii) shall apply to the election under this subparagraph. "(D) ACQUISITIONS AND DISPOSITIONS. —Rules similar to the rules of subparagraphs (A) and (B) of section 41(f)(3) shall apply for purposes of this subsection. "(6) POSSESSION INCOME.—For purposes of this subsection, the term 'possession income' means, with respect to any possession, the income referred to in subsection (a)(1)(A) determined with respect to that possession. In no event shall possession income be treated as being less than zero. "(7) SHORT YEARS.— I f the current year or a base period year is a short taxable year, the application of this subsection
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