Ill STAT. 968 PUBLIC LAW 105-34—AUG. 5, 1997 " (4) LOOK-THRU APPLIES TO DIVIDENDS FROM NONCON- TROLLED SECTION 902 CORPORATIONS. — "(A) IN GENERAL. —For purposes of this subsection, any applicable dividend shall be treated as income in a separate category in proportion to the ratio of— "(i) the portion of the earnings and profits described in subparagraph (B)(ii) attributable to income in such category, to "(ii) the total amount of such earnings and profits. " (B) APPLICABLE DIVIDEND.— For purposes of subparagraph (A), the term 'applicable dividend' means any dividend— "(i) from a noncontrolled section 902 corporation with respect to the taxpayer, and "(ii) paid out of earnings and profits accumulated in taxable years beginning after December 31, 2002. Applicability. "(C) SPECIAL RULES.— "(i) IN GENERAL.— Rules similar to the rules of paragraph (3)(F) shall apply for purposes of this paragraph. "(ii) EARNINGS AND PROFITS. —For purposes of this paragraph and paragraph (1)(E)— "(I) IN GENERAL.—The rules of section 316 shall apply. "(II) REGULATIONS. —The Secretary may prescribe regulations regarding the treatment of distributions out of earnings and profits for periods prior to the taxpayer's acquisition of such stock.". 26 USC 904 note. (c) EFFECTIVE DATE. —The amendments made by this section shall apply to taxable years beginning after December 31, 2002. Subtitle B—Treatment of Controlled Foreign Corporations SEC. 1111. GAIN ON CERTAIN STOCK SALES BY CONTROLLED FOREIGN CORPORATIONS TREATED AS DIVIDENDS. (a) GENERAL RULE.— Section 964 (relating to miscellaneous provisions) is amended by adding at the end thereof the following new subsection: "(e) GAIN ON CERTAIN STOCK SALES BY CONTROLLED FOREIGN CORPORATIONS TREATED AS DIVIDENDS.— "(1) IN GENERAL. — If a controlled foreign corporation sells or exchanges stock in any other foreign corporation, gain recognized on such sale or exchange shall be included in the gross income of such controlled foreign corporation as a dividend to the same extent that it would have been so included under section 1248(a) if such controlled foreign corporation were a United States person. For purposes of determining the amount which would have been so includible, the determination of whether such other foreign corporation was a controlled foreign corporation shall be made without regard to the preceding sentence. "(2) SAME COUNTRY EXCEPTION NOT APPLICABLE.— Clause (i) of section 954(c)(3)(A) shall not apply to any amount treated as a dividend by reason of paragraph (1).
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