i 828 Sto ck own ership, f ami ly, and pa rtn er- ship rule. Special rule for year 1936 . Foreign personal h olding compan y . 49 Stat . 1732. Unp aid exp enses and interest. 49 Stat .1638,1659 . 49 Stat. 1662 . Aue, p . 827. Effective dates. 75TH CONGRESS, 1sT SESSION-CH . 815-AUGUST 26, 1937 "( 2) STOCK OWNERSHIP, FAMILY, AND PARTNERSHIP RUL E .-For the purposes of determining, in applying paragraph (1), the owner ship o f stoc k- "(A) Stock owned, directly, or indirectly, by or for a cor- poration, partnership, estate, or trust, shall be considered as being owned proportionately by or for its shareholders, partners, or beneficiaries ; "(B) An individual shall be considered as owning the st ock own ed, dire ctly or ind irec tly, by or for his fami ly ; " (C) An individual owning (otherwise than by the appli- cation of subparagraph (B)) any stock in a corporation shall be considered as owning the stock owned, directly or indirectly, by or for his partner ; "(D) The family of an individual shall include only his brothers and sisters (whether by the whole or half blood), spouse ancestors, and lineal descendants ; and "(E ; Constructive Ownership as Actual Ownership .- Stock constructively owned by a person by reason of the application of subparagraph (A) shall, for the purpose of applying subparagraph (A), (B), or (C), be treated as actually owned by such person, but stock constructively owned by an individual by reason of the application of sub- paragraph (B) or (C) shall not be treated as owned by him for the purpose of again applying either of such subpara- graphs in order to make another the constructive owner of such stock. "(3 ) SPE CI AL RU LE FOR Y EAR 1936 .-In applying paragraph (1) (C) (i) in a case where the preceding taxable year therein referred to began in the calendar year 1936, the determination as to whet her the corpo ration was a foreign perso nal holding company shall be made under section 351 (b) (1) befo re the amendment of Title IA made by section 1 of the Revenue Act of 1937 . "( C) UNPAID EXPENSES AND INTEREST .--Iii computing net income no deduction shall be allowed in respect of expenses incurred under section 23 (a) or interest accrued under section 23 (b)- "( 1) If not pai d within the taxable year or within two and one half months after the close thereof ; and "(2 ) If, by reason of the method of accounting of the person to whom the payment is to be made, the amount thereof is not, unless paid, includible in the gross income of such person for the taxable year in which or with which the taxable year of the taxpayer ends ; and "(3 ) If, at the close of the taxable year of the taxpayer or at any time w ithin two and one half mon ths thereafte r, both the taxpayer and the person to whom the payment is to be made are persons between whom losses would be disallowed under section 24 (b) ." (b) Section 24 (b) and section 24 (c) of the Revenue Act of 1936, as in force prior to the amendment to section 24 made by sub- section (a) of this section, are amended by striking out "(b)" and 66 (c) " and inserting in lieu thereof "(d)" and "(e)" . SEC. 302 . EFFECTIVE DATES . The amendments made by this title shall apply only with respect to taxable years beginning after December 31, 1936 .
