Page:United States Statutes at Large Volume 54 Part 1.djvu/1020

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PUBLIC LAWS-CH. 757-OCT. 8 , 1940 Abnormalities in in- come. Determination of equity invested capi- Ant, p. 982 "SEC. 721. ABNORMALITIES IN INCOME IN TAXABLE PERIOD. "If there is includible in the gross income of the taxpayer for any taxable year an item of income of any one or more of the following classes: "(a) Arising out of a claim, award, judgment, or decree, or interest on any of the foregoing; or "(b) Constituting an amount payable under a contract the performance of which required more than 12 months; or "(c) Resulting from exploration, discovery, prospecting, research, or development of tangible property, patents, formulae, or processes, or any combination of the foregoing, extending over a period of more than 12 months; or "(d) Includible in gross income for the taxable year rather than for a different taxable year by reason of a change in the taxpayer's accounting period or method of accounting; or "(e) In the case of a lessor of real property, amounts included in gross income for the taxable year by reason of the termination of the lease; or "(f) Dividends on stock of foreign corporations, except foreign personal holding companies; and, in the light of the taxpayer's business, it is abnormal for the taxpayer to derive income of such class, or, if the taxpayer normally derives income of such class, the item includible in the gross income of the taxable year is grossly disproportionate to the gross income of the same class in the four previous taxable years, then: (1) the amount of such item attributable to any previous taxable year or years shall be determined under rules and regulations prescribed by the Commissioner with the approval of the Secretary; (2) the amount of such item attributable to any future taxable year or years shall be determined under rules and regulations prescribed by the Commis- sioner with the approval of the Secretary and shall, for the purposes of this subchapter, be included in the gross income for the future year or years to which attributable; and (3) the tax under this sub- chapter for the taxable year (in which the whole of such item would, without regard to this section, be includible) shall not exceed the sum of: "(A) The tax under this subchapter for such taxable year computed without the inclusion in gross income of the portion of such item which is attributable to any other taxable year, and "(B) The aggregate of the increase in the tax under this sub- chapter which would have resulted for each previous taxable year to which any portion of such item is attributable, computed as if an amount equal to such portion had been included in gross income for such previous taxable year. "SEC. 722 . ADJUSTMENT OF ABNORMALITIES IN INCOME AND CAP- ITAL BY THE COMMISSIONER. "For the purposes of this subchapter, the Commissioner shall also have authority to make such adjustments as may be necessary to adjust abnormalities affecting income or capital, and his decision shall be subject to review by the United States Board of Tax Appeals. "SEC. 723. EQUITY INVESTED CAPITAL IN SPECIAL CASES. "Where the Commissioner determines that the equity invested capital as of the beginning of the taxpayer's first taxable year under this subchapter cannot be determined in accordance with section 718, the equity invested capital as of the beginning of such year shall 986 [54 STAT.