56 STAT.] 77TH CONG. , 2D SESS.-CH. 619-OCT. 21 , 1942 able year of a bad debt, prior tax, or delinquency amount, to the extent of the amount of the recovery exclusion with respect to such debt, tax, or amount. For the purposes of this paragraph: "(A) Definition of Bad Debt. -T he term 'bad debt' means a debt on account of worthlessness or partial worthlessness of which a deduction was allowed for a prior taxable year. "(B) Definition of Prior Tax.- The term 'prior tax' means a tax on account of which a deduction or credit was allowed for a prior taxable year. "(C) Definition of Delinquency Amount. -The term 'delinquency amount' means an amount paid or accrued on account of which a deduction or credit was allowed for a prior taxable year and which is attributable to failure to file return with respect to a tax, or pay a tax, within the time required by the law under which the tax is imposed, or to failure to file return with respect to a tax or pay a tax. " (D) Definition of Recovery Exclusion.-The term 'recov- ery exclusion', with respect to a bad debt, prior tax, or delinquency amount, means the amount, determined in accordance with regulations prescribed by the Commissioner with the approval of the Secretary, of the deductions or credits allowed, on account of such bad debt, prior tax, or delinquency amount, which did not result in a reduction of the taxpayer's tax under this chapter (not including the tax under section 102) or corresponding provisions of prior revenue laws, reduced by the amount excludible in previous taxable years with respect to such debt, tax, or amount under this paragraph. "(E) Special Rules in Case of Section 102 Tax and Per- sonal Holding Company Tax.- In the application of sub- paragraphs (A), (B), (C), and (D) in determining the tax under section 102 or Subchapter A of Chapter 2, a recovery exclusion allowed for the purposes of Chapter 1 shall be allowed for the purpose of such section or subchapter whether or not the bad debt, prior tax, or delinquency amount resulted in a reduction of the section 102 tax or Subchapter A tax for the prior taxable year; and in the case of a bad debt, prior tax, or delinquency amount not allowable as a deduction or credit for the prior taxable year under Chapter 1 (except section 102) but allowable for the same taxable year under such section or subchapter a recovery exclusion shall be allowable for the purposes of such section or subchapter if such bad debt, prior tax, or delinquency amount did not result in a reduction of the tax under such section 102 or such Subchapter A. As used in this subparagraph references to Chapter 1, section 102, and Subchapter A in the case of taxable years not subject to the Internal Revenue Code, shall be held to be made to corre- sponding provisions of prior revenue Acts." (b) EFFECTIVE DATE OF AMENDMENTS UNDER THE INTERNAL REVENUE CODE. - The amendments made by this section shall be applicable with respect to taxable years beginning after December 31, 1938. (c) UNDER PRIOR REVENUE ACTs. - For the purposes of the Revenue Act of 1938 or any prior revenue Act, the amendments made to the Internal Revenue Code by subsection (a) of this section shall be effective as if they were a part of each such revenue Act on the date of its enactment. 813 " Bad debt. " "Prior tax." "Delinquency amount. " "Recovery exclu- sion." 53 Stat.3. 28U.S.c. l2; Supp. I, 102. Ante, p. 807; palt pp. 835 , 83. 53 Stat. 104. 26U. .C.. 00- 511; Supp. I, f 500, 504 506. Post, pp. 829, 835, 846,894-89 898 53 Stat. 4. 26U.S.C.i.1- 396, Supp. I, ch. 1 . Ante, p. 802. 52 Stat. 447.
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