498
PUBLIC LAW 91-172-DEC. 30, 1969
[83 STAT.
"(e) DEFINITION or GROSS INVESTMENT INCOME.—For purposes of
Post, p. 536.
26 USC 4001^
4931
subsection (d), the term 'gross investment income' means the gross amount of income from interest, dividends, rents, and royalties, but not including any such income to the extent included in computing the tax imposed by section 511." (b) AMENDMENT OF SUBTITLE D.—Subtitle D (relating to miscellaneous excise taxes) is amended by adding at the end thereof the following new chapter: "CHAPTER 42.—PRIVATE FOUNDATIONS "Sec. "Sec. "Sec. "Sec. "Sec. "Sec. "Sec. "Sec. "Sec.
Excise tax based on investment income. Taxes on self-dealing. Taxes on failure to distribute income. Taxes on excess business holdings. Taxes on investments which jeopardize charitable purpose. Taxes on taxable expenditures. Definitions and special rules. Application of taxes to certain nonexempt trusts. Application of taxes and denial of exemption with respect to certain foreign organizations. "SEC. 4940. EXCISE TAX BASED ON INVESTMENT INCOME. (a) TAX-EXEMPT FOUNDATIONS.—There is hereby imposed on each
26^s'c^5o\^^'
26 USC 1-1563.
4940. 4941. 4942. 4943. 4944. 4945. 4946. 4947. 4948.
private foundation which is exempt from taxation under section 501 ^^) ^^^ *^^ taxable year, with respect to the carrying on of its activities, a tax equal to 4 percent of the net investment income of such foundation for the taxable year. "'(b) TAXABLE FOUNDATIONS.—There is hereby imposed on each private foundation which is not exempt from taxation under section 501(a) for the taxable year, with respect to the carrying on of its activities, a tax equal to— "(1) the amount (if any) by which the sum of (A) the tax imposed under subsection (a) (computed as if such subsection applied to such private foundation for the taxable year), plus (B) the amount of the tax which would have been imposed under section 511 for the taxable year if such private foundation had been exempt from taxation under section 501(a), exceeds "(2) the tax imposed under subtitle A on such private foundation for the taxable year. "(c) N E T INVESTMENT INCOME DEFINED.—
"(1) IN GENERAL.—For purposes of subsection (a), the net investment income is the amount by which (A) the sum of the gross investment income and the net capital gain exceeds (B) the deductions allowed by paragraph (3). Except to the extent inconsistent with the provisions of this section, net investment income shall be determined under the principles of subtitle A. " (2) GROSS INVESTMENT INCOME.—For purposes of paragraph
(1), the term 'gross investment income' means the gross amount of income from interest, dividends, rents, and royalties, but not including any such income to the extent included in computing the tax imposed by section 511. "(3)
DEDUCTIONS.—
" (A) IN GENERAL.—For purposes of paragraph (1), there shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred for the production or collection of gross investment income or for the management, conservation, or maintenance of property held for the production of such income, determined with the modifications set forth in subparagraph (B).
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