PUBLIC LAW 98-369—JULY 18, 1984 (b) EXTENSION OF SECTION 267 TO CERTAIN RELATED ENTRIES.— (1) PASS-THRU ENTITIES.—Section 267 is amended by striking
98 STAT. 705 26 USC 267.
out subsection (f) and inserting in lieu thereof the following: "(e) SPECIAL RULES FOR PASS-THRU ENTITIES.—
"(1) IN GENERAL.—In the case of any amount paid or incurred by, to, or on behalf of, a pass-thru entity, for purposes of applying subsection (a)(2)— "(A) such entity, "(B) in the case of— "(i) a partnership, any person who owns (directly or indirectly) any capital interest or profits interest of such partnership, or "(ii) an S corporation, any person who owns (directly or indirectly) any of the stock of such corporation, to ~ "(C) any person who owns (directly or indirectly) any capital interest or profits interest of a partnership in which such entity owns (directly or indirectly) any capital interest ' or profits interest, and "(D) any person related (within the meaning of subsection (b) of this section or section 707(b)(l)) to a person described in subparagraph (B) or (C), shall be treated as persons specified in a paragraph of subsection (b). Subparagraph (C) shall apply to a transaction only if such transaction is related either to the operations of the • partnership described in such subparagraph or to an interest in such partnership. "(2) PASS-THRU ENTITY.—For purposes of this section, the term 'pass-thru entity' means— "(A) a partnership, and "(B) an S corporation. "(3) CONSTRUCTIVE OWNERSHIP IN THE CASE OF PARTNERSHIPS.—
For purposes of determining ownership of a capital interest or profits interest of a partnership, the principles of subsection (c) shall apply, except that— (A) paragraph (3) of subsection (c) shall not apply, and "(B) interests owned (directly or indirectly) by or for a C corporation shall be considered as owned by or for any tos' shareholder only if such shareholder owns (directly or indirectly) 5 percent or more in value of the stock of such ^'^ corporation.
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"(4) SUBSECTION (a)(2) NOT TO APPLY TO CERTAIN GUARANTEED PAYMENTS OF PARTNERSHIPS.—In the case of any amount paid or
incurred by a partnership, subsection (a)(2) shall not apply to the extent that section 707(c) applies to such amount. "(5) EXCEPTION FOR CERTAIN EXPENSES A N D INTEREST OF PARTNERSHIPS OWNING LOW-INCOME HOUSING.—
"(A) IN GENERAL.—This subsection shall not apply with respect to qualified expenses and interest paid or incurred by a partnership owning low-income housing to— "(i) any qualified 5-percent or less partner of such partnership, or "(ii) any person related (within the meaning of subsection (b) of this section or section 7070t)Xl)) to any qualified 5-percent or less partner of such partnership. "(B) QUALIFIED 5-PERCENT OR LESS PARTNER.—For purposes of this paragraph, the term 'qualified 5-percerit or less partner' means any partner who has (directly or indirectly)
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