77TH CONG., 1ST SESS.-CH. 10-MAR. 7, 1941 any taxable year shall not exceed the amount by which the deductions of such class for such taxable year exceed the deductions of such class for the taxable year for which the tax under this subchapter is being computed." SEC. 4. COMPUTATION OF AVERAGE BASE PERIOD NET INCOME. (a) Section 713 (a) (1) of the Internal Revenue Code is amended by striking out "subsection (b)" and inserting in lieu thereof "sub- section (d)", and by striking out "subsection (c)" wherever occurring therein and inserting in lieu thereof "subsection (g)". (b) Section 713 (b) of the Internal Revenue Code is amended to read as follows: "(b) BASE PERIOD. - "(1) IDEFINITON. -As used in this section the term 'base period'- "(A) If the corporation was in existence during the whole of the forty-eight months preceding the beginning of its first taxable year under this subchapter, means the period commencing with the beginning of its first taxable year beginning after December 31, 1935, and ending with the close of its last taxable year beginning before January 1, 1940; and "(B) In the case of a corporation which was in existence during only part of the forty-eight months preceding the beginning of its first taxable year under this subchapter, means the forty-eight months preceding the beginning of its first taxable year under this subchapter. "(2) DIVISION INTO HALVES.- For the purposes of subsections (d) and (f) the base period of the taxpayer shall be divided into halves, the first half to be composed of one-half the entire num- ber of months in the base period and to begin with the beginning of the base period. "(c) DEFICIT IN ExCEss PRorrrS NET INCOME.- For the purposes of this section the term 'deficit in excess profits net income' with respect to any taxable year means the amount by which the deduc- tions plus the credit for dividends received exceeded the gross income. For the purposes of this subsection in determining whether there was such an excess and in determining the amount thereof, the adjustments provided in section 711 (b) (1) shall be made. "(d) AVERAGE BASE PERIOD NET INCOME-DKETERM[INATION.- "(1) DEFINITION.- For the purposes of this section the aver- age base period net income of the taxpayer shall be the amount determined under subsection (e), subject to the exception that if the aggregate excess profits net income for the last half of its base period, reduced by the aggregate of the deficits in excess profits net income for such half, is greater than such aggregate so reduced for the first half, then the average base period net income shall be the amount determined under subsection (f), if greater than the amount determined under subsection (e). "(2) For the purposes of subsections (e) and (f), if the tax- payer was in existence during only part of the 48 months pre- ceding the beginning of its first taxable year under this sub- chapter, its excess profits net income- "(A) for each taxable year of twelve months (beginning with the beginning of its base period) during which it was not in existence, shall be an amount equal to 8 per centum of the excess of- "(i) the daily invested capital for the first day of the taxpayer's first taxable year beginning after December 31, 1939, over 54 Stat. 980. 26U. .c. §713(a) (1). 54 Stat. 980. 26 U.S. c. §713(b). 54 Stat. 977. 26U.S.C. 5711(b) (1). Post, p. 701 . 19 55 STAT.]
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