PUBLIC LAW 99-514—OCT. 22, 1986
100 STAT. 2297
the amount of the net capital gain for a taxable year (to which an election under section 4982(e)(4) does not apply) shall be determined without regard to any net capital loss attributable to transactions after October 31 of such year, and any such net capital loss shall be treated as arising on the 1st day of the next taxable year. To the extent provided in regulations, the preceding sentence shall apply also for purposes of computing regulated investment company taxable income." (c) CLERICAL AMENDMENT.—Chapter 44 is amended by striking out the chapter heading and the table of sections and inserting in lieu thereof the following: "CHAPTER 44—QUALIFIED INVESTMENT ENTITIES "Sec. 4981. Excise tax on undistributed income of real estate investment trusts. "Sec. 4982. Excise tax on undistributed income of regulated investment companies." (d) EFFECTIVE DATE.—The amendments made by this section shall
apply to calendar years beginning after December 31, 1986. SEC. 652. TREATMENT OF BUSINESS DEVELOPMENT COMPANIES. (a) GENERAL RULE.—Paragraph (1) of section 851(a) is amended by
striking out "either as a management company or as a unit investment trust" and inserting in lieu thereof "as a management company, business development company, or unit investment trust". OD) TECHNICAL AMENDMENT.—Paragraph (1) of section 851(e) (relating to investment companies furnishing capital to development corporations) is amended by striking out "registered management company" and inserting in lieu thereof "registered management company or registered business development company". (c) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 1986. SEC. 653. AMENDMENTS TO QUALIFICATION RULES. (a) TREATMENT OF CERTAIN HEDGING TRANSACTIONS.—Section 851
(defining regulated investment company) is amended by adding at the end thereof the following new subsection: "(g) TREATMENT OF CERTAIN HEDGING TRANSACTIONS.—
"(1) IN GENERAL.—In the case of any designated hedge, for purposes of subsection (b)(3), increases (and decreases) during the period of the hedge in the value of positions which are part of such hedge shall be netted. "(2) DESIGNATED HEDGE.—For purposes of this subsection, there is a designated hedge where— "(A) the taxpayer's risk of loss with respect to any position in property is reduced by reason of^ "(i) the taxpayer having an option to sell, being under a contractual option to sell, or having made (and not closed) a short sale of substantially identical property, ' (ii) the taxpayer being the grantor of an option to buy substantially identical property, or "(iii) under regulations prescribed by the Secretary, the taxpayer holding 1 or more other positions, and "(B) the positions which are part of the hedge are clearly identified by the taxpayer in the manner prescribed by regulations.'
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