PUBLIC LAW 99-514—OCT. 22, 1986
100 STAT. 2515
(3) The table of sections for part IV of subchapter A of chapter 11 is amended by adding a t the end thereof the following new item: "Sec. 2057. Sales of employer securities to employee stock ownership plans or worker-owned cooperatives."
(c) EFFECTIVE D A T E. — The amendments m a d e by this section shall apply to sales after the date of the e n a c t m e n t of this Act with respect to which a n election is m a d e by the executor of a n e s t a t e who is required to file the r e t u r n of the tax imposed by the I n t e r n a l Revenue Code of 1986 on a date (including extensions) after the date of the e n a c t m e n t of this Act. SEC. 1173. PROVISIONS RELATING TO LOANS USED TO ACQUIRE EMPLOYER SECURITIES. (a) DEDUCTION FOR DIVIDENDS P A I D TO REPAY L O A N S. —
(1) IN GENERAL. — Paragraph (2) of section 404(k) (relating to dividend paid deductions) is amended by striking out " o r " a t the end of subparagraph (A), by striking o u t the period a t the e n d of subparagraph (B) and inserting in lieu thereof ", or", and by inserting a t the end thereof the following n e w subparagraph: "(C) the dividend with respect to employer securities is used to m a k e payments on a loan described in section 404(a)(9)." (2) CONFORMING AMENDMENT.—Section 404(k) is amended by
adding a t the end thereof the following n e w sentence: " Any deduction under paragraph (2)(C) shall be allowable in the taxable year of the corporation in which the dividend is used to repay the loan described in such paragraph. " (b) SECURITIES ACQUISITION L O A N S. — (1) APPLICATION TO INTEREST RECEIVED BY RIC.—
(A) IN GENERAL.—Section 133(a) (relating to exclusion for interest on certain loans used to acquire employer securirsp, ties) is amended by striking o u t " o r " a t the e n d of paragraph (2), by inserting " o r " a t the end of paragraph (3), and by adding a t the end thereof the following n e w paragraph: "(4) a regulated investment company (as defined in section 851).". (B)
CONFORMING
AMENDMENT.—Section
852(b)(5)
is
amended by adding a t the end thereof the following n e w subparagraph: "(C) INTEREST O N CERTAIN LOANS USED TO ACQUIRE EM-
PLOYER SECURITIES.—For purposes of this paragraph — "(i) 50 percent of the a m o u n t of any loan of the regulated investment company which qualifies a s a securities acquisition loan (as defined in section 133) shall be t r e a t e d a s a n obligation described in section 103(a), and "(ii) 50 percent of the interest received on such loan shall be t r e a t e d a s interest excludable from gross income under section 103." (2) SECURITIES ACQUISITION LOAN.—Section 133(b)(l) (defining
securities acquisition loan) is amended to read a s follows: "(1) IN GENERAL.—For purposes of this section, the term 'securities acquisition loan' means — "(A) any loan to a corporation or to a n employee stock ownership plan to the e x t e n t that the proceeds a r e used to
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