100 STAT. 2574
PUBLIC LAW 99-514—OCT. 22, 1986
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ment company for either of the 1st 2 taxable years follow• fi! ing the start-up year, and f "(C) such corporation is not a passive foreign investment company for either of the 1st 2 taxable years following the start-up year. "(3) CERTAIN CORPORATIONS CHANGING BUSINESSES.—A corporation shall not be treated as a passive foreign investment company for any taxable year if— "(A) such corporation (and any predecessor) was not a yt, passive foreign investment corporation for any prior taxable year, "(B) it is established to the satisfaction of the Secretary that— %n*3 cl "(i) substantially all of the passive income of the corporation for the taxable year is attributable to proceeds from the disposition of 1 or more active trades or "^ businesses, and "(ii) such corporation will not be a passive foreign investment company for either of the 1st 2 taxable years following such taxable year, and "(C) such corporation is not a passive foreign investment company for either of such 2 taxable years. "(4) SEPARATE
INTERESTS TREATED AS SEPARATE CORPORA-
TIONS.—Under regulations prescribed by the Secretary, where necessary to carry out the purposes of this part, separate classes of stock (or other interests) in a corporation shall be treated as interests in separate corporations. "(5) APPLICATION OF SECTION WHERE STOCK HELD BY OTHER
ENTITY.—Under regulations, in any case in which a United States person is treated as holding stock in a passive foreign investment company by reason of subsection (a), any disposition by the United States person or the person holding such stock which results in the United States person being treated as no longer holding such stock, shall be treated as a disposition by the United States person with respect to stock in the passive foreign investment company. "(6) DISPOSITIONS.—If a taxpayer uses any stock in a passive foreign investment company as security for a loan, the taxpayer shall be treated as having disposed of such stock. "(7) COORDINATION WITH SECTION 1246.—Section 1246 shall not apply to earnings and profits of any company for any taxable year beginning after December 31, 1986, if such company is a passive foreign investment company for such taxable year. "(c) REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this part." (b) COORDINATION OF SECTION 1246 WITH SECTION 1248.—Section 1246 is amended by redesignating subsection (f) as subsection (g) and by inserting after subsection (e) the following new subsection: "(f) COORDINATION WITH SECTION 1248.—This section shall not apply to any gain to the extent such gain is treated as ordinary income under section 1248 (determined without regard to section 1248(g)(3))." (c) COORDINATION WITH SUBPART F.—Section 951 (relating
to
amounts included in gross income of United States shareholders) is amended by adding at the end thereof the following new subsection: "(f) COORDINATION WITH PASSIVE FOREIGN INVESTMENT COMPANY
PROVISIONS.—If, but for this subsection, an amount would be in-
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