Page:United States Statutes at Large Volume 110 Part 3.djvu/149

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PUBLIC LAW 104-188—AUG. 20, 1996 110 STAT. 1879 "(i) any loss from such activity for such taxable year (determined after the application of subsection (b)), over "(ii) any net income or gain for such taxable year from all other passive activities (determined after the application of subsection (b)), shall be treated as a loss which is not from a passive activity.". (2) EFFECTIVE DATE.— The amendment made by paragraph 26 USC 469 note. ^(1) shall apply to taxable years beginning after December 31, 1986. (f) MISCELLANEOUS AMENDMENTS TO FOREIGN PROVISIONS. — (1) COORDINATION OF UNIFIED ESTATE TAX CREDIT WITH TREATIES.— Subparagraph (A) of section 2102(c)(3) is amended by adding at the end thereof the following new sentence: "For purposes of the preceding sentence, property shall not be treated as situated in the United States if such property is exempt from the tax imposed by this subchapter under any treaty obligation of the United States.". (2) TREATMENT OF CERTAIN INTEREST PAID TO RELATED PERSON. — (A) Subparagraph (B) of section 163(j)(l) is amended by inserting before the period at the end thereof the following: "(and clause (ii) of paragraph (2)(A) shall not apply for purposes of applying this subsection to the amount so treated)". (B) Subsection (j) of section 163 is amended by redesignating paragraph (7) as paragraph (8) and by inserting after paragraph (6) the following new paragraph: " (7) COORDINATION WITH PASSIVE LOSS RULES, ETC.— This subsection shall be applied before sections 465 and 469.". (C) The amendments made by this paragraph shall 26 USC 163 note. apply as if included in the amendments made by section 7210(a) of the Revenue Reconciliation Act of 1989. (3) TREATMENT OF INTEREST ALLOCABLE TO EFFECTIVELY CONNECTED INCOME.— (A) IN GENERAL.— (i) Subparagraph (B) of section 884(f)(1) is amended by striking "to the extent" and all that follows down through "subparagraph (A)" and inserting "to the extent that the allocable interest exceeds the interest described in subparagraph (A)". (ii) The second sentence of section 884(f)(1) is amended by striking "reasonably expected" and all that follows down through the period at the end thereof and inserting "reasonably expected to be allocable interest.". (iii) Paragraph (2) of section 884(f) is amended to read as follows: "(2) ALLOCABLE INTEREST.— For purposes of this subsection, the term 'allocable interest' means any interest which is allocable to income which is effectively connected (or treated as effectively connected) with the conduct of a trade or business in the United States.". (B) EFFECTIVE DATE. — The amendments made by 26 USC 884 note. subparagraph (A) shall take effect as if included in the >>.