Ill STAT. 976 PUBLIC LAW 105-34—AUG. 5, 1997 Clause (ii) shall not apply if for the preceding taxable year the company elected to mark to market the stock held by such company as of the last day of such preceding taxable year. "(B) DISALLOWANCE OF DEDUCTION.— NO deduction shall be allowed to any regulated investment company for the increase in tax under subparagraph (A)(ii). Applicability. "(k) ELECTION.— This section shall apply to marketable stock in a passive foreign investment company which is held by a United States person only if such person elects to apply this section with respect to such stock. Such an election shall apply to the taxable year for which made and all subsequent taxable years unless— "(1) such stock ceases to be marketable stock, or "(2) the Secretary consents to the revocation of such election. "(1) TRANSITION RULE FOR INDIVIDUALS BECOMING SUBJECT TO UNITED STATES TAX.— If any individual becomes a United States person in a taxable year beginning after December 31, 1997, solely for purposes of this section, the adjusted basis (before adjustments under subsection (b)) of any marketable stock in a passive foreign investment company owned by such individual on the first day of such taxable year shall be treated as being the greater of its fair market value on such first day or its adjusted basis on such first day.". (b) COORDINATION WITH INTEREST CHARGE, ETC. — (1) Paragraph (1) of section 1291(d) is amended by adding at the end the following new flush sentence: "Except as provided in section 1296(j), this section also shall not apply if an election under section 1296(k) is in effect for the taxpayer's taxable year.". (2) The subsection heading for subsection (d) of section 1291 is amended by striking "SUBPART B" and inserting "SUB- PARTS B AND C". (3) Subparagraph (A) of section 1291(a)(3) is amended to read as follows: "(A) HOLDING PERIOD.— The taxpayer's holding period shall be determined under section 1223; except that— "(i) for purposes of applying this section to an excess distribution, such holding period shall be treated as ending on the date of such distribution, and "(ii) if section 1296 applied to such stock with respect to the taxpayer for any prior taxable year, such holding period shall be treated as beginning on the first day of the first taxable year beginning after the last taxable year for which section 1296 so applied.". (c) TREATMENT OF MARK-TO-MARKET GAIN UNDER SECTION 4982.— (1) Subsection (e) of section 4982 is amended by adding at the end thereof the following new paragraph: "(6) TREATMENT OF GAIN RECOGNIZED UNDER SECTION 1296. —For purposes of determining a regulated investment company's ordinary income— Applicability. "(A) notwithstanding paragraph (1)(C), section 1296 shall be applied as if such company's taxable year ended on October 31, and
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