PUBLIC LAW 105-34—AUG. 5, 1997 111 STAT. 967 SEC. 1104. TREATMENT OF PERSONAL TRANSACTIONS BY INDIVIDUALS UNDER FOREIGN CURRENCY RULES. (a) GENERAL RULE. —Subsection (e) of section 988 (relating to application to individuals) is amended to read as follows: " (e) APPLICATION TO INDIVIDUALS. — "(1) IN GENERAL.— The preceding provisions of this section shall not apply to any section 988 transaction entered into by an individual which is a personal transaction. "(2) EXCLUSION FOR CERTAIN PERSONAL TRANSACTIONS. — If— "(A) nonfunctional currency is disposed of by an individual in any transaction, and "(B) such transaction is a personal transaction, no gain shall be recognized for purposes of this subtitle by reason of changes in exchange rates after such currency was acquired by such individual and before such disposition. The preceding sentence shall not apply if the gain which would otherwise be recognized on the transaction exceeds $200. "(3) PERSONAL TRANSACTIONS.— For purposes of this subsection, the term 'personal transaction' means any transaction entered into by an individual, except that such term shall not include any transaction to the extent that expenses properly allocable to such transaction meet the requirements of— "(A) section 162 (other than traveling expenses described in subsection (a)(2) thereof), or "(B) section 212 (other than that part of section 212 dealing with expenses incurred in connection with taxes).". (b) EFFECTIVE DATE. —The amendments made by this section 26 USC 988 note. shall apply to taxable years beginning after December 31, 1997. SEC 1105. FOREIGN TAX CREDIT TREATMENT OF DIVIDENDS FROM NONCONTROLLED SECTION 902 CORPORATIONS. (a) SEPARATE BASKET ONLY TO APPLY TO PRE-2003 EARNINGS.— (1) IN GENERAL. — Subparagraph (E) of section 904(d)(1) is amended to read as follows: "(E) in the case of a corporation, dividends from noncontrolled section 902 corporations out of earnings and profits accumulated in taxable years beginning before January 1, 2003,". (2) AGGREGATION OF NON-PFICS. — Subparagraph (E) of section 904(d)(2) (relating to noncontroUed section 902 corporations) is amended by adding at the end the following new clause: "(iv) ALL NON-PFICS TREATED AS ONE.—All noncontroUed section 902 corporations which are not passive foreign investment companies (as defined in section 1297) shall be treated as one noncontroUed section 902 corporation for purposes of paragraph (1).". (3) CONFORMING AMENDMENTS.—Subparagraphs (C)(iii)(II) and (D) of section 904(d)(2) are each amended by inserting "out of earnings and profits accumulated in taxable years beginning before January 1, 2003" after "corporation". (b) APPLICATION OF LOOK-THRU RULES TO DIVIDENDS OF NON- CONTROLLED SECTION 902 CORPORATIONS ATTRIBUTABLE TO POST- 2002 EARNINGS. —Section 904(d) is amended by redesignating paragraphs (4) and (5) as paragraphs (5) and (6), respectively, and by inserting after paragraph (3) the following new paragraph:
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