Ill STAT. 972 PUBLIC LAW 105-34—AUG. 5, 1997 "(B) during which the shareholder is a United States shareholder (as defined in section 951(b)) of the corporation and the corporation is a controlled foreign corporation. "(3) NEW HOLDING PERIOD IF QUALIFIED PORTION ENDS.— "(A) IN GENERAL.— Except as provided in subparagraph (B), if the qualified portion of a shareholder's holding period with respect to any stock ends after December 31, 1997, solely for purposes of this part, the shareholder's holding period with respect to such stock shall be treated as beginning as of the first day following such period. "(B) EXCEPTION. — Subparagraph (A) shall not apply if such stock was, with respect to such shareholder, stock in a passive foreign investment company at any time before the qualified portion of the shareholder's holding period with respect to such stock and no election under section 1298(b)(1) is made. ". SEC. 1122. ELECTION OF MARK TO MARKET FOR MARKETABLE STOCK IN PASSIVE FOREIGN INVESTMENT COMPANY. (a) IN GENERAL. —Part VI of subchapter P of chapter 1 is amended by redesignating subpart C as subpart D, by redesignating sections 1296 and 1297 as sections 1297 and 1298, respectively, and by inserting after subpart B the following new subpart: "Subpart C—Election of Mark to Market For Marketable Stock "Sec. 1296. Election of mark to market for marketable stock. 'SEC. 1296. ELECTION OF MARK TO MARKET FOR MARKETABLE STOCK. "(a) GENERAL RULE. — In the case of marketable stock in a passive foreign investment company which is owned (or treated under subsection (g) as owned) by a United States person at the close of any taxable year of such person, at the election of such person— "(1) If the fair market value of such stock as of the close of such taxable year exceeds its adjusted basis, such United States person shall include in gross income for such teixable year an amount equal to the amount of such excess. "(2) If the adjusted basis of such stock exceeds the fair market value of such stock as of the close of such taxable year, such United States person shall be allowed a deduction for such taxable year equal to the lesser of— "(A) the amount of such excess, or "(B) the unreversed inclusions with respect to such stock. "(b) BASIS ADJUSTMENTS. — "(1) IN GENERAL.— The adjusted basis of stock in a passive foreign investment company— "(A) shall be increased by the amount included in the gross income of the United States person under subsection (a)(1) with respect to such stock, and "(B) shall be decreased by the amount allowed as a deduction to the United States person under subsection (a)(2) with respect to such stock. "(2) SPECIAL RULE FOR STOCK CONSTRUCTIVELY OWNED. — In the case of stock in a passive foreign investment company
�
