PUBLIC LAW 105-277—OCT. 21, 1998 112 STAT. 2681-918 the Commission provided for by the amendment under subsection (a) are as follows: (A) One member shall be appointed for one year. (B) One member shall be appointed for two years. (2) COMMENCEMENT OF TERMS. — Such terms shall begin on May 1, 1999. Subtitle C—Revenue Offsets SEC. 5301. TAX TREATMENT OF CASH OPTION FOR QUALIFIED PRIZES. (a) IN GENERAL.—Section 451 (relating to tjixable year for which items of gross income included) is amended by adding at the end the following new subsection: " (h) SPECIAL RULE FOR CASH OPTIONS FOR RECEIPT OF QUALI- FIED PRIZES. — "(1) IN GENERAL.—For purposes of this title, in the case of an individual on the cash receipts and disbursements method of accounting, a qualified prize option shall be disregarded in determining the taxable year for which any portion of the qualified prize is properly includible in gross income of the taxpayer. "(2) QUALIFIED PRIZE OPTION; QUALIFIED PRIZE.— For purposes of this subsection— "(A) IN GENERAL.—The term 'qualified prize option' means an option which— "(i) entitles an individual to receive a single cash pa3anent in lieu of receiving a qualified prize (or remaining portion thereof), and "(ii) is exercisable not later than 60 days after such individual becomes entitled to the qualified prize. "(B) QUALIFIED PRIZE.— The term 'qualified prize' means any prize or award which— "(i) is awarded as a part of a contests lottery, •: jackpot, game, or other similar arrangement, "(ii) does not relate to any past services performed by the recipient and does not require the recipient to perform any substantial future service, and "(iii) is payable over a period of at least 10 years. "(3) PARTNERSHIP, ETC. —The Secretary shall provide for the application of this subsection in the case of a partnership or other pass-through entity consisting entirely of individuals described in paragraph (1)." (b) EFFECTIVE DATE. — Applicability. (1) IN GENERAL.—The amendment made by this section 26 USC 451 note. shall apply to any prize to which a person first becomes entitled after the date of enactment of this Act. (2) TRANSITION RULE.—The amendment made by this section shall apply to any prize to which a person first becomes entitled on or before the date of enactment of this Act, except that in determining whether an option is a qualified prize option as defined in section 451(h)(2)(A) of the Internal Revenue Code of 1986 (as added by such amendment)— (A) clause (ii) of such section 451(h)(2)(A) shall not apply, and (B) such option shall be treated as a qualified prize option if it is exercisable only during all or part oi the 18-month period beginning on July 1, 1999.
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