Page:United States Statutes at Large Volume 53 Part 1.djvu/108

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96 CODIFICATION OF INTERNAL REVENUE LAWS (b) DEDUCTIONS NOT ALLOWED.- (1) TAXES AND PENSION TRUSTS. -The deductions provided in section 23 (d), relating to taxes of a shareholder paid by the corporation, and in section 23 (p), relating to pension trusts, shall not be allowed. (2) EXPENSES AND DEPRECIATION.- The aggregate of the deduc- tions allowed under section 23 (a), relating to expenses, and section 23 (1), relating to depreciation, which are allocable to the operation and maintenance of property owned or operated by the company, shall be allowed only in an amount equal to the rent or other compensation received for the use or right to use the prop- erty, unless it is established (under regulations prescribed by the Commissioner with the approval of the Secretary) to the satisfac- tion of the Commissioner: (A) That the rent or other compensation received was the highest obtainable, or, if none was received, that none was ob- tainable; (B) That the property was held in the course of a business carried on bona fide for profit; and (C) Either that there was reasonable expectation that the operation of the property would result in a profit, or that the property was necessary to the conduct of the business. SEC. 337. CORPORATION INCOME TAXED TO UNITED STATES SHARE- HOLDERS. (a) GENERAL RULE. -The undistributed Supplement P net income of a foreign personal holding company shall be included in the gross income of the citizens or residents of the United States, domestic corporations, domestic partnerships, and estates or trusts (other than estates or trusts the gross income of which under this chapter in- cludes only income from sources within the United States), who are shareholders in such foreign personal holding company (hereinafter called "United States shareholders") in the manner and to the extent set forth in this Supplement. (b) AMOUNT INCLUDED IN GROSS INCOME. -Each United States shareholder, who was a shareholder on the day in the taxable year of the company which was the last day on which a United States group (as defined in section 331 (a) (2)) existed with respect to the company, shall include in his gross income, as a dividend, for the taxable year in which or with which the taxable year of the company ends, the amount he would have received as a dividend if on such last day there had been distributed by the company, and received by the shareholders, an amount which bears the same ratio to the undistributed Supplement P net income of the company for the taxable year as the portion of such taxable year up to and includ- ing such last day bears to the entire taxable year. (c) CREDIT FOR OBLIGATIONS OF UNITED STATES AND ITS INSTRUMEN- TALTIES.- Each United States shareholder shall be allowed a credit against net income, for the purpose of the tax imposed by section 11, 13, 14, 201, 204, 207, or 362, of his proportionate share of the interest specified in section 25 (a) (1) or (2) which is included in the gross income of the company otherwise than by the application of the pro- visions of section 334 (b) (relating to the inclusion in the gross income of a foreign personal holding company of its distributive share of the undistributed Supplement P net income of another foreign personal holding company in which it is a shareholder). (d) INFORMATION IN RETURN.- Every United States shareholder who is required under subsection (b) to include in his gross income any amount with respect to the undistributed Supplement P net income of a foreign personal holding company and who, on the last day on which a United States group existed with respect to the company, owned 5 per centum or more in value of the outstanding stock of such company, shall set forth in his return in complete