72 S T A T. ]
PUBLIC LAW 85-866-SEPT. 2, 1958
respect of any obligation described in subsection (b)(1)(A) (ii) which is held by the taxpayer at the close of the taxable year; but in the taxable year in which any such obligation is sold or otherwise disposed of, if such obligation is a municipal bond (as defined in subsection (b)(1)), the cost of securities sold during such year shall be reduced by an amount equal to the adjustment described in paragraph (2), without regard to the fact that the taxpayer values his inventories on any basis other than cost." (b) CONFORMING AMENDMENT.—Section 1016(a)(6) (relating to adjustments to basis) is amended by striking out "short-term". (c) EFFECTIVE DATE.—The amendments made by subsections (a) and (b) shall apply with respect to taxable years ending after December 31, 1957, but only with respect to obligations acquired after such date. SEC. 3. STATUTORY SUBSISTENCE ALLOWANCE RECEIVED BY POLICE. (a) REPEAL.—Section 120 (relating to statutory subsistence allowance received by police) is hereby repealed. (b) CONFORMING AMENDMENT.—The table of sections for part III of subchapter B of chapter 1 is amended by striking out
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26 USC ioi6.
26 USC 120.
"Sec. 120. Statutory subsistence allowance received by police." (c) EFFECTIVE DATE.—The amendments made by subsections (a)
and (b) shall apply with respect to taxable years ending after September 30, 1958, but only with respect to amounts received as a statutory subsistence allowance for any day after September 30, 1958. SEC. 4. DEFINITION OF DEPENDENT. (a) SPOUSE.—Paragraph (9) of section 152(a) (relating to defini- 26 USC 152. tion of dependent) is amended to read as follows: "(9) An individual (other than an individual who at any time during the taxable year was the spouse, determined without regard to section 153, of the taxpayer) who, for the taxable year of the taxpayer, has as his principal place of abode the home of the taxpayer and is a member of the taxpayer's household, or". (b) ADOPTED CHILD.—The last sentence of section 152(b)(3) (relating to definition of dependent) is amended to read as follows: •'The preceding sentence shall not exclude from the definition of 'dependent' any child of the taxpayer—" (A) born to him, or legally adopted by him, in the Philippine Islands before January 1, 1956, if the child is a resident of the Republic of the Philippines, and if the taxpayer was a member of the Armed Forces of the United States at the time the child was born to him or legally adopted by him, or " (B) legally adopted by him, if, for the taxable year of the taxpayer, the child has as his principal place of abode the home of the taxpayer and is a member of the taxpayer's household, and if the taxpayer is a citizen of the United States." (c) MEMBER or HOUSEHOLD.—Section 152(b) (relating to definition of dependent) is amended by adding at the end thereof the following new paragraph: "(5) An individual is not a member of the taxpayer's household if at any time during the taxable year of the taxpayer the relationship between such individual and the taxpayer is in violation of local law." (d) EFFECTIVE DATE.—The amendment made by subsection (b) shall apply with respect to taxable years beginning after December 31, 1957.
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