1044
PUBLIC LAW 87-834-OCT. 16, 1962
[76 STAT.
person shall be considered as owned by such United States person during the period such stock was owned by such predecessor in interest, and during the period such stock was owned by any other predecessor in interest if between such United States person and such other predecessor in interest there was no transfer other than by reason of the death of an individual. "(4) UNITED STATES INCOME,—Any item includible in gross income of the foreign corporation under this chapter as income derived from sources within the United States of a foreign corporation engaged in trade or business in the United States. "(5) AMOUNTS INCLUDED I N GROSS INCOME UNDER SECTION
Ante, p. 1039. Ante, p. 1036.
1247.—If the United States person whose stock is sold or exchaihged was a qualified shareholder (as defined in section 124T(c)) of a foreign corporation which was a foreign investment company (as described in section 1246(b)(1)), the earnings and profits of the foreign corporation for taxable years in which such person was a qualified shareholder. " (e) SALES OR EXCHANGES OF STOCK I N CERTAIN DOMESTIC COR-
PORATIONS.—Under regulations prescribed by the Secretary or his delegate, if— "(1) a United States person sells or exchanges stock of a domestic corporation, or receives a distribution from a domestic 26 USC 302,331. corporation which, under section 302 or 331, is treated as an exchange of stock, and "(2) such domestic corporation was formed or availed of principally for the holding, directly or indirectly, of stock of one or more foreign corporations, such sale or exchange shall, for purposes of this section, be treated as a sale or exchange of the stock of the foreign corporation or corporations held by the domestic corporation. " (f) EXCEPTIONS.—This section shall not apply to— 26 USC 303. " (1) distributions to which section 303 (relating to distributions in redemption of stock to pay death taxes) applies; 26 USC 356. " (2) gain realized on exchanges to which section 356 (relating to receipt of additional consideration in certain reorganizations^ applies; or "(3) any amount to the extent that such amount is, under any other provision of this title, treated as— " (A) a dividend, " (B) gain from the sale of an asset which is not a capital asset, or " (C) gain from the sale of an asset held for not more than 6 months. " (g) TAXPAYER TO ESTABLISH EARNINGS AND PROFITS.—Unless the
taxpayer establishes the amount of the eamings and profits of the foreign corporation to be taken into account under subsection (a), all gain from the sale or exchange shall be considered a dividend under subsection (a), and unless the taxpayer establishes the amount of foreign taxes to be taken into account under subsection (b), the limitation of such subsection shall not apply." (b) CLERICAL AMENDMENT.—The table of sections for such part IV is amended by adding at the end thereof the following: "Sec. 1248. Gain from certain sales or exchanges of stock in certain foreign corporations."
(c) EFFECTIVE DATE.—The amendments made by this section shall apply with respect to sales or exchanges occurring after December 31, 1962.
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