96 STAT. 1684
26 USC 241.
26 USC 1375.
26 USC 341.
PUBLIC LAW 97-354—OCT. 19, 1982 "(1) the deduction allowed by section 172 (relating to net operating loss deduction), and "(2) the deductions allowed by part VIII of subchapter B (other than the deduction allowed by section 248, relating to organization expenditures).
"SEC. 1375. TAX IMPOSED WHEN PASSIVE INVESTMENT INCOME OF CORPORATION HAVING SUBCHAPTER C EARNINGS AND PROFITS EXCEEDS 25 PERCENT OF GROSS RECEIPTS.
"(a) GENERAL RULE.—If for the taxable year an S corporation has— "(1) subchapter C earnings and profits at the close of such taxable year, and "(2) gross receipts more than 25 percent of which are passive investment income, then there is hereby imposed a tax on the income of such corporation for such taxable year. Such tax shall be computed by multiplying the excess net passive income by the highest rate of tax specified in section 11(b). "(b) DEFINITIONS.—For purposes of this section— "(1) EXCESS NET PASSIVE INCOME.—
Ante, p. 1683.
Ante, p. 1672.
"(A) IN GENERAL.—Except as provided in subparagraph (B), the term 'excess net passive income' means an amount which bears the same ratio to the net passive income for the taxable year as— "(i) the amount by which the passive investment income for the taxable year exceeds 25 percent of the gross receipts for the taxable year, bears to "(ii) the passive investment income for the taxable year. "(B) LIMITATION.—The amount of the excess net passive income for any taxable year shall not exceed the corporation's taxable income for the taxable year (determined in accordance with section 1374(d)). "(2) NET PASSIVE INCOME.—The term 'net passive income' means— "(A) passive investment income, reduced by "(B) the deductions allowable under this chapter which are directly connected with the production of such income (other than deductions allowable under section 172 and part VIII of subchapter B). "(3) PASSIVE INVESTMENT INCOME; ETC.—The terms 'subchapter C earnings and profits', 'passive investment income', and 'gross receipts' shall have the same respective meanings as when used in paragraph (3) of section 1362(d). "(c) SPECIAL RULES.— "(1) DISALLOWANCE OF CREDIT.—No
26 USC 31.
credit shall be allowed under part IV of subchapter A of this chapter (other than section 39) against the tax imposed by subsection (a). "(2) COORDINATION WITH SECTION 1374.—If any gain— "(A) is taken into account in determining passive income for purposes of this section, and "(B) is taken into account under section 1374, the amount of such gain taken into account under section 1374 shall be reduced by the portion of the excess net passive income for the taxable year which is attributable (on a pro rata basis) to such gain.
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