26 U.S.C. § 1293
Every United States person who owns (or is treated under section 1298(a) as owning) stock of a qualified electing fund at any time during the taxable year of such fund shall include in gross income-
The inclusion under paragraph (1) shall be for the taxable year of the shareholder in which or with which the taxable year of the fund ends.
The pro rata share referred to in subsection (a) in the case of any shareholder is the amount which would have been distributed with respect to the shareholder's stock if, on each day during the taxable year of the fund, the fund had distributed to each shareholder a pro rata share of that day's ratable share of the fund's ordinary earnings and net capital gain for such year. To the extent provided in regulations, if the fund establishes to the satisfaction of the Secretary that it uses a shorter period than the taxable year to determine shareholders' interests in the earnings of such fund, pro rata shares may be determined by using such shorter period.
If the taxpayer establishes to the satisfaction of the Secretary that any amount distributed by a passive foreign investment company is paid out of earnings and profits of the company which were included under subsection (a) in the income of any United States person, such amount shall be treated, for purposes of this chapter, as a distribution which is not a dividend; except that such distribution shall immediately reduce earnings and profits. If the passive foreign investment company is a controlled foreign corporation (as defined in section 957(a)), the preceding sentence shall not apply to any United States shareholder (as defined in section 951(b)) in such corporation, and, in applying section 959 to any such shareholder, any inclusion under this section shall be treated as an inclusion under section 951(a)(1)(A).
The basis of the taxpayer's stock in a passive foreign investment company shall be-
A similar rule shall apply also in the case of any property if by reason of holding such property the taxpayer is treated under section 1298(a) as owning stock in a qualified electing fund.
For purposes of this section-
The term "ordinary earnings" means the excess of the earnings and profits of the qualified electing fund for the taxable year over its net capital gain for such taxable year.
A qualified electing fund's net capital gain for any taxable year shall not exceed its earnings and profits for such taxable year.
The earnings and profits of any qualified electing fund shall be determined without regard to paragraphs (4), (5), and (6) of section 312(n). Under regulations, the preceding sentence shall not apply to the extent it would increase earnings and profits by an amount which was previously distributed by the qualified electing fund.
For purposes of section 960-
For purposes of determining the amount included in the gross income of any person under this section, the ordinary earnings and net capital gain of a qualified electing fund shall not include any item of income received by such fund if-
The Secretary shall prescribe such adjustment to the provisions of this section as may be necessary to prevent the same item of income of a qualified electing fund from being included in the gross income of a United States person more than once.
26 U.S.C. § 1293
EDITORIAL NOTES
REFERENCES IN TEXTSection 902 (as in effect before its repeal), referred to in subsec. (f)(3), means section 902 of this title as in effect before its repeal by Pub. L. 115-97, §14301(a), Dec. 22, 2017, 131 Stat. 2221.
AMENDMENTS2017-Subsec. (f)(3). Pub. L. 115-97 added par. (3).1997-Subsecs. (a)(1), (d). Pub. L. 105-34 substituted "section 1298(a)" for "section 1297(a)". 1993-Subsec. (c). Pub. L. 103-66 inserted at end "If the passive foreign investment company is a controlled foreign corporation (as defined in section 957(a)), the preceding sentence shall not apply to any United States shareholder (as defined in section 951(b)) in such corporation, and, in applying section 959 to any such shareholder, any inclusion under this section shall be treated as an inclusion under section 951(a)(1)(A)." 1988-Subsec. (b). Pub. L. 100-647, §1012(p)(15), inserted at end "To the extent provided in regulations, if the fund establishes to the satisfaction of the Secretary that it uses a shorter period than the taxable year to determine shareholders' interests in the earnings of such fund, pro rata shares may be determined by using such shorter period." Subsec. (c). Pub. L. 100-647, §1012(p)(23), inserted ", for purposes of this chapter," after "shall be treated", and "; except that such distribution shall immediately reduce earnings and profits" after "is not a dividend".Subsec. (e)(3). Pub. L. 100-647, §1012(p)(18), added par. (3).Subsec. (g). Pub. L. 100-647, §1012(p)(32), added subsec. (g).
STATUTORY NOTES AND RELATED SUBSIDIARIES
EFFECTIVE DATE OF 2017 AMENDMENT Amendment by Pub. L. 115-97 applicable to taxable years of foreign corporations beginning after Dec. 31, 2017, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end, see section 14301(d) of Pub. L. 115-97, set out as a note under section 78 of this title.
EFFECTIVE DATE OF 1997 AMENDMENT Amendment by Pub. L. 105-34 applicable to taxable years of United States persons beginning after Dec. 31, 1997, and to taxable years of foreign corporations ending with or within such taxable years of United States persons, see section 1124 of Pub. L. 105-34, set out as a note under section 532 of this title.
EFFECTIVE DATE OF 1993 AMENDMENT Amendment by Pub. L. 103-66 applicable to taxable years of foreign corporations beginning after Sept. 30, 1993, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end, see section 13231(e) of Pub. L. 103-66, set out as a note under section 951 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT Amendment by Pub. L. 100-647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99-514, to which such amendment relates, see section 1019(a) of Pub. L. 100-647, set out as a note under section 1 of this title.
EFFECTIVE DATESection applicable to taxable years of foreign corporations beginning after Dec. 31, 1986, see section 1235(h) of Pub. L. 99-514, set out as a note under section 1291 of this title.
- Secretary
- The term "Secretary" means the Secretary of the Treasury or his delegate.
- United States person
- The term "United States person" means-(A) a citizen or resident of the United States,(B) a domestic partnership,(C) a domestic corporation,(D) any estate (other than a foreign estate, within the meaning of paragraph (31)), and(E) any trust if-(i) a court within the United States is able to exercise primary supervision over the administration of the trust, and(ii) one or more United States persons have the authority to control all substantial decisions of the trust.
- corporation
- The term "corporation" includes associations, joint-stock companies, and insurance companies.
- person
- The term "person" shall be construed to mean and include an individual, a trust, estate, partnership, association, company or corporation.
- shareholder
- The term "shareholder" includes a member in an association, joint-stock company, or insurance company.
- stock
- The term "stock" includes shares in an association, joint-stock company, or insurance company.
- taxable year
- The term "taxable year" means the calendar year, or the fiscal year ending during such calendar year, upon the basis of which the taxable income is computed under subtitle A. "Taxable year" means, in the case of a return made for a fractional part of a year under the provisions of subtitle A or under regulations prescribed by the Secretary, the period for which such return is made.
- taxpayer
- The term "taxpayer" means any person subject to any internal revenue tax.
- trade or business
- The term "trade or business" includes the performance of the functions of a public office.