Minimum holding period for withholding taxes on gain and income other than dividends etc.
(1) In general
(1)In general#
In no event shall a credit be allowed under subsection (a) for any withholding tax (as defined in subsection (k)) on any item of income or gain with respect to any property if—
(A) such property is held by the recipient of the item for 15 days or less during the 31-day period beginning on the date which is 15 days before the date on which the right to receive payment of such item arises, or
(B) to the extent that the recipient of the item is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property.
This paragraph shall not apply to any dividend to which subsection (k) applies.
(1)(A)#
such property is held by the recipient of the item for 15 days or less during the 31-day period beginning on the date which is 15 days before the date on which the right to receive payment of such item arises, or
(1)(B)#
to the extent that the recipient of the item is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property.
(2)Exception for taxes paid by dealers#
(A) In general Paragraph (1) shall not apply to any qualified tax with respect to any property held in the active conduct in a foreign country of a business as a dealer in such property.
(B) Qualified tax For purposes of subparagraph (A), the term “qualified tax” means a tax paid to a foreign country (other than the foreign country referred to in subparagraph (A)) if— (i) the item to which such tax is attributable is subject to taxation on a net basis by the country referred to in subparagraph (A), and (ii) such country allows a credit against its net basis tax for the full amount of the tax paid to such other foreign country.
(C) Dealer For purposes of subparagraph (A), the term “dealer” means— (i) with respect to a security, any person to whom paragraphs (1) and (2) of subsection (k) would not apply by reason of paragraph (4) thereof, and (ii) with respect to any other property, any person with respect to whom such property is described in section 1221(a)(1).
(D) Regulations The Secretary may prescribe such regulations as may be appropriate to carry out this paragraph, including regulations to prevent the abuse of the exception provided by this paragraph and to treat other taxes as qualified taxes.
(2)(A)In general#
Paragraph (1) shall not apply to any qualified tax with respect to any property held in the active conduct in a foreign country of a business as a dealer in such property.
(2)(B)Qualified tax#
(3)Exceptions#
The Secretary may by regulation provide that paragraph (1) shall not apply to property where the Secretary determines that the application of paragraph (1) to such property is not necessary to carry out the purposes of this subsection.
(4)Certain rules to apply#
Rules similar to the rules of paragraphs (5), (6), and (7) of subsection (k) shall apply for purposes of this subsection.
(5)Determination of holding period#
Holding periods shall be determined for purposes of this subsection without regard to section 1235 or any similar rule.