Page 174

TITLE 26-INTERNAL REVENUE CODE December 31, 1963, the taxpayer elects (at such time and in such manner as the Sec- retary by regulations prescribes) to have paragraph (1)(D) apply, and (iti) in the case of a foreign expropri- ation loss for a taxable year ending after December 31, 1958, and before January 1, 1964, the taxpayer elects (in such manner as the Secretary by regulations pre- scribes) on or before December 31, 1965, to have paragraph (1)(D) apply. (D) If a taxpayer makes an election under subparagraph (C)(iii), then (notwithstand- ing any law or rule of law), with respect to any taxable year ending before January 1, 1964, affected by the election- (i) the time for making or changing any choice or election under subpart A of part III of subchapter N (relating to foreign tax credit) shall not expire before Janu- ary 1, 1966, (ii) any deficiency attributable to the election under subparagraph (C)(iii) or to the application of clause (i) of this sub- paragraph may be assessed at any time before January 1, 1969, and (iii) refund or credit of any overpay- ment attributable to the election under subparagraph (C)(iii) or to the application of clause (i) of this subparagraph may be made or allowed if claim therefor is filed before January 1, 1969. (E) Any taxpayer entitled to a carryback period under paragraph (1) may elect to re- linquish the entire carryback period with respect to a net operating loss for any tax- able year ending after December 31, 1975. Such election shall be made in such manner as may be prescribed by the Secretary, and shall be made by the due date (including ex- tensions of time) for filing the taxpayer's return for the taxable year of the net oper- ating loss for which the election is to be in effect. Such election, once made for any taxable year, shall be irrevocable for that taxable year. (c) Net operating loss defined For purposes of this section, the term "net operating loss" means the excess of the deduc- tions allowed by this chapter over the gross income. Such excess shall be computed with the modifications specified in subsection (d). (d) Modifications The modifications referred to in this section are as follows: (1) Net operating loss deduction No net operating loss deduction shall be al- lowed. (2) Capital gains and losses of taxpayers other than corporations In the case of a taxpayer other than a cor- poration- (A) the amount deductible on account of losses from sales or exchanges of capital assets shall not exceed the amount includi- ble on account of gains from sales or ex- changes of capital assets; and (B) the deduction for long-term capital gains provided by section 1202 shall not be allowed. (3) Deduction for personal exemptions No deduction shall be allowed under section 151 (relating to personal exemptions). No de- duction in lieu of any such deduction shall be allowed. (4) Nonbusiness deductions of taxpayers other than corporations In the case of a taxpayer other than a cor- poration, the deductions allowable by this chapter which are not attributable to a tax- payer's trade or business shall be allowed only to the extent of the amount of the gross income not derived from such trade or busi- ness. For purposes of the preceding sen- tence- (A) any gain or loss from the sale or other disposition of- (i) property, used in the trade or busi- ness, of a character which is subject to the allowance for depreciation provided in section 167, or (it) real property used in the trade or business, shall be treated as attributable to the trade or business; (B) the modifications specified in para- graphs (1), (2)(B), and (3) shall be taken into account; (C) any deduction allowable under section 165(c)(3) (relating to casualty losses) shall not be taken into account; and (D) any deduction allowed under section 404 or section 405(c) to the extent attribut- able to contributions which are made on behalf of an individual who is an employee within the meaning of section 401(c)(1) shall not be treated as attributable to the trade or business of such individual. (5) Special deductions for corporations No deduction shall be allowed under section 242 (relating to partially tax-exempt interest) or under section 922 (relating to Western Hemisphere trade corporations). (6) Computation of deduction for dividends re- ceived, etc. The deductions allowed by sections 243 (re- lating to dividends received by corporations), 244 (relating to dividends received on certain preferred stock of public utilities), and 245 (relating to dividends received from certain foreign corporations) shall be computed with- out regard to section 246(b) (relating to limi- tation on aggregate amount of deductions); and the deduction allowed by section 247 (re- lating to dividends paid on certain preferred stock of public utilities) shall be computed without regard to subsection (a)(1)(B) of such section. (7) In the case of any taxable year for which part II of subchapter M (relating to real estate in- vestment trusts) applies to the taxpayer- (A) the net operating loss for such taxable year shall be computed by taking into ac- count the adjustments described in section 857(b)(2) (other than the deduction for divi- dends paid described in section 857(b)(2)(B)); and (B) where such taxable year is a "prior taxable year" referred to in paragraph (2) of subsection (b), the term "taxable § 172 Page 174