Page 210

TITLE 26-INTERNAL REVENUE CODE the Interstate Commerce Act (49 U.S.C. 1(3) makes a payment in cash, rail passenger equipment, or services to the National Rail- road Passenger Corporation (hereinafter in this section referred to as the "Passenger Corporation") pursuant to a contract entered into under section 401(a) of the Rail Passen- ger Service Act, and (2) no stock in the Passenger Corporation is issued at any time to such corporation in con- nection with any contract entered into under such section 401(a), then the amount of such payment shall (sub- ject to subsection (c) be allowed as a deduction for the taxable year in which it is made. (b) When payment is made Under regulations prescribed by the Secre- tary, a payment in rail passenger equipment shall be treated as made when title to the equipment is transferred, and a payment in ser- vices shall be treated as made when the services are rendered. (c) Effect of certain subsequent acquisitions of stock (1) Disallowance of deductions If any dedu,-tion has been allowed under subsection (a) to a corporation and such cor- poration (or a successor corporation) acquires any stock in the Passenger Corporation (other than in a transaction described in sec- tion 374 or 381) before the close of the 36- month period which begins with the day on which the last payment is made to the Pas- senger Corporation pursuant to the contract entered into under such section 401(a), then such deduction shall be disallowed (as of the close of the taxable year for which it was al- lowed under subsection (a)). (2) Collection of deficiency If any deduction is disallowed by reason of paragraph (1), then the periods of limitation provided in sections 6501 and 6502 on the making of an assessment and the collection by levy or a proceeding in court shall, with re- spect to any deficiency (including interest and additions to the tax) resulting from such a disallowance, include one year following the date on which the person acquiring the stock which results in the disallowance (in accor- dance with regulations prescribed by the Sec- retary) notifies the Secretary of such acquisi- tion; and such assessment and collection may be made notwithstanding any provision of law or rule of law which otherwise would prevent such assessment and collection. (d) Members of controlled group Under regulations prescribed by the Secre- tary, if a corporation is a member of a con- trolled group of corporations (within the mean- ing of section 1563), subsections (a)(2) and (c) shall be applied by treating all members of such controlled group as one corporation. (Added Pub. L. 91-518, title IX, § 901(a), Oct. 30, 1970, 84 Stat. 1341, and amended Pub. L. 93- 496, § 12, Oct. 28, 1974, 88 Stat. 1531; Pub. L. 94- 455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834.) REFERENCES IN TEXT Section 401(a) of the Rail Passenger Service Act re- ferred to in subsec. (a)(l), is classified to section 561(a) of Title 45, Railroads. AMENDMENTS 1976-Subsecs. (b), (c)(2), (d). Pub. L. 96-455 struck out "or his delegate" following "Secretary". 1974-Subsec. (a)(1). Pub. L. 93-496 substituted "Rail Passenger Service Act" for "Rail Passenger Service Act of 1970". EFFECTIVE DATE Section 901(c) of Pub. L. 91-518 provided that: "The amendments made by this section (adding this sec- tion] shall apply to taxable years ending after the date of the enactment of this Act [October 30, 1970J." PART IX-ITEMS NOT DEDUCTIBLE Sec. 261. General rule for disallowance of deductions. 262. Personal, living, and family expenses. 263. Capital expenditures. 264. Certain amounts paid in connection with in- surance contracts. 265. Expenses and interest relating to tax-exempt income. 266. Carrying charges. 267. Losses, expenses, and interest with respect to transactions between related taxpayers. 268. Sale of land with unharvested crop. 269. Acquisitions made to evade or avoid income tax. [270. Repealed.] 271. Debts owed by political parties, etc. 272. Disposal of coal or domestic iron ore. 273. Holders of life or terminable interest. 274. Disallowance of certain entertainment, etc., expenses. 275. Certain taxes. 276. Certain indirect contributions to political parties. 277. Deductions incurred by certain membership organizations in transactions with mem- bers. 278. Capital expenditures incurred in planting and developing citrus and almond groves. 279. Interest on indebtedness incurred by corpo- ration to acquire stock or assets of another corporation. 280. Certain expenditures incurred in production of films, books, records, or similar proper- ty. 280A. Disallowance of certain expenses in connec- tion with business use of home, rental of vacation homes, etc. 280B. Demolition of certain historic structures. AMENDMENTS 1976-Pub. L. 94-455, title II, § 210(b), title VI, § 601(b), title XXI, § 2124(b)(2), Oct. 4, 1976, 90 Stat. 1544, 1572, 1918, added items 280, 280A, and 280B. 1971-Pub. L. 91-680, § 1(c), Jan. 12, 1971, 84 Stat. 2064, added "and almond" following "citrus" in item 278. 1969-Pub. L. 91-172, title I, § 121(b)(3)(B), title II, §§ 213(c)(2), 216(b), title IV, § 411(b), Dec. 30, 1969, 83 Stat. 541, 572, 574, 608, struck out item 270, limitation on deductions allowable to individuals in certain cases, and added items 277 to 279. 1966-Pub. L. 89-368, title III, § 301(b), Mar. 15, 1966, 80 Stat. 67, added item 276. 1964-Pub. L. 88-272, title 11, §§ 207(b)(3)(B), 227(b)(4), Feb. 26, 1964, 78 Stat. 42, 98, inserted "or do- mestic iron ore" In item 272, and added item 275. 1962-Pub. L. 87-834, § 4(a)(2), Oct. 16, 1962, 76 Stat. 976, added item 274. Page 210 § 250