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TITLE 26-INTERNAL REVENUE CODE (2) such corporation and such organization file a consolidated return for the taxable year, such corporation shall be treated, for purposes of the tax imposed by subsection (a), as being organized and operated for the same purposes as such organization, in addition to the pur- poses described in section 501(c)(2). (d) Tax preferences The tax imposed by section 56 shall apply to an organization subject to tax under this sec- tion with respect to items of tax preference which enter into the computation of unrelated business taxable income. (Aug. 16, 1954, ch. 736, 68A Stat. 169; July 14, 1960, Pub. L. 86-667, § 3, 74 Stat. 535; Feb. 2, 1966, Pub. L. 89-352, § 2, 80 Stat. 4; Dec. 30, 1969, Pub. L. 91-172, title I § 121(a)(1)-(3), title III, § 301(b)(8), title VIII, § 803(d)(2), 83 Stat. 536, 585, 684.) AMENDMENTS 1969-Subsec. (a)(2)(A). Pub. L. 91-172, § 121(a)(1), removed reference, in subpar. catchline, to pars. (2), (3), (5), (6), (14)(B), (C), and (17) of section 501(c) of this title, and, in text, struck out the exemptions to churches, conventions, or associations of churches, from the imposition of tax on their unrelated business income, made corporations organized under section 501(c)(1) of this title (i.e. organized under Acts of Con- gress), exempt from such tax, but made all such ex- emptions subservient to the exceptions in part II and section 501(a) of this title. Subsec. (b)(1). Pub. L. 91-172, § 803(d)(2), substituted section l(d) for section 1 in the reference to the sec- tion under which the computation of the tax dealing with the imposition of tax on the unrelated business taxable income of trusts, is computed. Subsec. (b)(2). Pub. L. 91-172, § 121(a)(2), pluralized the word "trust" in par. catchline, and, in text, made the imposition of tax on the unrelated business income of exempt trusts subject to the provisions of part II, and, for the purposes of determining trusts exempt from taxation, substituted reference to section 501(a) for reference to "section 501(c)(3) or (17) or sec- tion 401(a)". Subsec. (c). Pub. L. 91-172, § 121(a)(3), added subsec. Cc). Former subsec. (c), covering the effective date, was stricken. Subsec. (d). Pub. L. 91-172, § 301(b)(8), added subsec. (d). 1966-Subsec. (a)(2)(A). Pub. L. 89-352 inserted "(14)(B) or (C)," after "(6)," in the heading and in the text. 1960-Subsec. (a)(2). Pub. L. 86-667, § 3(a), included organizations described in section 501(c)(17) within subpar. (A). Subsec. (b). Pub. L. 86-667, § 3(b), inserted a refer- ence to section 501(c)(17). EFFECTIVE DATE OF 1969 AmENDmENT Section 121(g) of Pub. L. 91-172 provided that: "The amendments made by this section [amending sections 48, 501, 502, 503, 511 to 514, 681, 801, 810, 1443, 1504 and 7605 of this title] (other than by subsections (b)(3) and (e) [enacting sections 277 and 6050 of this title]) shall apply to taxable years beginning after De- cember 31, 1969. The amendments made by subsection (b)(3) [enacting section 277 of this title] shall apply to taxable years beginning after December 31, 1970. The amendments made by subsection (e) [enacting section 6050 of this title] shall apply with respect to transfers of property after December 31, 1969. Where an organi- zation makes a bargain purchase of property before October 9, 1969, which is subject to a mortgage which was placed on the property more than 5 years before the purchase, and the organization paid the seller a total amount no greater than the amount of the sell- er's cost (including attorneys' fees) directly related to the transfer of such property to the organization (but in any event no more than 10 percent of the value of the seller's equity in the property), the indebtedness secured by such mortgage shall not be treated, not- withstanding the amendments made by subsection (d)(1) [amending section 514 of this title], as acquisi- tion indebtedness for purposes of section 514(c)(1) of the Internal Revenue Code of 1954 [section 514(c)(i) of this title] during a period of 10 years following the date of the transaction." Amendment of subsec. (b)(1) of this section by sec- tion 803(d)(2) of Pub. L. 91-172 applicable to taxable years beginning after Dec. 31, 1970, see section 803(f) of Pub. L. 91-172, set out as an Effective Date of 1969 Amendment note under section 1 of this title. Subsec. (d) of this section applicable to taxable years ending after Dec. 31, 1969, see section 301(c) of Pub. .. 91-172, set out as an Effective Date note under section 56 of this title. EFFECTIVE DATE OF 1966 AMENDMENT Section 3 of Pub. L. 89-352 provided in part that: "The amendment made by section 2 [amending subsec. (a)(2)(A) of this section] shall apply to tax.able years beginning after the date of the enactment of this Act (Feb. 2, 1966]." EFFECTIVE DATE OF 1960 AMENDMENT Amendment by Pub. L. 86-667 applicable to taxable years beginning after Dec. 31, 1959, see section 6 of Pub. L. 86-667, set out as an Effective Date of 1960 Amendments note under section 501 of this title. CRoss REFERENCES Alternative capital gains tax, see section 1201 of this title. Taxes of foreign countries and possessions of United States as credit against tax under this section, see sec- tion 515 of this title. Unrelated trade or business, see section 513 of this title. Withholding of tax on foreign tax-exempt organiza- tions, see section 1443 of this title. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 11, 12, 48, 408, 509, 512, 513. 514, 515, 527, 1201, 1245, 1250, 1443, 1563, 2611, 4940, 6050 of this title. SECTION REFERRED TO IN D.C. CODE This section is referred to in section 47-1554 of the District of Columbia Code. § 512. Unrelated business taxable income (a) Definition For purposes of this title- (1) General rule Except as otherwise provided in this subsec- tion, the term "unrelated business taxable income" means the gross income derived by any organization from any unrelated trade or business (as defined in section 513) regularly carried on by it, less the deductions allowed by this chapter which are directly connected with the carrying on of such trade or busi- ness, both computed with the modifications provided in subsection (b). (2) Special rule for foreign organizations In the case of an organization described in section 511 which is a foreign organization, the unrelated business taxable income shall be- (A) Its unrelated business taxable income which is derived from sources within the § 512 Page 390