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TITLE 26-INTERNAL REVENUE CODE (b) Definitions For purposes of this part- (1) Ordinary gross income The term "ordinary gross income" means the gross income determined by excluding-- (A) all gains from the sale or other dispo- sition of capital assets, (B) all gains (other than those referred to in subparagraph (A)) from the sale or other disposition of property described in section 1231(b), and (C) in the case of a foreign corporation all of the outstanding stock of which during the last half of the taxable year is owned by nonresident alien Individuals (whether di- rectly or indirectly through foreign estates, foreign trusts, foreign partnerships, or other foreign corporations), all items of income which would, but for this subpara- graph, constitute personal holding company income under any paragraph of subsection (a) other than paragraph (7) thereof: (2) Adjusted ordinary gross income The term "adjusted ordinary gross income" means the ordinary gross income adjusted as follows: (A) Rents From the gross income from rents (as de- fined in the second sentence of paragraph (3) of this subsection) subtract the amount allowable as deductions for- (1) exhaustion, wear and tear, obsoles- cence, and amortization of property other than tangible personal property which is not customarily retained by any one lessee for more than three years, (it) property taxes, (iii) interest, and (iv) rent, to the extent allocable, under regulations prescribed by the Secretary, to such gross income from rents. The amount subtracted under this subparagraph shall not exceed such gross income from rents. (B) Mineral royalties, etc. From the gross income from mineral, oil, and gas royalties described in paragraph (4), and from the gross income from work- ing interests in an oil or gas well, subtract the amount allowable as deductions for- (I) exhaustion, wear and tear, obsoles- pence, amortization, and depletion, (ii) property and severance taxes, (ii1) interest, and (iv) rent, to the extent allocable, under regulations prescribed by the Secretary, to such gross income from royalties or such gross income from working interests in oil or gas wells. The amount subtracted under this subpara- graph with respect to royalties shall not exceed the gross income from such royal- ties, and the amount subtracted under this subparagraph with respect to working inter- ests shall not exceed the gross income from such working interests. (C) Interest There shall be excluded- (i) interest received on a direct obliga- tion of the United States held for sale to customers in the ordinary course of trade or business by a regular dealer who is making a primary market in such obliga- tions, and (ii) interest on a condemnation award, a judgment, and a tax refund. (D) Certain excluded rents From the gross income consisting of com- pensation described in subparagraph (D) of paragraph (3) subtract the amount allowa- ble as deductions for the items described in clauses (I), (ii), (iii), and (iv) of subpara- graph (A) to the extent allocable, under regulations prescribed by the Secretary, to such gross income. The amount subtracted under this subparagraph shall not exceed such gross income. (3) Adjusted income from rents The term "adjusted income from rents" means the gross income from rents, reduced by the amount subtracted under paragraph (2)(A) of this subsection. For purposes of the preceding sentence, the term "rents" means compensation, however designated, for the use of, or right to use, property, and the in- terest on debts owed to the corporation, to the extent such debts represent the price for which real property held primarily for sale to customers in the ordinary course of its trade or business was sold or exchanged by the cor- poration; but such term does not include- (A) amounts constituting personal hold- ing company income under subsection (a)(6), (B) copyright royalties (as defined in sub- section (a)(4)), (C) produced film rents (as defined in sub- section (a)(5)(B)), or (D) compensation, however designated, for the use of, or the right to use, any tangi- ble personal property manufactured or pro- duced by the taxpayer, if during the tax- able year the taxpayer is engaged in sub- stantial manufacturing or production of tangible personal property of the same type. (4) Adjusted income from mineral, oil, and gas roy- alties The term "adjusted income from mineral, oil, and gas royalties" means the gross income from mineral, oil, and gas royalties (including production payments and overriding royal- ties), reduced by the amount subtracted under paragraph (2)(B) of this subsection in respect of such royalties. (c) Gross income of insurance companies other than life or mutual In the case of an insurance company other than life or mutual, the term "gross income" as used in this part means the gross income, as de- 'fined in section 832(b)(1), increased by the amount of losses incurred, as defined in section 832(b)(5), and the amount of expenses incurred, as defined in section 832(b)(6), and decreased by the amount deductible under section 832(c)(7) (relating to tax-free interest). (Aug. 16, 1954, ch. 736, 68A Stat. 186; Apr. 22, 1960, Pub. L. 86-435, § 1(a), (b), 74 Stat. 77, Feb. Page 413 § 543