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TITLE 26-INTERNAL REVENUE CODE 2, 1962, Pub. L. 87-403, § 3(c), 76 Stat. 6; Feb. 26, 1964, Pub. L. 88-272, title II, § 225(d), (k)(2), 78 Stat. 81, 93; Aug. 22, 1964, Pub. L. 88-484, § 3(a), 78 Stat. 598; Nov. 13, 1968, Pub. L. 89-809, title I, § 104(h)(2), title II, § 206(a), (b), 80 Stat. 1559, 1578, 1579; Oct. 4, 1976, Pub. L. 94-455, title II, § 211(a), title XIX, §§ 1901(b)(32)(D), 1906(b)(13)(A), title XXI, § 2106(a), 90 Stat. 1544, 1800, 1834, 1902.) AMENDMENT EFFEcTIvE JANUARY 1, 1978 Last sentence of subsec. (a)(4) of this sec- tion amended effective Jan. 1, 1978, by Pub. L. 94-553, §§ 102, 105(d), Oct 19, 1976, 90 Stat. 2598, 2599, by striking out "(other than by reason of section 2 or 6 thereof)" immedi- ately after "title 17 of the United States Code". AMENDMENTS 1976-Subsec. (a)(1). Pub. L. 94-455, § 1901(b)(32)(D), added in subpar. (B) "(46 U.S.C. 1161 or 1177)" follow- ing "Merchant Marine Act, 1936", and struck out subpar. (C) relating to a dividend distribution of di- vested stock. Subsec. (a)(5)(B). Pub. L. 94-455, § 211(a), added "In the case of a producer who actually participates in the production of the film, such term includes an interest in the proceeds or profits from the film, but only to the extent such interest is attributable to such active participation" following "production of such film". Subsec. (a)(6). Pub. L. 94-455, § 2106(a), redesignated existing provisions as subpars. (a), (B), and (C) and, as redesignated, added in subpar. (A) "tangible" follow- ing "right to use" and in subpar. (C) added exclusions from income embodied in cl. (i1). Subsec. (b)(2). Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary" in subpars. (A), (B) and (D). 196--Subsec. (a)(2). Pub. L. 89-809, § 206(b)(1), struck out provision that royalties received for the use of, or for the privilege of using, a patent, invention, model, or design, secret formula, process, or other similar property right be treated as rent if such prop- erty right is also used by the corporation receiving such royalties in the manufacture or production of tangible personal property held for lease to customers and if the amount constituting rent from such leases to customers meets the requirement of subparagraph (A). Subsec. (b)(1). Pub. L. 89-809, § 104(h)(2), added subpar. (C). Subsec. (b)(2). Pub. L. 89-809, § 206(b)(2), added subpar. (D). Subsec. (b)(3). Pub. L. 89-809, § 206(a), struck out "amounts constituting personal holding company income under subsection (a)(6), nor copyright royal- ties (as defined in subsection (a)(4)), nor produced film rents (as defined in subsection (a)(5)(B))." following "but does not include", and added subpars. (A) to (D). 1964-Subsec. (a). Pub. L. 88-272, § 225(d), amended subsec. (a) generally, and among other changes, substi- tuted "adjusted ordinary gross income" for "gross income", provided, relative to rental income, that in addition to the 50-percent test of par. (2)(A), now ap- plied on the basis of adjusted income from rents and adjusted ordinary gross income, a second test for ex- clusion shall be whether the sum on the dividends paid during the taxable year, the dividends paid on the last day of the year, and the consent dividends for the taxable year, equals or exceeds the amount by which the personal holding company income for the year exceeds 10 percent of the ordinary gross income, relative to mineral, oil, and gas royalties, that in addi. tion to the 50-percent test of par. (3)(A), now applied on the basis of adjusted ordinary gross income, and the 15-percent test of par. (3)(C), from which test have been excluded deductions "specifically allowable under sections other than section 162" and is also now applied on the basis of adjusted gross income, the roy- alties shall be excluded if the personal holding compa- ny income for the taxable year is not more than 10 percent of the ordinary gross income, relative to copy- right royalties, retained the 50-percent test as in par. (4)(A). making it applicable to ordinary gross income, included in the computation of the income for the tax- able year the adjusted income from rents and the ad- Justed income from mineral, oil, and gas royalties, ex- cluded from the sum of deductions allocable to royal- ties, deductions specifically allowable under sections other than 162, and changed the requirement that de- ductions constitute 50 percent or more of gross income to provide that they must equal 25 percent of ordinary gross income reduced by royalties paid and by depreci- ation deductions with respect to copyrights, relative to produced film rents, that they be treated on their own basis and not as rentals, and defined "produced film rents", relative to use of corporation property by shareholders, that personal holding company income includes copyright royalties and the adjusted income from mineral, oil, and gas royalties, eliminated gains from the sale or other disposition of any interest in an estate or trust, from the sale or exchange of stock or securities, and from futures transactions in any com- modity, and also the definition of "rents" which can now be found in subsec. (b)(3). Subsec. (a)(2). Pub. L. 88-484 inserted sentence re- quiring royalties received for the use of, or for the privilege of using, a patent, invention, model, or design (whether or not patented), secret formula or process, or any other similar property right to be treated as rent, if such property right is also used by the corpora. tion receiving such royalties in the manufacture or production of tangible personal property held for lease to customers, and if the amount (computed with- out regard to this sentence) constituting rent from such leases to customers meets the requirements of subparagraph (A). Subsec. (b). Pub. L. 88-272, § 225(d), added subsec. (b), and omitted a prior subsec. (b) which provided that gross income and personal holding company income determined with respect to transactions relat- ing to gains from stock and security transactions, and with respect to transactions relating to gains from commodity transactions, should include only the excess of gains over losses from such transactions. Subsec. (d). Pub. L. 88-272, § 225(k)(2), eliminated subsec. (d) which related to special adjustment on dis- position of antitrust stock received as a dividend. 1962-Subsec. (a)(1). Pub. L. 87-403 prescribed the conditions making inapplicable the provisions of the paragraph to dividend distribution of divested stock. Subsec. (d). Pub. L. 87-403 added subsec. (d). 1960-Subsec. (a)(1). Pub. L. 86-435, § l(b)(1), ex- cluded copyright royalties. Subsec. (a)(6). Pub. L. 86-435, § l(b)(2), added sen- tence providing that copyright royalties constitute personal holding company income. Subsec. (a)(9). Pub. L. 86-435, § 1(a), added subsec. (a)(9). EFFECTIVE DATE OF 1978 AMENDMENT Section 211(b) of Pub. L. 94-455 provided that: "The amendment made by subsection (a) [to subsec. (a)(5)(B) of this section] shall apply to taxable years ending on or after December 31. 1975." Amendment of subsec. (a)(1) by section 1901(b)(32)(D) of Pub. L. 94-455 applicable with re- spect to taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, set out as an Ef- fective Date of 1976 Amendment note under section 2 of this title. Section 2106(b) of Pub. L. 94-455 provided that: "The amendment made by subsection (a) [amending subsec. (a)(6) of this section] shall apply to taxable years beginning after December 31, 1976." EFFECTIVE DATE OF 1966 AMENDMENT Section 206(c) of Pub. L. 89-809 provided that: "The amendments made by subsections (a) and (b) [amend- § 543 Page 414