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TITLE 26-INTERNAL REVENUE CODE AMENDMENTS 1976--Subsecs. (c)(3), (e), (g). Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary" wherever appearing. Subsec. (h). Pub. L. 94-455, § 1901(a)(78), struck out subsec. (h) relating to the effective date of provisions concerning deduction of deficiency dividends. EFFECTIVE DATE OF 1976 AMENDMENT Amendment of subsec. (h) by section 1901(a)(78) of Pub. L. 94-455 applicable with respect to taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, set out as an Effective Date of 1976 Amendment note under section 2 of this title. CROSS REFERENCES Distributor or transfer corporation in carryover situ- ations as e~ititled to deficiency dividend deduction, see section 381 of this title. Personal holding company dividend defined, see sec- tion 316 of this title. Suspension of running of period of limitation, see section 6503 of this title. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 316, 381, 6422, 6515 of this title. PART III-FOREIGN PERSONAL HOLDING COMPANIES Sec. 551. Foreign personal holding company income taxed to United States shareholders. 552. Definition of foreign personal holding company. 553. Foreign personai .iolding company income. 554. Stock ownership. 555. Gross income of foreign personal holding compa- nies. 556. Undistributed foreign personal holding company income. 557. Income not placed on annual basis. 558. Returns of officers, directors, and shareholders of foreign personal holding companies. AMENDMENTS 1958-Pub. L.85-866, title I, § 33(d)(2), Sept. 2, 1958, 72 Stat. 1632, added item 558. § 551. Foreign personal holding company income taxed to United States shareholders (a) General rule The undistributed foreign personal holding company income of a foreign personal holding company shall be included in the gross income of the citizens or residents of the United States, domestic corporations, domestic partnerships, and estates or trusts (other than estates or trusts the gross income of which under this subtitle includes only income from sources within the United States), who are sharehold- ers in such foreign personal holding company (hereinafter called "United States sharehold- ers") in the manner and to the extent set forth in this part. (b) Amount included In gross income Each United States shareholder, who was a shareholder on the day in the taxable year of the company which was the last day on which a United States group (as defined in section 552(a)(2)) existed with respect to the company, shall include in his gross income, as a dividend, for the taxable year in which or with which the taxable year of the company ends, the amount he would have received as a dividend (deter- mined as if any distribution in liquidation actu- ally made in such taxable year had not been made) if on such last day there had been dis- tributed by the company, and received by the shareholders, an amount which bears the same ratio to the undistributed foreign personal holding company income of the company for the taxable year as the portion of such taxable year up to and including such last day bears to the entire taxable year. (c) Information in return Every United States shareholder who is re- quired under subsection (b) to include In his gross income any amount with respect to the undistributed foreign personal holding compa- ny income of a foreign personal holding compa- ny and who, on the last day on which a United States group existed with respect to the compa- ny, owned 5 percent or more in value of the outstanding stock o such company, shall set forth in his return in complete detail the gross income, deductions and credits, taxable incozme, foreign personal holding company, and undis- tributed foreign personal holding company income of such company. (d) Effect on capital account of foreign personal holding company An amount which bears the same ratio to the undistributed foreign personal holding compa- ny income of the foreign personal holding com- pany for its taxable year as the portion of such taxable year up to and including the last day on which a United States group existed with re- spect to the company bears to the entire tax- able year, shall, for the purpose of determining the effect of distributions in subsequent tax- able years by the corporation, be considered as paid-in surplus or as a contribution to capital, and the accumulated earnings and profits as of the close of the taxable year shall be corre- spondingly reduced, if such amount or any por- tion thereof is required to be included as a divi- dend, directly or indirectly, in the gross income of United States shareholders. (e) Basis of stock in hands of shareholders The amount required to be included in the gross income of a United States shareholder under subsection (b) shall, for the purs' .,, of adjusting the basis of his stock *with respect to which the distribution would have been made (if it had been made), be treated as having been reinvested by the shareholder as a contribution to the capital of the corporation; but only to the extent to which such amount is included in his gross income in his return, increased or de- creased by any adjustment of such amount in the last determination of the shareholder's tax liability, made before the expiration of 6 years after the date prescribed by law for filing the return. (f) Cross references (1) For basis of stock or securities in a foreign person. al holding company acquired from a decedent, see sec- tion 1014(b)(5). (2) For period of limitation on assessment and collec. tion without ansessment, in case of failure to include in gross income tite amount properly includible therein under subsection (b), see section 6501. (Aug. 16, 1954, ch. 736, 68A Stat. 193; Feb. 26, 1964, Pub. L. 88-272, title II, § 225(f)(4), 78 Stat. 88; Oct. 4, 1971, Pub. L. 94-455, title XIX, 71-999 0 - 78 - 29 (Vol. 7) Page 421 § 551