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TITLE 26-INTERNAL REVENUE CODE (ii) the transfer in an exchange to which section 351 applies if following the exchange the tentative quantity deter- mined under the table contained in para- graph (3)(B) is allocated under paragraph (8) between the transferor and transferee. (iii) a change of beneficiaries of a trust by reason of the death, birth, or adoption of any vested beneficiary if the transferee was a beneficiary of such trust or is a lineal descendant of the settlor or any other vested beneficiary of such trust, except in the case of any trust where any beneficiary of such trust is a member of the family (as defined in section 267(c)(4)) of a settlor who created inter vivos and testamentary trusts for members of the family and such settlor died within the last six days of the fifth month in 1970, and the law in the jurisdiction in which such trust was created requires all or a portion of the gross or net proceeds of any royalty or other interest in oil, gas, or other mineral representing any percent- age depletion allowance to be allocated to the principal of the trust, (iv) a transfer of property between cor- porations which are members of the same controlled group of corporations (as de- fined in paragraph (8)CD)(i)), or v) a transfer of property between busi- ness entities which are under common control (within the meaning of paragraph (8)(B)) or between related persons in the same family (within the meaning of para- graph (8)(C)), or (vi) a transfer of property between a trust and related persons in the same family (within the meaning of paragraph (8)(C)) to the extent that the beneficia- ries of that trust are and continue to be related persons in the family that trans- ferred the property, and to the extent that the tentative oil quantity is allocated among the members of the family (within the meaning of paragraph (8)(C)). Clause iv) or Cv) shall apply only so long as the tentative oil quantity determined under the table contained in paragraph (3)(B) is allocated under paragraph (8) between the transferor and transferee. (10) Special rule for fiscal year taxpayers In applying this subsection to a taxable year which is not a calendar year, each por- tion of such taxable year which occurs during a single calendar year shall be treated as if it were a short taxable year. (11) Certain production not taken into account In applying this subsection, there shall not be taken into account the production of natu- ral gas with respect to which subsection (b) applies. (d) Limitations on application of subsection Cc) (1) Limitation based on taxable income The deduction for the taxable year attribut- able to the application of subsection Cc) shall not exceed 65 percent of the taxpayer's tax- able income for the year computed without regard to- (A) any depletion on production from an oil or gas property which is subject to the provisions of subsection (c), (B) any net operating loss carryback to the taxable year under section 172, (C) any capital loss carryback to the tax- able year under section 1212, and (D) in the case of a trust, any distribu- tions to its beneficiary, except in the case of any trust where any beneficiary of such tr'ist is a member of the family (as defined in ,:ection 267(c)(4)) of a settlor who created inter" vivos and testamentary trusts for members of the family and such settlor died within the last six days of the fifth month in 1970, and the law in the jurisdiction in which such trust was created requires all or a portion of the gross or net proceeds of any royalty or other interest in oil, gas, or other mineral representing any percentage depletion allowance to be allocated to the principal of the trust. If an amount is disallowed as a deduction for the taxable year by reason of application of the preceding sentence, the disallowed amount shall be treated as an amount allowa- ble as a deduction under subsection (c) for the following taxable year, subject to the ap- plication of the preceding sentence to such taxable year. For purposes of basis adjust- ments and determining whether cost deple- tion exceeds percentage depletion with re- spect to the production from a property, any amount disallowed as a deduction on the ap- plication of this paragraph shall be allocated to the respective properties from which the oil or gas was produced in proportion to the percentage depletion otherwise allowable to such properties under subsection Mc). (2) Retailers excluded Subsection (c) shall not apply in the case of any taxpayer who directly, or through a re- lated person, sells oil or natural gas (exclud- ing bulk sales of such items to commercial or indurstrial users), or any product derived from oil or natural gas- (A) through any retail outlet operated by the taxpayer or a related person, or (B) to any person- (i) obligated under an agreement or con- tract with the taxpayer or a related person to use a trademark, trade name, or service mark or name owned by such tax- payer or a related person, in marketing or distributing oil or natural gas or any prod- uct derived from oil or natural gas, or (ii) given authority, pursuant to an agreement or contract with the taxpayer or a related person, to occupy any retail outlet owned, leased, or in any way con- trolled by the taxpayer or a related person. Notwithstanding the preceding sentence this paragraph shall not apply in any case where the combined gross receipts from the sale of such oil, natural gas, or any product derived therefrom, for the taxable year of all retail outlets taken into account for purposes of this paragraph do not exceed $5,000,000. For purposes of this paragraph, sales of oil, natu- ral gas, or any product derivel from oil or Page 447 § 613A