Page 594

TITLE 26-INTERNAL REVENUE CODE § 922. Special deduction (a) General rule In the case of a Western Hemisphere trade corporation there shall be allowed as a deduc- tion in computing taxable income an amount computed as follows- (1) First determine the taxable income of such corporation computed without regard to this section. (2) Then multiply the amount determined under paragraph (1) by the fraction- (A) the numerator of which is 14 percent, and (B) the denominator of which is that per- centage which equals the sum of the normal tax rate and the surtax rate for the taxable year prescribed by section 11. No deduction shall be allowed under this sec- tion to a corporation for a taxable year for which it is a DISC or in which it owns at any time stock in a DISC or former DISC (as de- fined in section 992(a)). (b) Phaseout of deduction In the case of a taxable year beginning after December 31, 1975, and before January 1, 1980, the percent specified in subsection (a)(2)(A) shall be (in lieu of 14 percent) the percent specified in the following table: For a taxable year The percentage beginning in- shall be- 1976 ..................................................................... 11 1977 .................................................................... . 8 1978 .................................................................... . 5 1979 .................................................................... . 2 (Aug. 16, 1954, ch. 736, 68A Stat. 291; Dec. 10, 1971, Pub. L. 92-178, title V, §502(c), 85 Stat. 550; Oct. 4, 1976, Pub. L. 94-455, title X, § 1052(a), (c)(1), 90 Stat. 1647, 1648.) REPEAL OF SECTION Section repealed by Pub. L. 94-455, title X, §1052(b), Oct. 4, 1976, 90 Stat. 1648, appli- cable with respect to taxable years begin- ning after Dec. 31, 1979. AMENDMENTS 1976-Subset. (a). Pub. L. 94-455, § 1052(c)(1), substi- tuted "(a) General rule-In the case of" for "In the case of" following "Special deduction". Subsec. (b). Pub. L. 94-455, § 1052(a), added subsec. (b). 1971-Pub. L. 92-178 disallowed a deduction to a cor- poration for a taxable year for which it is a DISC or in which it owns at any time stock in a DISC or former DISC. EFFEcTIvE DATE OF 1976 AMENDMENT Section 1052(d) of Pub. L. 94-455 provided that: "The amendments made by subsection (a) [enacting subsec. (b) of this section] and paragraph (1) of sub- section (c) [amending subsec. (a) this section] shall apply with respect to taxable years beginning after December 31, 1975. The amendments made by subsec. tion (b) [repealing this section and section 921 of this title] and by subsection (c) (other than paragraph (1)) [amending sections 170(b)(2), 172(d)(5), (6), 907(g), 1503, 6091(b)(2)(B) of this title] shall apply with re- spect to taxable years beginning after December 31, 1979." EFFECTIVE DATE OF 1971 AMENDMENT Amendment by Pub. L. 92-178 appli'nable with re- spect to taxable years ending after Dec. 31, 1971, except that a corporation may not be a DISC for any taxable year beginning before Jan. 1, 1972, see section 507 of Pub. L. 92-178, set out as an Effective Date of 1971 Amendment note under section 991 of this title. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 172, 6091 of this title. SUBPART D-PossESSIONS OF THE UNITED STATES Sec. 931. Income from sources within possessions of the United States. 932. Citizens of possessions of the United States. 933. Income from sources within Puerto Rico. 934. Limitation on reduction in income tax liability in- curred to the Virgin Islands. 935. Coordination of United States and Guam individ- ual income taxes. 936. Puerto Rico and possession tax credit. AMENDMENTS 1972-Pub. L. 92-606, § 1(f)(5), Oct. 31, 1972, 86 Stat. 1497, added item 935. 1960-Pub. L. 86-779. § 4(a)(2), Sept. 14, 1960, 74 Stat. 999, added item 934. SUBPART REFERRED TO IN OTHER SECTIONS This subpart is referred to in section 1304 of this title. § 931. Income from sources within possessions of the United States (a) General rule In the case of individual citizens of the United States, gross income means only gross income from sources within the United States if the conditions of both paragraph (1) and para- graph (2) are satisfied: (1) 3-year period If 80 percent or more of the gross income of such citizen (computed without the benefit of this section) for the 3-year period immediate- ly preceding the close of the taxable year (or for such part of such period immediately pre- ceding the close of such taxable year as may be applicable) was derived from sources within a possession of the United States; and (2) Trade or business If 50 percent or more of his gross income (computed without the benefit of this sec- tion) for such period or such part thereof was derived from the active conduct of a trade or business within a possession of the United States either on his own account or as an em- ployee or agent of another. (b) Amounts received in United States Notwithstanding subsection (a), there shall be included in gross income all amounts re- ceived by such citizens or corporations within the United States, whether derived from sources within or without the United States. (c) Definition For purposes of this section, the term "pos- session of the United States" does not include the Commonwealth of Puerto Rico, the Virgin Islands of the United States, or Guam. 'Item 936 has been editorially inserted. Pub. L. 94- 455 added section 936 without amending analysis to add item 936. § 922 Page 594