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TITLE 26-INTERNAL REVENUE CODE other provision of this title to the extent provided in paragraph (2) and to the extent so recognized shall be included in gross income as a dividend, or (C) a shareholder distributes, sells, or ex- changes stock in a DISC or former DISC in a transaction to which section 311, 336, or 337 applies, then an amount equal to the excess of the fair market value of such stock over its adjusted basis in the hands of the shareholder shall, notwithstanding any provision of this title, be included in gross income of the shareholder as a dividend to the extent provided in paragraph (2). (2) Amount included The amounts described in paragraph (1) shall be included in gross income as a divi- dend to the extent of the accumulated DISC income of the DISC or former DISC which is attributable to the stock disposed of and which was accumulated in taxable years of such corporation during the period or periodG the stock disposed of was held by the share- holder which disposed of such stock. (d) Foreign investment attributable to DISC earnings For the purposes of this part- (1) In general The amount of foreign investment attribut- able to producer's loans of a DISC for a tax- able year shall be the smallest of- (A) the net increase in foreign assets by members of the controlled group (as de- fined in section 993(a)(3)) which includes the DISC, (B) the actual foreign investment by do- mestic members of such group, or (C) the amount of outstanding producer's loans by such DISC to members of such controlled group. (2) Net increase in foreign assets The term "net increase in foreign assets" of a controlled group means the excess of- (A) the amount incurred by such group to acquire assets (described in section 1231(b)) located outside the United States over, (B) the sum of- (i) the depreciation with respect to assets of such group located outside the United States; (ii) the outstanding amount of stock or debt obligations of such group issued after December 31, 1971, to persons other than the United States persons or any member of such group; (ill) one-half the earnings and profits of foreign members of such group and for- eign branches of domestic members of such group; (iv) one-half the royalties and fees paid by foreign members of such group to do- mestic members of such group; and (v) the uncommitted transitional funds of the group as determined under para- graph (4). For purposes of this paragraph, assets which are qualified export assets of a DISC (or would be qualified export assets if owned by a DISC) shall not be taken into account. Amounts described in this para- graph (other than in subparagraphs (B)(ii) and (v)) shall be taken into account only to the extent they are attributable to taxable years beginning after December 31, 1971. (3) Actual foreign Investment The term "actual foreign investment" by domestic members of a controlled group means the sum of- (A) contributions to capital of foreign members of the group by domestic members of the group after December 31, 1971, (B) the outstanding amount of stock or debt obligations of foreign members of such group (other than normal trade indebted- ness) issued after December 31, 1971, to do- mestic members of such group, (C) amounts transferred by domestic members of the group after the December 31, 1971, to foreign branches of such mem- bers, and (D) one-half the earnings and profits of foreign members of such group and foreign branches of domestic members of such group for taxable years beginning after De- cember 31, 1971. As used in this subsection, the term "domestic member" means a domestic corporation which is a member of a controlled group (as defined in section 993(a)(3)), and the term "foreign member" means a foreign corpora- tion which is a member of such a controlled group. (4) Uncommitted transitional funds The uncommitted transitional funds of the group shall be an amount equal to the sum of- (A) the excess of- (i) the amount of stock or debt obliga- tions of domestic members of such group outstanding on December 31, 1971, and issued on or after January 1, 1968, to per- sons other than United States persons or any members of such group, but only to the extent the taxpayer establishes that such amount constitutes a long-term bor- rowing for purposes of the foreign direct investment program, over (ii) the net amount of actual foreign in- vestment by domestic members of such group during the period that such stock or debt obligations have been outstand- ing; and (B) the amount of liquid assets to the extent not included in subparagraph (A) held by foreign members of such group and foreign branches of domestic members of such group on October 31, 1971, in excess of their reasonable working capital needs on such date. For purposes of this paragraph, the term "liquid assets" means money, bank deposits (not including time deposits), and indebted- ness of 2 years or less to maturity on the date of acquisition; and the actual foreign invest- ment shall be determined under paragraph (3) without regard to the date in subpara- graph (A) of such paragraph and without regard to subparagraph (D) of such para- graph. Page 626 § 995