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TITLE 26-INTERNAL REVENUE CODE EFrEcTivE DATE Section 14(c) of Pub. L. 87-834 provided that: "The amendments made by this section [adding this section and section 1247 and amending sections 312, 751 and 1223 of this title] shall apply with respect to taxable years beginning after December 31, 1962." SEcTION REFEMMM TO IN OrMm SECTIONS This section is referred to in sections 312, 751, 1223, 1247, 1248 of this title. § 1247. Election by foreign investment companies to distribute income currently (a) Election by foreign investment company (1) In general If a foreign investment company which is described in section 1246(b)(1) elects (in the manner provided in regulations prescribed by the Secretary) on or before December 31, 1962, with respect to each taxable year begin- ning after December 31, 1962, to- (A) distribute to Its shareholders 90 per- cent or more of what its taxable income would be if it were a domestic corporation; (B) designate in a written notice mailed to its shareholders at any time before the ex- piration of 45 days after the close of its tax- able year the pro rata amount of the amount (determined as if such corporation were a domestic corporation) of the net cap- ital gain of the taxable year; and the por- tion thereof which is being distributed; and (C) provide such information as the Secre- tary deems necessary to carry out the pur- poses of this section, then section 1248 shall not apply with respect to the qualified shareholders of such compa- ny during any taxable year to which such election applies. (2) Special rules (A) Computation of taxable income For purposes of paragraph (1)(A), the tax- able income of the company shall be com- puted without regard to- (I) the net capital gain referred to in paragraph (1)(B), (it) section 172 (relating to net operating losses), and (iII) any deduction provided by part VIII of subchapter B (other than the deduc- tion provided by section 248, relating to organizational expenditures). (B) Distributions after the cloie of the taxable yerr For purposes of paragraph (1)(A), a distri- bution made after the close of the taxable year and on or before the 15th day of the third month of the next taxable year shall be treated as distributed during the taxable year to the extent elected by the company (in accordance with regulations prescribed by the Secretary on or before the 15th day of such third month. (C) Carryover of capital losses from nonelection years denied In computing the net capital gain referred to in paragraph (1)(B), section 1212 shall not apply to losses incurred in or with re- spect to taxable years before the first tax- able year to which the election applies. (b) Years to which election applies The election of any foreign investment com- pany under this section shall terminate as ef the close of the taxable year preceding its first taxable year in which any of the following occurs: (1) the contpany fails to comply with the provisions of subparagraph (A), (B), or (C) of subsection (a)(1), unless it is shown that such failure is due to reasonable cause and not due to willful neglect, (2) the company is a foreign personal hold- ing company, or (3) the company is not a foreign investment company which is described in section 1246(b)(1). (c) Qualified shareholders For purposes of this section- (1) In general The term "qualified shareholder" means any shareholder who is a United States person (as defined in section 7701(a)(30)), other than a shareholder described in para- graph (2). (2) Certain United States persons excluded from definition A United States person shall not be treated as a qualified shareholder for the taxable year if for such taxable year (or for any prior taxable year) he did not include, in comput- ing his long-term capital gains in his return for such taxable year, the amount designated by such company pursuant to subsection (a)(1)(B) as his share of the undistributed capital gains of such company for its taxable year ending within or with such taxable year of the taxpayer. The preceding sentence shall not apply with respect to any failure by the taxpayer to treat an amount as provided therein if the taxpayer shows that such fail- ure was due to reasonable cause and not due to willful neglect. (d) Treatment of distributed and undistributed capital gains by a qualified shareholder Every qualified shareholder of a foreign in- vestment company for any taxable year of such company with respect to which an election pur- suant to subsection (a) is in effect shall include, in computing his long-term capital gains- (1) for his taxable year in which received, his pro rata share of the distributed portion of the net capital gain for such taxable year of such company, and (2) for his taxable year in which or with which the taxable year of such company ends, his pro rata share of the undistributed portion of the net capital gain for such tax- able year of such company. (e) Adjustments Under regulations prescribed by the Secre- tary, proper adjustments shall be made- (1) in the earnings and profits of the elect- ing foreign investment company and a quali- fied shareholder's ratable share thereof, and (2) in the adjusted basis of stock of such company held by such shareholder, to reflect such shareholder's inclusion in gross income of undistributed capital gains. § 1247 Page 700