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TITLE 26-INTERNAL REVENUE CODE (f) Election by foreign investment company with re- spect to foreign tax credit A foreign investment company with respect to which an election pursuant to subsection (a) is in effect and more than 50 percent of the value (as defined in section 851(c)(4)) of whose total assets at the close of the taxable year con- sists of stock or securities in foreign corpora- tions may, for such taxable year, elect the ap- plication of this subsection with respect to income, war profits, and excess profits taxes de- scribed in section 901(b)(1) which are paid by the foreign investment company during such taxable year to foreign countries and posses- sions of the United States. If such election is made- (1) the foreign investment company- (A) shall compute its taxable income, for purposes of subsection (a)(1)(A), without any deductions for income, war profits, or excess profits taxes paid to foreign coun- tries or possessions of the United States, and (B) shall treat the amount of such taxes, for purposes of subsection (a)(1)(A), as dis- tributed to its shareholders; (2) each qualified shareholder of such for- eign Investment company- (A) shall include in gross income and treat as paid by him his proportionate share of such taxes, and (B) shall treat, for purposes of applying subpart A of part III of subchapter N, his proportionate share of such taxes as having been paid to the country in which the for- eign investment company is incorporated, and (C) shall treat as gross income from sources within the country in which the for- eign investment company is incorporated, for purposes of applying subpart A of part III of subchapter N, the sum of his propor- tionate share of such taxes and any divi- dend paid to him by such foreign invest- ment company. (g) Notice to shareholders The amounts to be treated by qualified share- holders, for purposes of subsection (f)(2), as their proportionate share of the taxes described in subsection (f)(1)(A) paid by a foreign invest- ment company shall not exceed the amounts so designated by the foreign investment company in a written notice mailed to its shareholders not later than 45 days after the close of its tax- able year. (h) Manner of making election and notifying share- holders The election provided in subsection (f) and the notice to shareholders required by subsec- tion (g) shall be made in such manner as the Secretary may prescribe by regulations. (i) Loss on sale or exchange of certain stock held less than 9 months If- (1) under this section, any qualified share- holder treats any amount designated under subsection (a)(1)(B) with respect to a share of stock as long-term capital gain, and (2) such share is held by the taxpayer for less than 9 months, then any loss on the sale or exchange of such share shall, to the extent of the amount de- scribed in paragraph (1), be treated as loss from the sale or exchange of a capital asset held for more than 9 months. (Added Pub. L. 87-834, § 14(a)(1), Oct. 16, 1962, 76 Stat. 1037, and amended Pub. L. 94-455, title XIV, § 1402(b)(1)(X), title XIX, §§ 1901(b)(33) (P), (R), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1732, 1802, 1834.) TAXABLE YEARS AFTER 1977 Subsec. (i) of this section amended by Pub. L. 94-455, title XIV, § 1402(b)(2), Oct. 4, 1976, 90 Stat. 1732, effective with respect to taxable years beginning after Dec. 31, 1977, by substituting "I year"for "9 months". AMENDMENTS 1976-Subsec. (a)(1)(B), (C). Pub. L. 94-455, § 1901(b)(33)(P), substituted "the amount (determined as if such corporation were a domestic corporation) of the net capital gain" for "the excess (determined as If such corporation were a domestic corporation) of the net long-term capital gain over the net short-term cap- ital loss". § 1906(b)(13)(A), struck out "or his delegate" following "Secretary". Subsec. (a)(2)(A)i), (B), (C). Pub. L. 94-455, § 1901(b)(33)(R), substituted in subpars. (A)(1) and (C) "the net capital gain" for "the excess of the net long- term capital gain over the net short-term capital loss,". § 1906(b)(13)(A) struck out in subpara. (a)(2)(B) "or his delegate" following "Secretary". Subsec. (d)(1), (2). Pub. L. S4-455, § 1901(b)(33MR), substituted "the net capital gain" for "the excess of the net long.term capital gain over the net short-term capital loss,". Subsecs. (e), (II). Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary". Subsec. (1). Pub. L. 94-455, § 1402(b)(1)(X), provided that "6 months" would be changed to "9 months" for taxable years beginning in 1977. EFFECTIVE DATE OF 1976 AMENDMENT Amendment of subsecs. (a)(1)(B), (a)(2)(A)(i), (C), (d)(1), (2) by section 1901(b)(33)(P), (R) of Pub. L. 94- 455, effective for 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. Section 1402(b)(1) of Pub. L. 94-455 provided in part that the substitution of "9 months" for "6 months" in subsec. (I) of this section by section 1402(b)(1)(X) of Pub. L. 94-455 is effective with respect to taxable years beginning in 1977. EFFEcTIvE DATE Section applicable with respect to taxable years be. ginning after Dec. 31, 1962, see section 14(c) of Pub. L. 87-834, set out as an Effective Date note under section 1246 of this title. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 951, 1212, 1248 of this title. § 1248. Gain from certain sales or exchanges of stock in certain foreign corporations (a) General rule If- (1) a United States person sells or ex- changes stock in a foreign corporation, or if a United States person receives a distribution from a foreign corporation which, under sec- tion 302 or 331, is treated as an exchange of stock, and Page 701 § 1248