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TITLE 26-INTERNAL REVENUE CODE (3) any amount to the extent that such amount is, under any other provision of this title, treated as- (A) a dividend (other than an amount treated as a dividend under subsection f)), (B) ordinary income, or (C) gain from the sale of an asset held for not more than 9 months. (h) Taxpayer to establish earnings and profits Unless the taxpayer establishes the amount of the earnings and profits of the foreign corpo- ration to be taken into account under subsec- tion (a) or (f), all gain from the sale or ex- change shall be considered a dividend under subsection (a) or (f), and unless the taxpayer establishes the amount of foreign taxes to be taken into account under subsection (b), t., e limitation of such subsection shall not apply. (Added Pub. L. 87-834, § 15(a), Oct. 16, 1962, 76 Stat. 1041, and amended Pub. L. 89-809, title I, § 104(k), Nov. 13, 1966, 80 Stat. 1562; Pub. L. 91- 172, title IV, § 442(b)(2), Dec. 30, 1969, 83 Stat. 628; Pub. L. 94-455, title X, §§ 1022(a), 1042(b), (c)(1), (3), title XIV, § 1402(b)(1)(Y), title XIX, §§ 1901(b)(3)(H), (32)(B)(iii), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1619, 1636, 1637, 1732, 1793, 1800, 1834.) TAXABLE YEARs AFTER 1977 Subsecs. (b) and (g) of this section amend- ed by Pub. L. 94-455, title XIV, §1402(b)(2), OcL 4, 1976, 90 StaL 1732, effective with re- spect to taxable years beginning after Dec. 31, 1977, by substituting "1 year" for "9 months". REFERENcEs IN TEXT The Tax Reduction Act of 1975, referred to in subsec. (d)(3), is Pub. L. 94-12, Mar. 29, 1975, 89 Stat. 26. For complete classification of this Act to the Code, see Short Title of 1975 Amendment note set out under section 1 of this title and Tables volume. AMENDMENTS 1976-Subsec. (a). Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary". Subsec. (b). Pub. L. 94-455, § 1402(b)(1)(Y), provided that "6 months" would be changed to "9 months" for taxable years beginning in 1977. Subsec. (c)(1). Pub. L. 94-455, §§ 1901(b)(32)(B)(iii), 1906(b)(13(A), substituted "section 312(k)" for "sec- tion 312(m)(3)", and struck out "or his delegate" fol- lowing "Secretary". Subsec. (c)(2)(A). Pub. L. 94-455, § 1042(c)(3)(A), sub- stituted "subsection (a) or (f) applies to a sale, ex- change, or distributicn" for "subsection (a) applies to a sale or exchange". Subsec. (c)(2)(C). Pub. L. 94-455, § 1042(b), inserted parenthetical text "(or on the date of any sale or ex- change of the stock of such other foreign corporation occurring during the 5-year period ending on the date of the sale or exchange of the stock of such foreign corporation, to the extent not otherwise taken into ac- count under this section but not in excess of the fair market value of the stock of such other foreign corpo- ration sold or exchanged over the basis of such stock (for determining gain) in the hands of the transfer- or)". § 1906(b)(13)(A), struck out "or his delegate" fol- lowing "Secretary". Subsec. (d)(2). Pub. L. 94-455. § 1906(b)(13)(A), struck out "or his delegate" following "Secretary". Subsec. (d)(3). Pub. L. 94-455. § 1022(a), substituted provisions of par. (3) relating to "Less developed coun. try corporations under prior law" and reading "Earn- ings and profits of a foreign corporation which were accumulated during any taxable year beginning before January 1, 1976, while such corporation was a less de. veloped country corporation under section 902(d) as in effect before the enactment of the Tax Reduction Act of 1975" for prior par. (3) relating to "Less developed country corporations" and reading "Earnings and profits accumulated by a foreign corporation while it was a less developed country corporation (as defined in section 902(d)), if the stock sold or exchanged was owned for a continuous period of at least 10 years, ending with the date of the sale or exchange, by the United States person who sold or exchanged such stock. In the case of stock sold or exchanged by a cor- poration, if United States persons who are itdividuals, estates, or trusts (each of whom owned within the meaning of section 958(a), or were considered as owning by applying the rules of ownership of section 958(b), 10 percent or more of the total combined voting power of all classes of stock entitled to vote of such corporation) owned, or were considered as owning, at any time during the 10-year period ending on the date of the sale or exchange more than 50 per- cent of the total combined voting power of all classes of stock entitled to vote such corporation, this para- graph shall apply only if such United States persons owned, or were considered as owning, at all times during the remainder of such 10-year period more than 50 percent of the total combined voting power of all classes of stock entitled to vote of such corporation. For purposes of this paragraph, stock owned by a United States person who is an individual, estate, or trust which was acquired by reason of the death of the predecessor in interest of such United States person shall be considered as owned by such United States person during the period such stock was owned by such predecessor in interest, and during the period such stock was owned by any other predecessor in in- terest if between such United States person and such other predecessor in interest there was no transfer other than by reason of the death of an individual." Subsec. (e). Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary". Subsec. (f). Pub. L. 94-455, § 1042(c)(1), added subsec. (f) and redesignated former subsec. (f) as (g). Subsec. (g). Pub. L. 94-455, §§ 1042(c)(1), (3)(B), 1402(b)(1)(Y), 1901(b)(3)(H), redesignated former subsec. (f) as (g); inserted in par. (3)(A) parenthetical text "(other than an amount treated as a dividend under subsection (f))"; provided that in par. (3)(C) "6 months" would be changed to "9 months" for taxable years beginning in 1977; and substituted in par. (3)(B) "ordinary income" for "gain from the sale of an asset which is not a capital asset", respectively. Former subsec. (g) redesignated (h). Subsec. (h). Pub. L. 94-455, § 1042(c)(1), (3)(C), rede- signated former subsec. (g) as (h) aid inserted refer- ence to subsec. (f) in two instances. 1969-Subsec. (c)(1). Pub. L. 91-172 added reference to the exception provided for in section 312(m)(3). 1966-Subsec. (d)(4). Pub. L. 89-809 provided that for taxable years beginning after December 31. 1966. the earnings and profits of the foreign corporation, for purposes of this section, is not to include income effectively connected with the conduct of a trade or business within the United States, and added provision that the exclusion does not apply to income which is exempt from tax or subject to a reduced rate of tax pursuant to a treaty. EFCrIVE DATE OF 1976 AMENDMENT Section 1022(b) of Pub. L. 94-455 provided that: "The amendment made by subsection (a) [amending subsec. (d)(3) of this section] shall apply to taxable years beginning after December 31, 1975." For effective date of amendment of subsecs. (c)(2)(A), (C), (f), (g), (h) by section 1042 of Pub. L. 94- 455, see section 1042(e) of Pub. L. 94-455, set out as an Effective Date of 1976 Amendment note under section 367 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 introductory clause and par. (2) of subsec. (b) and §41248 Page 704