Internal Revenue Code – Section 165

Sec. 165. Losses

-STATUTE-

(a) General rule

There shall be allowed as a deduction any loss sustained during

the taxable year and not compensated for by insurance or otherwise.

(b) Amount of deduction

For purposes of subsection (a), the basis for determining the

amount of the deduction for any loss shall be the adjusted basis

provided in section 1011 for determining the loss from the sale or

other disposition of property.

(c) Limitation on losses of individuals

In the case of an individual, the deduction under subsection (a)

shall be limited to -

(1) losses incurred in a trade or business;

(2) losses incurred in any transaction entered into for profit,

though not connected with a trade or business; and

(3) except as provided in subsection (h), losses of property

not connected with a trade or business or a transaction entered

into for profit, if such losses arise from fire, storm,

shipwreck, or other casualty, or from theft.

(d) Wagering losses

Losses from wagering transactions shall be allowed only to the

extent of the gains from such transactions.

(e) Theft losses

For purposes of subsection (a), any loss arising from theft shall

be treated as sustained during the taxable year in which the

taxpayer discovers such loss.

(f) Capital losses

Losses from sales or exchanges of capital assets shall be allowed

only to the extent allowed in sections 1211 and 1212.

(g) Worthless securities

(1) General rule

If any security which is a capital asset becomes worthless

during the taxable year, the loss resulting therefrom shall, for

purposes of this subtitle, be treated as a loss from the sale or

exchange, on the last day of the taxable year, of a capital

asset.

(2) Security defined

For purposes of this subsection, the term "security" means -

(A) a share of stock in a corporation;

(B) a right to subscribe for, or to receive, a share of stock

in a corporation; or

(C) a bond, debenture, note, or certificate, or other

evidence of indebtedness, issued by a corporation or by a

government or political subdivision thereof, with interest

coupons or in registered form.

(3) Securities in affiliated corporation

For purposes of paragraph (1), any security in a corporation

affiliated with a taxpayer which is a domestic corporation shall

not be treated as a capital asset. For purposes of the preceding

sentence, a corporation shall be treated as affiliated with the

taxpayer only if -

(A) the taxpayer owns directly stock in such corporation

meeting the requirements of section 1504(a)(2), and

(B) more than 90 percent of the aggregate of its gross

receipts for all taxable years has been from sources other than

royalties, rents (except rents derived from rental of

properties to employees of the corporation in the ordinary

course of its operating business), dividends, interest (except

interest received on deferred purchase price of operating

assets sold), annuities, and gains from sales or exchanges of

stocks and securities.

 

In computing gross receipts for purposes of the preceding

sentence, gross receipts from sales or exchanges of stocks and

securities shall be taken into account only to the extent of

gains therefrom.

(h) Treatment of casualty gains and losses

(1) $100 limitation per casualty

Any loss of an individual described in subsection (c)(3) shall

be allowed only to the extent that the amount of the loss to such

individual arising from each casualty, or from each theft,

exceeds $500 ($100 for taxable years beginning after December 31,

2009).

(2) Net casualty loss allowed only to the extent it exceeds 10

percent of adjusted gross income

(A) In general

If the personal casualty losses for any taxable year exceed

the personal casualty gains for such taxable year, such losses

shall be allowed for the taxable year only to the extent of the

sum of -

(i) the amount of the personal casualty gains for the

taxable year, plus

(ii) so much of such excess as exceeds 10 percent of the

adjusted gross income of the individual.

(B) Special rule where personal casualty gains exceed personal

casualty losses

If the personal casualty gains for any taxable year exceed

the personal casualty losses for such taxable year -

(i) all such gains shall be treated as gains from sales or

exchanges of capital assets, and

(ii) all such losses shall be treated as losses from sales

or exchanges of capital assets.

(3) Special rule for losses in federally declared disasters

(A) In general

If an individual has a net disaster loss for any taxable

year, the amount determined under paragraph (2)(A)(ii) shall be

the sum of -

(i) such net disaster loss, and

(ii) so much of the excess referred to in the matter

preceding clause (i) of paragraph (2)(A) (reduced by the

amount in clause (i) of this subparagraph) as exceeds 10

percent of the adjusted gross income of the individual.

(B) Net disaster loss

For purposes of subparagraph (A), the term "net disaster

loss" means the excess of -

(i) the personal casualty losses -

(I) attributable to a federally declared disaster

occurring before January 1, 2010, and

(II) occurring in a disaster area, over

 

(ii) personal casualty gains.

(C) Federally declared disaster

For purposes of this paragraph -

(i) Federally declared disaster

The term "federally declared disaster" means any disaster

subsequently determined by the President of the United States

to warrant assistance by the Federal Government under the

Robert T. Stafford Disaster Relief and Emergency Assistance

Act.

(ii) Disaster area

The term "disaster area" means the area so determined to

warrant such assistance.

(4) Definitions of personal casualty gain and personal casualty

loss

For purposes of this subsection -

(A) Personal casualty gain

The term "personal casualty gain" means the recognized gain

from any involuntary conversion of property which is described

in subsection (c)(3) arising from fire, storm, shipwreck, or

other casualty, or from theft.

(B) Personal casualty loss

The term "personal casualty loss" means any loss described in

subsection (c)(3). For purposes of paragraphs (2) and (3), the

amount of any personal casualty loss shall be determined after

the application of paragraph (1).

(5) Special rules

(A) Personal casualty losses allowable in computing adjusted

gross income to the extent of personal casualty gains

In any case to which paragraph (2)(A) applies, the deduction

for personal casualty losses for any taxable year shall be

treated as a deduction allowable in computing adjusted gross

income to the extent such losses do not exceed the personal

casualty gains for the taxable year.

(B) Joint returns

For purposes of this subsection, a husband and wife making a

joint return for the taxable year shall be treated as 1

individual.

(C) Determination of adjusted gross income in case of estates

and trusts

For purposes of paragraph (2), the adjusted gross income of

an estate or trust shall be computed in the same manner as in

the case of an individual, except that the deductions for costs

paid or incurred in connection with the administration of the

estate or trust shall be treated as allowable in arriving at

adjusted gross income.

(D) Coordination with estate tax

No loss described in subsection (c)(3) shall be allowed if,

at the time of filing the return, such loss has been claimed

for estate tax purposes in the estate tax return.

(E) Claim required to be filed in certain cases

Any loss of an individual described in subsection (c)(3) to

the extent covered by insurance shall be taken into account

under this section only if the individual files a timely

insurance claim with respect to such loss.

(i) Disaster losses

(1) Election to take deduction for preceding year

Notwithstanding the provisions of subsection (a), any loss

occurring in a disaster area (as defined by clause (ii) of

subsection (h)(3)(C)) and attributable to a federally declared

disaster (as defined by clause (i) of such subsection) may, at

the election of the taxpayer, be taken into account for the

taxable year immediately preceding the taxable year in which the

disaster occurred.

(2) Year of loss

If an election is made under this subsection, the casualty

resulting in the loss shall be treated for purposes of this title

as having occurred in the taxable year for which the deduction is

claimed.

(3) Amount of loss

The amount of the loss taken into account in the preceding

taxable year by reason of paragraph (1) shall not exceed the

uncompensated amount determined on the basis of the facts

existing at the date the taxpayer claims the loss.

(4) Use of disaster loan appraisals to establish amount of loss

Nothing in this title shall be construed to prohibit the

Secretary from prescribing regulations or other guidance under

which an appraisal for the purpose of obtaining a loan of Federal

funds or a loan guarantee from the Federal Government as a result

of a federally declared disaster (as defined by subsection

(h)(3)(C)(i) (!1) may be used to establish the amount of any loss

described in paragraph (1) or (2).

 

(j) Denial of deduction for losses on certain obligations not in

registered form

(1) In general

Nothing in subsection (a) or in any other provision of law

shall be construed to provide a deduction for any loss sustained

on any registration-required obligation unless such obligation is

in registered form (or the issuance of such obligation was

subject to tax under section 4701).

(2) Definitions

For purposes of this subsection -

(A) Registration-required obligation

The term "registration-required obligation" has the meaning

given to such term by section 163(f)(2) except that clause (iv)

of subparagraph (A), and subparagraph (B), of such section

shall not apply.

(B) Registered form

The term "registered form" has the same meaning as when used

in section 163(f).

(3) Exceptions

The Secretary may, by regulations, provide that this subsection

and section 1287 shall not apply with respect to obligations held

by any person if -

(A) such person holds such obligations in connection with a

trade or business outside the United States,

(B) such person holds such obligations as a broker dealer

(registered under Federal or State law) for sale to customers

in the ordinary course of his trade or business,

(C) such person complies with reporting requirements with

respect to ownership, transfers, and payments as the Secretary

may require, or

(D) such person promptly surrenders the obligation to the

issuer for the issuance of a new obligation in registered form,

 

but only if such obligations are held under arrangements provided

in regulations or otherwise which are designed to assure that

such obligations are not delivered to any United States person

other than a person described in subparagraph (A), (B), or (C).

(k) Treatment as disaster loss where taxpayer ordered to demolish

or relocate residence in disaster area because of disaster

In the case of a taxpayer whose residence is located in an area

which has been determined by the President of the United States to

warrant assistance by the Federal Government under the Robert T.

Stafford Disaster Relief and Emergency Assistance Act, if -

(1) not later than the 120th day after the date of such

determination, the taxpayer is ordered, by the government of the

State or any political subdivision thereof in which such

residence is located, to demolish or relocate such residence, and

(2) the residence has been rendered unsafe for use as a

residence by reason of the disaster,

 

any loss attributable to such disaster shall be treated as a loss

which arises from a casualty and which is described in subsection

(i).

(l) Treatment of certain losses in insolvent financial institutions

(1) In general

If -

(A) as of the close of the taxable year, it can reasonably be

estimated that there is a loss on a qualified individual's

deposit in a qualified financial institution, and

(B) such loss is on account of the bankruptcy or insolvency

of such institution,

 

then the taxpayer may elect to treat the amount so estimated as a

loss described in subsection (c)(3) incurred during the taxable

year.

(2) Qualified individual defined

For purposes of this subsection, the term "qualified

individual" means any individual, except an individual -

(A) who owns at least 1 percent in value of the outstanding

stock of the qualified financial institution,

(B) who is an officer of the qualified financial institution,

(C) who is a sibling (whether by the whole or half blood),

spouse, aunt, uncle, nephew, niece, ancestor, or lineal

descendant of an individual described in subparagraph (A) or

(B), or

(D) who otherwise is a related person (as defined in section

267(b)) with respect to an individual described in subparagraph

(A) or (B).

(3) Qualified financial institution

For purposes of this subsection, the term "qualified financial

institution" means -

(A) any bank (as defined in section 581),

(B) any institution described in section 591,

(C) any credit union the deposits or accounts in which are

insured under Federal or State law or are protected or

guaranteed under State law, or

(D) any similar institution chartered and supervised under

Federal or State law.

(4) Deposit

For purposes of this subsection, the term "deposit" means any

deposit, withdrawable account, or withdrawable or repurchasable

share.

(5) Election to treat as ordinary loss

(A) In general

In lieu of any election under paragraph (1), the taxpayer may

elect to treat the amount referred to in paragraph (1) for the

taxable year as an ordinary loss described in subsection (c)(2)

incurred during the taxable year.

(B) Limitations

(i) Deposit may not be federally insured

No election may be made under subparagraph (A) with respect

to any loss on a deposit in a qualified financial institution

if part or all of such deposit is insured under Federal law.

(ii) Dollar limitation

With respect to each financial institution, the aggregate

amount of losses attributable to deposits in such financial

institution to which an election under subparagraph (A) may

be made by the taxpayer for any taxable year shall not exceed

$20,000 ($10,000 in the case of a separate return by a

married individual). The limitation of the preceding sentence

shall be reduced by the amount of any insurance proceeds

under any State law which can reasonably be expected to be

received with respect to losses on deposits in such

institution.

(6) Election

Any election by the taxpayer under this subsection for any

taxable year -

(A) shall apply to all losses for such taxable year of the

taxpayer on deposits in the institution with respect to which

such election was made, and

(B) may be revoked only with the consent of the Secretary.

(7) Coordination with section 166

Section 166 shall not apply to any loss to which an election

under this subsection applies.

(m) Cross references

(1) For special rule for banks with respect to worthless

securities, see section 582.

(2) For disallowance of deduction for worthlessness of

securities to which subsection (g)(2)(C) applies, if issued by

a political party or similar organization, see section 271.

(3) For special rule for losses on stock in a small business

investment company, see section 1242.

(4) For special rule for losses of a small business

investment company, see section 1243.

(5) For special rule for losses on small business stock, see

section 1244.

 

-SOURCE-

(Aug. 16, 1954, ch. 736, 68A Stat. 49; Pub. L. 85-866, title I,

Secs. 7, 57(c)(1), title II, Sec. 202(a), Sept. 2, 1958, 72 Stat.

1608, 1646, 1676; Pub. L. 87-426, Sec. 2(a), Mar. 31, 1962, 76

Stat. 51; Pub. L. 88-272, title II, Secs. 208(a), 238, Feb. 26,

1964, 78 Stat. 43, 128; Pub. L. 88-348, Sec. 3(a), June 30, 1964,

78 Stat. 237; Pub. L. 91-606, title III, Sec. 301(h), Dec. 31,

1970, 84 Stat. 1759; Pub. L. 91-677, Sec. 1(a), Jan. 12, 1971, 84

Stat. 2061; Pub. L. 91-687, Sec. 1, Jan. 12, 1971, 84 Stat. 2071;

Pub. L. 92-336, Sec. 2(a), July 1, 1972, 86 Stat. 406; Pub. L. 92-

418, Sec. 2(a), Aug. 29, 1972, 86 Stat. 656, 657; Pub. L. 93-288,

title VII, Sec. 702(h), formerly title VI, Sec. 602(h), May 22,

1974, 88 Stat. 164, renumbered title VII, Sec. 702(h), Pub. L. 103-

337, div. C, title XXXIV, Sec. 3411(a)(1), (2), Oct. 5, 1994, 108

Stat. 3100; Pub. L. 94-455, title XIX, Sec. 1901(a)(26), Oct. 4,

1976, 90 Stat. 1767; Pub. L. 97-248, title II, Sec. 203(a), (b),

title III, Sec. 310(b)(5), Sept. 3, 1982, 96 Stat. 422, 598; Pub.

L. 98-369, div. A, title I, Sec. 42(a)(4), title VII, Sec.

711(c)(1), (2)(A)(i), (ii), title X, Sec. 1051(a), July 18, 1984,

98 Stat. 556, 943, 1044; Pub. L. 99-514, title IX, Sec. 905(a),

title X, Sec. 1004(a), Oct. 22, 1986, 100 Stat. 2385, 2388; Pub. L.

100-647, title I, Sec. 1009(d)(1), Nov. 10, 1988, 102 Stat. 3449;

Pub. L. 100-707, title I, Sec. 109(l), Nov. 23, 1988, 102 Stat.

4709; Pub. L. 105-34, title IX, Sec. 912(a), Aug. 5, 1997, 111

Stat. 878; Pub. L. 106-554, Sec. 1(a)(7) [title III, Sec.

318(b)(1), (2)], Dec. 21, 2000, 114 Stat. 2763, 2763A-645; Pub. L.

108-311, title IV, Sec. 408(a)(7)(A), (B), Oct. 4, 2004, 118 Stat.

1191; Pub. L. 110-343, div. C, title VII, Sec. 706(a)(1), (2)(A)-

(C), (c), Oct. 3, 2008, 122 Stat. 3921-3923; Pub. L. 111-147,

title V, Sec. 502(a)(2)(D), Mar. 18, 2010, 124 Stat. 107.)

 

 

-STATAMEND-

AMENDMENT OF SUBSECTION (J)(2)(A)

Pub. L. 111-147, title V, Sec. 502(a)(2)(D), (f), Mar. 18, 2010,

124 Stat. 107, 108, provided that, applicable to obligations issued

after the date which is 2 years after Mar. 18, 2010, subsection

(j)(2)(A) of this section is amended by striking "except that

clause (iv) of subparagraph (A), and subparagraph (B), of such

section shall not apply".

 

-REFTEXT-

REFERENCES IN TEXT

The Robert T. Stafford Disaster Relief and Emergency Assistance

Act, referred to in subsecs. (h)(3)(C)(i) and (k), is Pub. L. 93-

288, May 22, 1974, 88 Stat. 143, which is classified principally

to chapter 68 (Sec. 5121 et seq.) of Title 42, The Public Health

and Welfare. For complete classification of this Act to the Code,

see Short Title note set out under section 5121 of Title 42 and

Tables.

 

 

-MISC1-

AMENDMENTS

2008 - Subsec. (h)(1). Pub. L. 110-343, Sec. 706(c), substituted

"$500 ($100 for taxable years beginning after December 31, 2009)"

for "$100".

Subsec. (h)(3). Pub. L. 110-343, Sec. 706(a)(1), added par. (3).

Former par. (3) redesignated (4).

Subsec. (h)(4). Pub. L. 110-343, Sec. 706(a)(1), redesignated

par. (3) as (4). Former par. (4) redesignated (5).

Subsec. (h)(4)(B). Pub. L. 110-343, Sec. 706(a)(2)(A),

substituted "paragraphs (2) and (3)" for "paragraph (2)".

Subsec. (h)(5). Pub. L. 110-343, Sec. 706(a)(1), redesignated

par. (4) as (5).

Subsec. (i)(1). Pub. L. 110-343, Sec. 706(a)(2)(B), substituted

"loss occurring in a disaster area (as defined by clause (ii) of

subsection (h)(3)(C)) and attributable to a federally declared

disaster (as defined by clause (i) of such subsection)" for "loss

attributable to a disaster occurring in an area subsequently

determined by the President of the United States to warrant

assistance by the Federal Government under the Robert T. Stafford

Disaster Relief and Emergency Assistance Act".

Subsec. (i)(4). Pub. L. 110-343, Sec. 706(a)(2)(C), substituted

"federally declared disaster (as defined by subsection

(h)(3)(C)(i)" for "Presidentially declared disaster (as defined by

section 1033(h)(3))".

2004 - Subsecs. (i)(1), (k). Pub. L. 108-311 inserted "Robert T.

Stafford" before "Disaster Relief and Emergency Assistance Act".

2000 - Subsec. (g)(3). Pub. L. 106-554, Sec. 1(a)(7) [title III,

Sec. 318(b)(2)], struck out last sentence of concluding provisions

which read as follows: "As used in subparagraph (A), the term

'stock' does not include nonvoting stock which is limited and

preferred as to dividends."

Subsec. (g)(3)(A). Pub. L. 106-554, Sec. 1(a)(7) [title III, Sec.

318(b)(1)], amended subpar. (A) generally. Prior to amendment,

subpar. (A) read as follows: "stock possessing at least 80 percent

of the voting power of all classes of its stock and at least 80

percent of each class of its nonvoting stock is owned directly by

the taxpayer, and".

1997 - Subsec. (i)(4). Pub. L. 105-34 added par. (4).

1988 - Subsecs. (i)(1), (k). Pub. L. 100-707 substituted "and

Emergency Assistance Act" for "Act of 1974".

Subsec. (l)(5) to (7). Pub. L. 100-647 added pars. (5) and (6),

redesignated former par. (6) as (7), and struck out former par. (5)

which read as follows: "Election. - Any election by the taxpayer

under this subsection may be revoked only with the consent of the

Secretary and shall apply to all losses of the taxpayer on deposits

in the institution with respect to which such election was made."

1986 - Subsec. (h)(4)(E). Pub. L. 99-514, Sec. 1004(a), added

subpar. (E).

Subsecs. (l), (m). Pub. L. 99-514, Sec. 905(a), added subsec. (l)

and redesignated former subsec. (l) as (m).

1984 - Subsec. (c)(3). Pub. L. 98-369, Sec. 711(c)(2)(A)(i),

extended limitation to losses of property not connected with a

transaction entered into for profit.

Subsec. (h). Pub. L. 98-369, Sec. 711(c)(2)(A)(ii), substituted

heading "Treatment of casualty gains and losses" for "Casualty and

theft losses"; substituted par. (1) "$100 limitation per casualty"

provision for former par. (1) "General rule" provision stating

that: "Any loss of an individual described in subsection (c)(3)

shall be allowed for any taxable year only to the extent that -

"(A) the amount of loss to such individual arising from each

casualty, or from each theft, exceeds $100, and

"(B) the aggregate amount of all such losses sustained by such

individual during the taxable year (determined after application

of subparagraph (A) exceeds 10 percent of the adjusted gross

income of the individual.";

added par. (2) "Net casualty loss allowed only to the extent it

exceeds 10 percent of adjusted gross income" provision and par. (3)

"Definitions of personal casualty gain and personal casualty loss"

provisions; redesignated as par. (4) former par. (2) catchline;

added par. (4)(A) "Personal casualty losses allowable in computing

adjusted gross income to the extent of personal casualty gains"

provision; redesignated as par. (4)(B) former par. (2)(A) joint

returns provision, substituting "For purposes of this section" for

"For purposes of the $100 and 10 percent limitations described in

paragraph (1)" and "individual" for "one individual"; redesignated

as par. (4)(C) former par. (2)(B), substituting therein paragraph

"(2)" for "(1)"; and redesignated as par. (4)(D) former par.

(2)(C).

Pub. L. 98-369, Sec. 711(c)(1), amended par. (2) by redesignating

subpar. (B) as (C) and by adding a new subpar. (B) relating to the

determination of adjusted gross income in case of estates and

trusts.

Subsec. (j)(3). Pub. L. 98-369, Sec. 42(a)(4), substituted

"section 1287" for "subsection (d) of section 1232".

Subsecs. (k), (l). Pub. L. 98-369, Sec. 1051(a), added subsec.

(k) and redesignated former subsec. (k) as (l).

1982 - Subsec. (c)(3). Pub. L. 97-248, Sec. 203(b), inserted

"except as provided in subsection (h)," before "losses of property"

and struck out provisions that a loss described in this paragraph

would be allowed only to the extent that the amount of loss to such

individual arising from each casualty, or from each theft, exceeded

$100, that, for purposes of the $100 limitation, a husband and wife

making a joint return under section 6013 for the taxable year in

which the loss was allowed as a deduction would be treated as one

individual, and that no loss described in this paragraph would be

allowed if, at the time of filing the return, such loss had been

claimed for estate tax purposes in the estate tax return.

Subsec. (h). Pub. L. 97-248, Sec. 203(a), added subsec. (h)

relating to casualty and theft losses. Former subsec. (h), relating

to disaster losses, redesignated (i).

Subsec. (i). Pub. L. 97-248, Sec. 203(a), redesignated former

subsec. (h), relating to disaster losses, as (i), in subsec. (i),

as so redesignated, further redesignated existing unnumbered

provisions as pars. (1) and (2), in par. (1), as so redesignated,

substituted "be taken into account for the taxable year" for "be

deducted for the taxable year", in par. (2), as so redesignated,

substituted "shall be treated for purposes of this title as having

occurred" for "will be deemed to have occurred", added par. (3),

and struck out provision that a deduction under this subsection

could not be in excess of so much of the loss as would have been

deductible in the taxable year in which the casualty occurred,

based on facts existing at the date the taxpayer claimed the loss.

Former subsec. (i), setting forth cross references, redesignated

(j).

Subsec. (j). Pub. L. 97-248, Sec. 310(b)(5), added subsec. (j)

relating to denial of deduction for losses on certain obligations

not in registered form. Former subsec. (j), setting forth cross

references, redesignated (k).

Pub. L. 97-248, Sec. 203(a), redesignated former subsec. (i),

setting forth cross references, as (j).

Subsec. (k). Pub. L. 97-248, Sec. 310(b)(5), redesignated former

subsec. (j), setting forth cross references, as (k).

1976 - Subsecs. (i), (j). Pub. L. 94-455 redesignated subsec. (j)

as subsec. (i). Former subsec. (i), which related to property

confiscated by Cuba, was struck out.

1974 - Subsec. (h). Pub. L. 93-288 substituted "Disaster Relief

Act of 1974" for "Disaster Relief Act of 1970".

1972 - Subsec. (h). Pub. L. 92-418 struck out par. (1) provisions

relating to losses attributable to a disaster occurring during

period following close of taxable year and on or before time

prescribed by law for filing the income tax return for the taxable

year without regard to any extension of time, struck out par. (2)

designation, and inserted "attributable to a disaster" before

"occurring in an area", and at end of second sentence, inserted

"based on facts existing at the date the taxpayer claims the loss".

Subsec. (h)(1). Pub. L. 92-336 substituted provisions relating to

losses attributable to a disaster which occurs during the period

after the close of the taxable year and on or before the last day

of the 6th calendar month beginning after the close of the taxable

year, for provisions relating to losses attributable to a disaster

which occurs during the period following the close of the taxable

year and on or before the time prescribed by law for filing the

income tax return for the taxable year, determined without regard

to any extension of time.

1971 - Subsec. (g)(3). Pub. L. 91-687 substituted "stock

possessing at least 80 percent of the voting power of all classes

of its stock and at least 80 percent of each class of its nonvoting

stock" for "at least 95 percent of each class of its stock" in

subpar. (A), and inserted at the end of the subsection the sentence

providing that the term "stock", as used in subpar. (A), does not

include nonvoting stock which is limited and preferred as to

dividends.

Subsec. (i)(1). Pub. L. 91-677, Sec. 1(a)(1), (2), struck out "or

(2)" after "paragraph (1)" in cl. (B), and substituted "one or more

days in the period beginning on December 31, 1958, and ending on

May 16, 1959" for "December 31, 1958".

Subsec. (i)(2)(B). Pub. L. 91-677, Sec. 1(a)(3), substituted "one

or more days during the period beginning on December 31, 1958, and

ending on May 16, 1959" for "December 31, 1958" and "the first day

in such period on which the property was held by the taxpayer" for

"December 31, 1958".

Subsec. (i)(3). Pub. L. 91-677, Sec. 1(a)(4), struck out subsec.

(i)(3) which authorized a refund or credit to be given for any

overpayment attributable to the application of par. (1), provided

that a claim was filed for such refund or credit before Jan. 1,

1965.

1970 - Subsec. (h)(2). Pub. L. 91-606 substituted "the Disaster

Relief Act of 1970" for "sections 1855-1855g of title 42".

1964 - Subsec. (c)(3). Pub. L. 88-272, Sec. 208(a), inserted

requirement that losses must exceed $100 to be deductible.

Subsec. (i). Pub. L. 88-348 designated existing provisions as

par. (1), substituted provisions permitting individuals who were

citizens of the United States or resident aliens on Dec. 31, 1958,

who sustained any loss of property prior to Jan. 1, 1964, and which

was not a loss described in par. (1) or (2) of subsec. (c), to

treat such loss as a loss under subsec. (c)(3), except that in

cases of tangible property, the property had to be held by the

taxpayer, and located in Cuba, on Dec. 31, 1958, for provisions

which permitted any loss of tangible property to be treated as a

loss from a casualty within subsec. (c)(3), therein, and added

pars. (2) and (3).

Pub. L. 88-272, Sec. 238, added subsec. (i). Former subsec. (i)

redesignated (j).

Subsec. (j). Pub. L. 88-272, Sec. 238, redesignated former

subsec. (i) as (j).

1962 - Subsecs. (h), (i). Pub. L. 87-426 added subsec. (h) and

redesignated former subsec. (h) as (i).

1958 - Subsec. (g)(3)(B). Pub. L. 85-866, Sec. 7, substituted

"rental of" for "rental from".

Subsec. (h)(3), (4). Pub. L. 85-866, Sec. 57(c)(1), added pars.

(3) and (4).

Subsec. (h)(5). Pub. L. 85-866, Sec. 202(a), added par. (5).

 

EFFECTIVE DATE OF 2010 AMENDMENT

Amendment by Pub. L. 111-147 applicable to obligations issued

after the date which is 2 years after Mar. 18, 2010, see section

502(f) of Pub. L. 111-147, set out as a note under section 149 of

this title.

 

EFFECTIVE DATE OF 2008 AMENDMENT

Amendment by section 706(a)(1), (2)(A)-(C) of Pub. L. 110-343

applicable to disasters declared in taxable years beginning after

Dec. 31, 2007, see section 706(d)(1) of Pub. L. 110-343, set out as

a note under section 56 of this title.

Amendment by section 706(c) of Pub. L. 110-343 applicable to

taxable years beginning after Dec. 31, 2008, see section 706(d)(2)

of Pub. L. 110-343, set out as a note under section 56 of this

title.

 

EFFECTIVE DATE OF 2000 AMENDMENT

Pub. L. 106-554, Sec. 1(a)(7) [title III, Sec. 318(b)(3)], Dec.

21, 2000, 114 Stat. 2763, 2763A-645, provided that: "The amendments

made by this subsection [amending this section] shall apply to

taxable years beginning after December 31, 1984."

 

EFFECTIVE DATE OF 1997 AMENDMENT

Section 912(b) of Pub. L. 105-34 provided that: "The amendment

made by subsection (a) [amending this section] shall take effect on

the date of the enactment of this Act [Aug. 5, 1997]."

 

EFFECTIVE DATE OF 1988 AMENDMENT

Amendment by Pub. L. 100-647 effective, except as otherwise

provided, as if included in the provision of the Tax Reform Act of

1986, Pub. L. 99-514, to which such amendment relates, see section

1019(a) of Pub. L. 100-647, set out as a note under section 1 of

this title.

 

EFFECTIVE DATE OF 1986 AMENDMENT

Amendment by section 905(a) of Pub. L. 99-514 applicable to

taxable years beginning after Dec. 31, 1981, see section 905(c)(1)

of Pub. L. 99-514, as amended, set out as a note under section 451

of this title.

Section 1004(b) of Pub. L. 99-514 provided that: "The amendment

made by this section [amending this section] shall apply to losses

sustained in taxable years beginning after December 31, 1986."

 

EFFECTIVE DATE OF 1984 AMENDMENT

Amendment by section 42(a)(4) of Pub. L. 98-369 applicable to

taxable years ending after July 18, 1984, see section 44 of Pub. L.

98-369, set out as an Effective Date note under section 1271 of

this title.

Amendment by section 711(c)(1) of Pub. L. 98-369 effective as if

included in the provision of the Tax Equity and Fiscal

Responsibility Act of 1982, Pub. L. 97-248, to which such amendment

relates, see section 715 of Pub. L. 98-369, set out as a note under

section 31 of this title.

Section 711(c)(2)(A)(v) of Pub. L. 98-369 provided that: "The

amendments made by this subparagraph [amending this section and

sections 873, 931, and 1231 of this title] shall apply to taxable

years beginning after December 31, 1983."

Section 1051(b) of Pub. L. 98-369 provided that: "The amendment

made by subsection (a) [amending this section] shall apply to

taxable years ending after December 31, 1981, with respect to

residences in areas determined by the President of the United

States, after such date, to warrant assistance by the Federal

Government under the Disaster Relief Act of 1974 [42 U.S.C. 5121 et

seq.]."

 

EFFECTIVE DATE OF 1982 AMENDMENT

Section 203(c) of Pub. L. 97-248, as amended by Pub. L. 99-514,

Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The

amendments made by this section [amending this section] shall apply

to taxable years beginning after December 31, 1982. Such amendments

shall also apply to the taxpayer's last taxable year beginning

before January 1, 1983, solely for purposes of determining the

amount allowable as a deduction with respect to any loss taken into

account for such year by reason of an election under section 165(i)

of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as

amended by this section)."

Amendment by section 310(b)(5) of Pub. L. 97-248 applicable to

obligations issued after Dec. 31, 1982, with exceptions for certain

warrants, see section 310(d) of Pub. L. 97-248, set out as a note

under section 103 of this title.

 

EFFECTIVE DATE OF 1976 AMENDMENT

Amendment by Pub. L. 94-455 applicable with respect to taxable

years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L.

94-455, set out as a note under section 2 of this title.

 

EFFECTIVE DATE OF 1974 AMENDMENT

Amendment by Pub. L. 93-288 effective Apr. 1, 1974, see section

605 of Pub. L. 93-288, formerly set out as an Effective Date note

under section 5121 of Title 42, The Public Health and Welfare.

 

EFFECTIVE DATE OF 1972 AMENDMENTS

Section 2(c) of Pub. L. 92-418 provided in part that: "The

amendment made by subsection (a) [amending this section] shall

apply to disasters occurring after December 31, 1971, in taxable

years ending after such date."

Section 2(b) of Pub. L. 92-336 provided that: "The amendment made

by subsection (a) [amending this section] shall apply to disasters

occurring after December 31, 1971, in taxable years ending after

such date."

 

EFFECTIVE DATE OF 1971 AMENDMENTS

Section 2 of Pub. L. 91-687 provided that: "The amendments made

by this Act [amending this section] shall apply with respect to

taxable years beginning on or after January 1, 1970."

Section 1(b)(1) of Pub. L. 91-677 provided that: "The amendments

made by subsection (a) [amending this section] shall apply in

respect of losses sustained in taxable years ending after December

31, 1958."

 

EFFECTIVE DATE OF 1970 AMENDMENT

Section 304 of Pub. L. 91-606 provided that: "This Act [enacting

sections 4401 to 4485 of Title 42, The Public Health and Welfare,

amending this section, sections 5064 and 5708 of this title,

sections 1706e, 1709, 1715l of Title 12, Banks and Banking,

sections 241-1, 646 and 758 of Title 20, Education, section 1820

[now 3720] of Title 38, Veterans' Benefits, section 461 of former

Title 40, Public Buildings, Property, and Works, section 1681 note

of Title 42, repealing sections 1855 to 1855g, 1855aa, 1855aa note,

1855bb to 1855ii, 1855aaa, 1855aaa note, 1855bbb to 1855nnn of

Title 42, and section 1926 of Title 7, Agriculture, and enacting

provisions set out as notes under section 4401 and section 4434 of

Title 42] shall take effect immediately upon its enactment [Dec.

31, 1970], except that sections 226(b), 237, 241, 252(a), and 254

[sections 4436(b), 4456, 4460, 4482(a), and 4484 of Title 42,

respectively] shall take effect as of August 1, 1969, and sections

231, 232, and 233 [sections 4451, 4452 of Title 42 and amendments

to section 1820 [now 3720] of Title 38, respectively] shall take

effect as of April 1, 1970."

 

EFFECTIVE DATE OF 1964 AMENDMENTS

Section 208(b) of Pub. L. 88-272 provided that: "The amendment

made by subsection (a) [amending this section] shall apply to

losses sustained after December 31, 1963, in taxable years ending

after such date."

Section 3(b) of Pub. L. 88-348 provided that: "The amendment made

by subsection (a) [amending this section] shall apply in respect of

losses sustained in taxable years ending after December 31, 1958."

 

EFFECTIVE DATE OF 1962 AMENDMENT

Section 2(b) of Pub. L. 87-426 provided that: "The amendments

made by this section [amending this section] shall be effective

with respect to any disaster occurring after December 31, 1961."

 

EFFECTIVE DATE OF 1958 AMENDMENT

Section 1(c) of title I of Pub. L. 85-866, as amended by Pub. L.

99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:

"Except as otherwise expressly provided -

"(1) amendments made by this title to subtitle A of the

Internal Revenue Code of 1986 [formerly I.R.C. 1954] (relating to

income taxes) [enacting section 558 of this title and amending

this section and sections 152, 166, 168, 170, 172, 213, 337, 404,

421, 535, 545, 556, 582, 611, 613, 851, 1015, 1031, 1033, 1034,

1053, 1232, 1233, 1234, 1237, 1341, and 1347 of this title] shall

apply to taxable years beginning after December 31, 1953, and

ending after August 16, 1954; and

"(2) amendments made by this title to subtitle F of such Code

(relating to procedure and administration) [enacting sections

7513 and 7514 of this title and amending sections 6013, 6015,

6212, 6325, 6338, 6339, 6501, 6504, 6511, 6601, 6652, 6653, 6851,

6871, 7213, 7324, 7325, and 7422 of this title] shall take effect

as of August 17, 1954, and such subtitle, as so amended, shall

apply as provided in section 7851 of the Internal Revenue Code of

1986".

Amendment by section 57(c)(1) of Pub. L. 85-866 applicable with

respect to taxable years beginning after Sept. 2, 1958, see section

57(d) of Pub. L. 85-866, set out as a note under section 243 of

this title.

 

TRANSITIONAL RULE FOR 1984 AMENDMENT

Section 711(c)(2)(B) of Pub. L. 98-369, as amended by Pub. L. 99-

514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "In the

case of taxable years beginning before January 1, 1984 -

"(i) For purposes of paragraph (1)(B) of section 165(h) of the

Internal Revenue Code of 1986 [formerly I.R.C. 1954], adjusted

gross income shall be determined without regard to the

application of section 1231 of such Code to any gain or loss from

an involuntary conversion of property described in subsection

(c)(3) of section 165 of such Code arising from fire, storm,

shipwreck, or other casualty or from theft.

"(ii) Section 1231 of such Code shall be applied after the

application of paragraph (1) of section 165(h) of such Code."

 

CLARIFICATION OF TREATMENT OF CERTAIN FSLIC FINANCIAL ASSISTANCE

Pub. L. 103-66, title XIII, Sec. 13224, Aug. 10, 1993, 107 Stat.

485, provided that:

"(a) General Rule. - For purposes of chapter 1 of the Internal

Revenue Code of 1986 -

"(1) any FSLIC assistance with respect to any loss of

principal, capital, or similar amount upon the disposition of any

asset shall be taken into account as compensation for such loss

for purposes of section 165 of such Code, and

"(2) any FSLIC assistance with respect to any debt shall be

taken into account for purposes of section 166, 585, or 593 of

such Code in determining whether such debt is worthless (or the

extent to which such debt is worthless) and in determining the

amount of any addition to a reserve for bad debts arising from

the worthlessness or partial worthlessness of such debts.

"(b) FSLIC Assistance. - For purposes of this section, the term

'FSLIC assistance' means any assistance (or right to assistance)

with respect to a domestic building and loan association (as

defined in section 7701(a)(19) of such Code without regard to

subparagraph (C) thereof) under section 406(f) of the National

Housing Act [former 12 U.S.C. 1729(f)] or section 21A of the

Federal Home Loan Bank Act [12 U.S.C. 1441a] (or under any similar

provision of law).

"(c) Effective Date. -

"(1) In general. - Except as otherwise provided in this

subsection -

"(A) The provisions of this section shall apply to taxable

years ending on or after March 4, 1991, but only with respect

to FSLIC assistance not credited before March 4, 1991.

"(B) If any FSLIC assistance not credited before March 4,

1991, is with respect to a loss sustained or charge-off in a

taxable year ending before March 4, 1991, for purposes of

determining the amount of any net operating loss carryover to a

taxable year ending on or after March 4, 1991, the provisions

of this section shall apply to such assistance for purposes of

determining the amount of the net operating loss for the

taxable year in which such loss was sustained or debt written

off. Except as provided in the preceding sentence, this section

shall not apply to any FSLIC assistance with respect to a loss

sustained or charge-off in a taxable year ending before March

4, 1991.

"(2) Exceptions. - The provisions of this section shall not

apply to any assistance to which the amendments made by section

1401(a)(3) of the Financial Institutions Reform, Recovery, and

Enforcement Act of 1989 [Pub. L. 101-73, amending section 597 of

this title and repealing provisions set out as a note under

section 597 of this title] apply."

 

OVERPAYMENTS OR UNDERPAYMENTS OF TAX ATTRIBUTABLE TO CERTAIN

AMENDMENTS BY PUB. L. 99-514 OR PUB. L. 100-647

Section 1009(d)(4) of Pub. L. 100-647 provided that: "If on the

date of the enactment of this Act [Nov. 10, 1988] (or at any time

before the date 1 year after such date of enactment) credit or

refund of any overpayment of tax attributable to amendments made by

section 905 of the Reform Act [section 905 of Pub. L. 99-514,

amending this section and section 451 of this title] or by this

subsection [amending this section and section 451 of this title and

provisions set out as a note under section 451 of this title] (or

the assessment of any underpayment of tax so attributable) is

barred by any law or rule of law -

"(A) credit or refund of any such overpayment may nevertheless

be made if claim therefore [sic] is filed before the date 1 year

after such date of enactment, and

"(B) assessment of any such underpayment may nevertheless be

made if made before the date 1 year after such date of

enactment."

 

DEDUCTION FOR BUS AND FREIGHT FORWARDER OPERATING AUTHORITY

Section 243 of Pub. L. 99-514, as amended by Pub. L. 100-647,

title I, Sec. 1002(j), Nov. 10, 1988, 102 Stat. 3371, provided

that:

"(a) Bus Operating Authority. -

"(1) In general. - Subject to the modifications contained in

paragraph (2), section 266 of the Economic Recovery Tax Act of

1981 [section 266 of Pub. L. 97-34, set out below] shall be

applied as if the term 'motor carrier operating authority'

included a bus operating authority.

"(2) Modifications. - For purposes of paragraph (1), section

266 of such Act shall be applied -

"(A) by substituting 'November 19, 1982' for 'July 1, 1980'

each place it appears, and

"(B) by substituting 'November 1982' for 'July 1980' in

subsection (a) thereof.

"(3) Bus operating authority defined. - For purposes of this

subsection and section 266 of such Act, the term 'bus operating

authority' means -

"(A) a certificate or permit held by a motor common or

contract carrier of passengers which was issued pursuant to

subchapter II of chapter 109 of title 49, United States Code,

and

"(B) a certificate or permit held by a motor carrier

authorizing the transportation of passengers, as a common

carrier, over regular routes in intrastate commerce which was

issued by the appropriate State agency.

"(b) Freight Forwarder Operating Authority. -

"(1) In general. - Subject to the modifications contained in

paragraph (2), section 266 of the Economic Recovery Tax Act of

1981 [section 266 of Pub. L. 97-34, set out below] shall be

applied as if subsection (b) thereof contained 'or a freight

forwarder' after 'contract carrier of property'.

"(2) Modifications. - The modifications referred to in this

paragraph are:

"(A) 60-month period. - The 60-month period referred to in

section 266(a) of such Act shall begin with the later of -

"(i) the deregulation month, or

"(ii) at the election of the taxpayer, the 1st month of the

taxpayer's 1st taxable year beginning after the deregulation

month.

"(B) Authority must be held as of beginning of 60-month

period. - A motor carrier operating authority shall not be

taken into account unless such authority is held by the

taxpayer at the beginning of the 60-month period applicable to

the taxpayer under subparagraph (A).

"(C) Adjusted basis not to exceed adjusted basis at beginning

of 60-month period. - The adjusted basis taken into account

with respect to any motor carrier operating authority shall not

exceed the adjusted basis of such authority as of the beginning

of the 60-month period applicable to the taxpayer under

subparagraph (A).

"(3) Deregulation month. - For purposes of this section, the

term 'deregulation month' means the month in which the Secretary

of the Treasury or his delegate determines that a Federal law has

been enacted which deregulates the freight forwarding industry.

"(c) Special Rule for Motor Carrier Operating Authority. - In the

case of a corporation which was incorporated on December 29, 1969,

in the State of Delaware, notwithstanding any other provision of

law, there shall be allowed as a deduction for the taxable year of

the taxpayer beginning in 1980 an amount equal to $2,705,188 for

its entire loss due to a decline in value of its motor carrier

operating authority by reason of deregulation.

"(d) Application of Section 334(b)(2). - For purposes of

subsections (a) and (b), the reference to section 334(b)(2) in

section 266(c)(2)(A)(ii) of the Economic Recovery Tax Act of 1981

[section 266(c)(2)(A)(ii) of Pub. L. 97-34, set out below] shall be

a reference to such section as in effect before its repeal.

"(e) Effective Dates. -

"(1) Bus operating authority. -

"(A) In general. - Subsection (a) shall apply to taxable

years ending after November 18, 1982.

"(B) Statute of limitations. - If refund or credit of any

overpayment of tax resulting from subsection (a) is prevented

at any time on or before the date which is 1 year after the

date of the enactment of this Act [Oct. 22, 1986] by the

operation of any law or rule of law (including res judicata),

refund or credit of such overpayment (to the extent

attributable to the application of such subsection) may,

notwithstanding such law or rule of law, be made or allowed if

claim therefore [sic] is filed on or before the date which is

18 months after such date of enactment.

"(2) Freight forwarder operating authority. - Subsection (b)

shall apply to taxable years ending after the month preceding the

deregulation month."

 

DEDUCTION FOR MOTOR CARRIER OPERATING AUTHORITY

Pub. L. 97-34, title II, Sec. 266, Aug. 13, 1981, 95 Stat. 265,

as amended by Pub. L. 97-424, title V, Sec. 517(a), Jan. 6, 1983,

96 Stat. 2183; Pub. L. 97-448, title I, Sec. 102(n), Jan. 12, 1983,

96 Stat. 2374; Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat.

2095, provided that:

"(a) General Rule. - For purposes of chapter 1 of the Internal

Revenue Code of 1986 [formerly I.R.C. 1954] [this chapter], in

computing the taxable income of a taxpayer who, on July 1, 1980,

held one or more motor carrier operating authorities, an amount

equal to the aggregate adjusted basis of all motor carrier

operating authorities held by the taxpayer on July 1, 1980, or

acquired subsequent thereto pursuant to a binding contract in

effect on July 1, 1980, shall be allowed as a deduction ratably

over a period of 60 months. Such 60-month period shall begin with

the month of July 1980 (or if later, the month in which acquired),

or at the election of the taxpayer, the first month of the

taxpayer's first taxable year beginning after July 1, 1980.

"(b) Definition of Motor Carrier Operating Authority. - For

purposes of this section, the term 'motor carrier operating

authority' means a certificate or permit held by a motor common or

contract carrier of property and issued pursuant to subchapter II

of chapter 109 of title 49 of the United States Code.

"(c) Special Rules. -

"(1) Adjusted basis. - For purposes of the Internal Revenue

Code of 1986, proper adjustments shall be made in the adjusted

basis of any motor carrier operating authority held by the

taxpayer on July 1, 1980, for the amounts allowable as a

deduction under this section.

"(2) Certain stock acquisitions. -

"(A) In general. - Under regulations prescribed by the

Secretary of the Treasury or his delegate, and at the election

of the holder of the authority, in any case in which a

corporation -

"(i) on or before July 1, 1980 (or after such date pursuant

to a binding contract in effect on such date), acquired stock

in a corporation which held, directly or indirectly, any

motor carrier operating authority at the time of such

acquisition, and

"(ii) would have been able to allocate to the basis of such

authority that portion of the acquiring corporation's cost

basis in such stock attributable to such authority if the

acquiring corporation had received such authority in the

liquidation of the acquired corporation immediately following

such acquisition and such allocation would have been proper

under section 334(b)(2) of such Code,

the holder of the authority may, for purposes of this section,

allocate a portion of the basis of the acquiring corporation in

the stock of the acquired corporation to the basis of such

authority in such manner as the Secretary may prescribe in such

regulations.

"(B) Treatment of certain noncorporate taxpayers. - Under

regulations prescribed by the Secretary of the Treasury or his

delegate, and at the election of the holder of the authority,

in any case in which -

"(i) a noncorporate taxpayer or group of noncorporate

taxpayers on or before July 1, 1980, acquired in one purchase

stock in a corporation which held, directly or indirectly,

any motor carrier operating authority at the time of such

acquisition, and

"(ii) the acquisition referred to in clause (i) would have

satisfied the requirements of subparagraph (A) if the stock

had been acquired by a corporation,

then, for purposes of subparagraphs (A) and (C), the noncorporate

taxpayer or group of noncorporate taxpayers referred to in clause

(i) shall be treated as a corporation. The preceding sentence

shall apply only if such noncorporate taxpayer (or group of

noncorporate taxpayers) on July 1, 1980, held stock constituting

control (within the meaning of section 368(c) of the Internal

Revenue Code of 1986) of the corporation holding (directly or

indirectly) the motor carrier operating authority.

"(C) Adjustment to basis. - Under regulations prescribed by

the Secretary of the Treasury or his delegate, proper

adjustment shall be made to the basis of the stock or other

assets in the manner provided by such regulations to take into

account any allocation under subparagraph (A).

"(3) Section 381 of the internal revenue code of 1986 to apply.

- For purposes of section 381 of the Internal Revenue Code of

1986, any item described in this section shall be treated as an

item described in subsection (c) of such section 381.

"(d) Effective Date. - The provisions of this section shall apply

to taxable years ending after June 30, 1980."

[Section 517(b) of Pub. L. 97-424 provided that: "The amendment

made by subsection (a) [adding subsec. (c)(2)(B) of this note]

shall apply to taxable years ending after July 30, 1980."]

 

TAX TREATMENT OF CERTAIN 1972 DISASTER LOANS

Section 2103 of Pub. L. 94-455, as amended by Pub. L. 99-514,

Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:

"(a) Application of Section. - This section shall apply to any

individual -

"(1) who was allowed a deduction under section 165 of the

Internal Revenue Code of 1986 [formerly I.R.C. 1954] (relating to

losses) for a loss attributable to a disaster occurring during

calendar year 1972 which was determined by the President, under

section 102 of the Disaster Relief Act of 1970, to warrant

disaster assistance by the Federal Government.

"(2) who in connection with such disaster -

"(A) received income in the form of cancellation of a

disaster loan under section 7 of the Small Business Act

[section 636 of Title 15, Commerce and Trade] or an emergency

loan under subtitle C of the Consolidated Farm and Rural

Development Act [section 1961 et seq. of Title 7, Agriculture],

or

"(B) received income in the form of compensation (not taken

into account in computing the amount of the deduction) for such

loss in settlement of any claim of the taxpayer against a

person for that person's liability in tort for the damage or

destruction of that taxpayer's property in connection with the

disaster, and

"(3) who elects (at such time and in such manner as the

Secretary of the Treasury or his delegate may by regulations

prescribe) to take the benefits of this section.

"(b) Effect of Election. - In the case of any individual to whom

this section applies -

"(1) the tax imposed by chapter 1 of the Internal Revenue Code

of 1986 for the taxable year in which the income taken into

account is received or accrued which is attributable to such

income shall not exceed the additional tax under such chapter

which would have been payable for the year in which the deduction

for the loss was taken if such deduction had not been taken for

such year,

"(2) any amount of tax imposed by chapter 1 attributable to the

income taken into account which, on October 1, 1975, was unpaid

may be paid in 3 equal annual installments (with the first such

installment due and payable on April 15, 1977), and

"(3) no interest on any deficiency shall be payable for any

period before April 16, 1977, to the extent such deficiency is

attributable to the receipt of such compensation, and no interest

on any installment referred to in paragraph (2) shall be payable

for any period before the due date of such installment.

"(c) Income Taken Into Account. - For purposes of this section,

the income taken into account is -

"(1) in the case of an individual described in subsection

(a)(2)(A), the amount of income (not in excess of $5,000)

attributable to the cancellation of a disaster loan under section

7 of the Small Business Act or an emergency loan under subtitle C

of the Consolidated Farm and Rural Development Act received by

reason of the disaster described in subsection (a)(1), or

"(2) in the case of an individual described in subsection

(a)(2)(B), the amount of compensation (not in excess of $5,000)

for the loss in settlement of any claim of the taxpayer against a

person for that person's liability in tort for the damage or

destruction of that taxpayer's property in connection with the

disaster described in subsection (a)(1).

"(d) Phaseout Where Adjusted Gross Income Exceeds $15,000. - If

for the taxable year for which the deduction for the loss was taken

the individual's adjusted gross income exceeded $15,000, the $5,000

limit set forth in paragraph (1) or (2) of subsection (c)

(whichever applies) shall be reduced by one dollar for each full

dollar that such adjusted gross income exceeds $15,000. In the case

of a married individual filing a separate return, the preceding

sentence shall be applied by substituting '$7,500' for '$15,000'.

"(e) Statute of Limitations. - If refund or credit of any

overpayment of income tax resulting from an election made under

this section is prevented on the date of the enactment of this Act

[Oct. 4, 1976], or at any time within one year after such date, by

the operation of any law, or rule of law, refund or credit of such

overpayment (to the extent attributable to such election) may,

nevertheless, be made or allowed if claim therefor is filed within

one year after such date. If the taxpayer makes an election under

this section and if assessment of any deficiency for any taxable

year resulting from such election is prevented on the date of the

enactment of this Act [Oct. 4, 1976], or at any time within one

year after such date, by the operation of any law or rule of law,

such assessment (to the extent attributable to such election) may,

nevertheless, be made if made within one year after such date."

 

REFUND OR CREDIT OF OVERPAYMENT; TIME FOR FILING CLAIM; INTEREST

Section 1(b)(2) of Pub. L. 91-677 authorized refund or credit of

overpayment attributable to the amendments made by subsec. (a) to

subsec. (i) of this section if claim therefor was filed after Jan.

12, 1971, and before July 1, 1971, without interest for any period

before Jan. 1, 1972.

 

-FOOTNOTE-

(!1) So in original. Probably should be followed by a second closing

parenthesis.

 

 

-End-