(1) If the fair market value of such stock as of the close of such taxable year exceeds its adjusted basis, such United States person shall include in gross income for such taxable year an amount equal to the amount of such excess.
(2) If the adjusted basis of such stock exceeds the fair market value of such stock as of the close of such taxable year, such United States person shall be allowed a deduction for such taxable year equal to the lesser of—
If the adjusted basis of such stock exceeds the fair market value of such stock as of the close of such taxable year, such United States person shall be allowed a deduction for such taxable year equal to the lesser of—
(A) the amount of such excess, or
(B) the unreversed inclusions with respect to such stock.
(1) In general
The adjusted basis of stock in a passive foreign investment company—
(A) shall be increased by the amount included in the gross income of the United States person under subsection (a)(1) with respect to such stock, and
(B) shall be decreased by the amount allowed as a deduction to the United States person under subsection (a)(2) with respect to such stock.
(2) Special rule for stock constructively owned
In the case of stock in a passive foreign investment company which the United States person is treated as owning under subsection (g)—
(A) the adjustments under paragraph (1) shall apply to such stock in the hands of the person actually holding such stock but only for purposes of determining the subsequent treatment under this chapter of the United States person with respect to such stock, and
(B) similar adjustments shall be made to the adjusted basis of the property by reason of which the United States person is treated as owning such stock.
(1) Ordinary treatment
(A) Gain
Any amount included in gross income under subsection (a)(1), and any gain on the sale or other disposition of marketable stock in a passive foreign investment company (with respect to which an election under this section is in effect), shall be treated as ordinary income.
(B) Loss
Any—
(i) amount allowed as a deduction under subsection (a)(2), and
(ii) loss on the sale or other disposition of marketable stock in a passive foreign investment company (with respect to which an election under this section is in effect) to the extent that the amount of such loss does not exceed the unreversed inclusions with respect to such stock,
(2) Source
The source of any amount included in gross income under subsection (a)(1) (or allowed as a deduction under subsection (a)(2)) shall be determined in the same manner as if such amount were gain or loss (as the case may be) from the sale of stock in the passive foreign investment company.
(1) the amount included in gross income of the taxpayer under subsection (a)(1) with respect to such stock for prior taxable years, over
(2) the amount allowed as a deduction under subsection (a)(2) with respect to such stock for prior taxable years.
(1) In general
The term “marketable stock” means—
(A) any stock which is regularly traded on—
any stock which is regularly traded on—
(i) a national securities exchange which is registered with the Securities and Exchange Commission or the national market system established pursuant to section 11A of the Securities and Exchange Act of 1934, or
(ii) any exchange or other market which the Secretary determines has rules adequate to carry out the purposes of this part,
(B) to the extent provided in regulations, stock in any foreign corporation which is comparable to a regulated investment company and which offers for sale or has outstanding any stock of which it is the issuer and which is redeemable at its net asset value, and
(C) to the extent provided in regulations, any option on stock described in subparagraph (A) or (B).
(2) Special rule for regulated investment companies
In the case of any regulated investment company which is offering for sale or has outstanding any stock of which it is the issuer and which is redeemable at its net asset value, all stock in a passive foreign investment company which it owns directly or indirectly shall be treated as marketable stock for purposes of this section. Except as provided in regulations, similar treatment as marketable stock shall apply in the case of any other regulated investment company which publishes net asset valuations at least annually.
(1) this section (other than subsection (c)(2)) shall apply to such foreign corporation in the same manner as if such corporation were a United States person, and
(2) for purposes of subpart F of part III of subchapter N—
for purposes of subpart F of part III of subchapter N—
(A) any amount included in gross income under subsection (a)(1) shall be treated as foreign personal holding company income described in , and
(B) any amount allowed as a deduction under subsection (a)(2) shall be treated as a deduction allocable to foreign personal holding company income so described.
(1) In general
For purposes of this section, stock owned, directly or indirectly, by or for a foreign partnership or foreign trust or foreign estate shall be considered as being owned proportionately by its partners or beneficiaries. Stock considered to be owned by a person by reason of the application of the preceding sentence shall, for purposes of applying such sentence, be treated as actually owned by such person.
(2) Treatment of certain dispositions
In any case in which a United States person is treated as owning stock in a passive foreign investment company by reason of paragraph (1)—
(A) any disposition by the United States person or by any other person which results in the United States person being treated as no longer owning such stock, and
(B) any disposition by the person owning such stock,
shall be treated as a disposition by the United States person of the stock in the passive foreign investment company.
For purposes of , any amount included in gross income under subsection (a) shall be treated as a dividend.
In the case of stock of a passive foreign investment company which is acquired by bequest, devise, or inheritance (or by the decedent’s estate) and with respect to which an election under this section was in effect as of the date of the decedent’s death, notwithstanding section 1014, the basis of such stock in the hands of the person so acquiring it shall be the adjusted basis of such stock in the hands of the decedent immediately before his death (or, if lesser, the basis which would have been determined under section 1014 without regard to this subsection).
(1) Taxpayers other than regulated investment companies
(A) In general
If the taxpayer elects the application of this section with respect to any marketable stock in a corporation after the beginning of the taxpayer’s holding period in such stock, and if the requirements of subparagraph (B) are not satisfied, section 1291 shall apply to—
(i) any distributions with respect to, or disposition of, such stock in the first taxable year of the taxpayer for which such election is made, and
(ii) any amount which, but for section 1291, would have been included in gross income under subsection (a) with respect to such stock for such taxable year in the same manner as if such amount were gain on the disposition of such stock.
(B) Requirements
The requirements of this subparagraph are met if, with respect to each of such corporation’s taxable years for which such corporation was a passive foreign investment company and which begin after
(2) Special rules for regulated investment companies
(A) In general
If a regulated investment company elects the application of this section with respect to any marketable stock in a corporation after the beginning of the taxpayer’s holding period in such stock, then, with respect to such company’s first taxable year for which such company elects the application of this section with respect to such stock—
(i) section 1291 shall not apply to such stock with respect to any distribution or disposition during, or amount included in gross income under this section for, such first taxable year, but
(ii) such regulated investment company’s tax under this chapter for such first taxable year shall be increased by the aggregate amount of interest which would have been determined under if section 1291 were applied without regard to this subparagraph.
(B) Disallowance of deduction
No deduction shall be allowed to any regulated investment company for the increase in tax under subparagraph (A)(ii).
(1) such stock ceases to be marketable stock, or
(2) the Secretary consents to the revocation of such election.
If any individual becomes a United States person in a taxable year beginning after