Taxation of DISC income to shareholders

A shareholder of a DISC or former DISC shall be subject to taxation on the earnings and profits of a DISC as provided in this chapter, but subject to the modifications of this subpart. A shareholder of a DISC shall be treated as having received a distribution taxable as a dividend with respect to his stock in an amount which is equal to his pro rata share of the sum (or, if smaller, the earnings and profits for the taxable year) of— the sum of— For purposes of paragraph (1)(D), taxable income of a DISC for the taxable year attributable to military property shall be determined by only taking into account— For purposes of subparagraph (A), the term “military property” means any property which is an arm, ammunition, or implement of war designated in the munitions list published pursuant to section 38 of the Arms Export Control Act (22 U.S.C. 2778). For purposes of applying paragraph (1)(E), all DISC’s which are members of the same controlled group shall be treated as a single corporation. The dollar amount under paragraph (1)(E) shall be allocated among the DISC’s which are members of the same controlled group in a manner provided in regulations prescribed by the Secretary. If— The amounts described in paragraph (1) shall be included in gross income as a dividend to the extent of the accumulated DISC income of the DISC or former DISC which is attributable to the stock disposed of and which was accumulated in taxable years of such corporation during the period or periods the stock disposed of was held by the shareholder which disposed of such stock. For the purposes of this part— The amount of foreign investment attributable to producer’s loans of a DISC for a taxable year shall be the smallest of— The term “net increase in foreign assets” of a controlled group means the excess of— the sum of— The term “actual foreign investment” by domestic members of a controlled group means the sum of— The uncommitted transitional funds of the group shall be an amount equal to the sum of— the excess of— Under regulations prescribed by the Secretary the determinations under this subsection shall be made on a cumulative basis with proper adjustments for amounts previously taken into account. If— A shareholder of a DISC shall pay for each taxable year interest in an amount equal to the product of— For purposes of this subsection— The term “shareholder’s DISC-related deferred tax liability” means, with respect to any taxable year of a shareholder of a DISC, the excess of— The Secretary shall prescribe regulations which provide such adjustments— The term “tax liability” means the amount of the tax imposed by this chapter for the taxable year reduced by credits allowable against such tax (other than credits allowable under sections 31, 32, and 34). For purposes of this subsection— The term “deferred DISC income” means, with respect to any taxable year of a shareholder, the excess of— For purposes of applying subparagraph (A) with respect to any taxable year of a shareholder, the computation year is the taxable year of the DISC which ends with (or within) the taxable year of the shareholder which precedes the taxable year of the shareholder for which the amount of deferred DISC income is being determined. For purposes of subparagraph (A), the term “distributions-in-excess-of-income” means, with respect to any taxable year of a DISC, the excess (if any) of— For purposes of this subsection, the term “base period T-bill rate” means the annual rate of interest determined by the Secretary to be equivalent to the average of the 1-year constant maturity Treasury yields, as published by the Board of Governors of the Federal Reserve System, for the 1-year period ending on September 30 of the calendar year ending with (or of the most recent calendar year ending before) the close of the taxable year of the shareholder. The Secretary shall prescribe such regulations as may be necessary for the application of this subsection to short years of the DISC, the shareholder, or both. The interest accrued during any taxable year which a shareholder is required to pay under paragraph (1) shall be treated, for purposes of this title, as interest payable under section 6601 and shall be paid by the shareholder at the time the tax imposed by this chapter for such taxable year is required to be paid. For purposes of this subsection, the term “DISC” includes a former DISC. If any organization described in subsection (a)(2) or (b)(2) of section 511 (or any other person otherwise subject to tax under section 511) is a shareholder in a DISC—