Interest on tax deferral

If a United States person receives an excess distribution in respect of stock in a passive foreign investment company, then— with respect to such excess distribution, the taxpayer’s gross income for the current year shall include (as ordinary income) only the amounts allocated under subparagraph (A) to— If the taxpayer disposes of stock in a passive foreign investment company, then the rules of paragraph (1) shall apply to any gain recognized on such disposition in the same manner as if such gain were an excess distribution. For purposes of this section— The taxpayer’s holding period shall be determined under section 1223; except that— The term “current year” means the taxable year in which the excess distribution or disposition occurs. For purposes of this section, the term “excess distribution” means any distribution in respect of stock received during any taxable year to the extent such distribution does not exceed its ratable portion of the total excess distribution (if any) for such taxable year. For purposes of this subsection— The term “total excess distribution” means the excess (if any) of— The total excess distributions with respect to any stock shall be zero for the taxable year in which the taxpayer’s holding period in such stock begins. Under regulations prescribed by the Secretary— For purposes of this section— The term “deferred tax amount” means, with respect to any distribution or disposition to which subsection (a) applies, an amount equal to the sum of— For purposes of paragraph (1)(A), the aggregate increases in taxes shall be determined by multiplying each amount allocated under subsection (a)(1)(A) to any taxable year (other than any taxable year referred to in subsection (a)(1)(B)) by the highest rate of tax in effect for such taxable year under section 1 or 11, whichever applies. The amount of interest referred to in paragraph (1)(B) on any increase determined under paragraph (2) for any taxable year shall be determined for the period— For purposes of this subsection, the term “due date” means the date prescribed by law (determined without regard to extensions) for filing the return of the tax imposed by this chapter for the taxable year. This section shall not apply with respect to any distribution paid by a passive foreign investment company, or any disposition of stock in a passive foreign investment company, if such company is a qualified electing fund with respect to the taxpayer for each of its taxable years— If— If— For purposes of clause (i), the term “post-1986 earnings and profits” means earnings and profits which were accumulated in taxable years of such company beginning after December 31, 1986, and during the period or periods the stock was held by the taxpayer while the company was a passive foreign investment company. For purposes of section 959(e), any amount included in gross income under this subparagraph shall be treated as included in gross income under section 1248(a). In the case of any stock to which subparagraph (A) or (B) applies— Except to the extent inconsistent with the regulations prescribed under subsection (f), rules similar to the rules of subsections (c), (d), and (e) of section 1246 (as in effect on the day before the date of the enactment of the American Jobs Creation Act of 2004) shall apply for purposes of this section; except that— To the extent provided in regulations, in the case of any transfer of stock in a passive foreign investment company where (but for this subsection) there is not full recognition of gain, the excess (if any) of— If there are creditable foreign taxes with respect to any distribution in respect of stock in a passive foreign investment company— to the extent— For purposes of this subsection— The term “creditable foreign taxes” means, with respect to any distribution, any withholding tax imposed with respect to such distribution, but only if the taxpayer chooses the benefits of section 901 and such taxes are creditable under section 901 (determined without regard to paragraph (1)(C)(ii)). The term “excess distribution taxes” means, with respect to any distribution, the portion of the creditable foreign taxes with respect to such distribution which is attributable (on a pro rata basis) to the portion of such distribution which is an excess distribution. The rules of this subsection also shall apply in the case of any gain which but for this section would be includible in gross income as a dividend under section 1248.