taxable year to which this subsection (as in effect before the Tax Reform Act of 1976) applies, the amount of the net investment Ante, p. 1520. income taken into account under this subsection shall be the amount of such income (determined without regard to this sentence) multiplied by a fraction the numerator of which is the excess of the investment interest for the taxable year over the investment interest to which such prior provision applies, and the denominator of which is the investment interest for the taxable year."; (3) by striking out "limitations in paragraphs (1) and (2) (A)" in paragraph (3) (E) and inserting in lieu thereof "limitation in paragraph (1)"; (4) by striking out paragraph (5) and redesignating paragraphs (6) and (7) as paragraphs (5) and (6), respectively; (5) by adding at the end of paragraph (5) (as so redesignated) the following: "For taxable years beginning after December 31, 1975, this para- 6) by adding at the end thereof the following new paragraph: OF ENTERPRISE. "(A) GENERAL RULE.-In the case of any 50 percent owned corporation or partnership, the $10,000 figure specified in paragraph (1) shall be increased by the lesser of "(i) $15,000, or "(ii) the interest paid or accrued during the taxable In the case of a separate return by a married individual, "(B) OWNERSHIP REQUIREMENTS.-This paragraph shall (b) EFFECTIVE DATE. 26 USC 163 (1) IN GENERAL.-Except as provided in paragraph (2), the note. amendments made by subsection (a) shall apply to taxable years beginning after December 31, 1975. (2) INDEBTEDNESS INCURRED BEFORE SEPTEMBER 11, 1975.-In the case of indebtedness attributable to a specific item of property which (A) is for a specified term, and (B) was incurred before September 11, 1975, or is incurred after September 10, 1975, pursuant to a written contract or commitment which on September 11, 1975, and at all times thereafter before the incurring of such indebtedness, is binding on the taxpayer, the amendments made by this section shall not apply, but section 163 (d) of the Internal Revenue Code of 1954 (as in effect before the enactment of this Act) shall apply. For purposes of the preceding sentence, so much of the net investment income (as defined in section 163 (d) (3) (A) of such Code) for any taxable year as Ante, p. 1542 26 USC 280. 26 USC 280 note. 26 USC 543. is not taken into account under section 163 (d) of such Code, as SEC. 210. AMORTIZATION OF PRODUCTION COST OF MOTION PICTURES, (a) IN GENERAL.-Part IX of subchapter B of chapter 1 (relating to items not deductible) is amended by adding at the end thereof the following new section: "SEC. 280. CERTAIN EXPENDITURES INCURRED IN PRODUCTION OF "(b) PRORATION OF PRODUCTION COST OVER INCOME PERIOD.— Amounts referred to in subsection (a) are deductible only for those taxable years ending during the period during which the taxpayer reasonably may be expected to receive substantially all of the income he will receive from any such film, sound recording, book, or similar property. The amount deductible for any such taxable year is an amount which bears the same ratio to the sum of all such amounts (attributable to such film, sound recording, book, or similar property) as the income received from the property for that taxable year bears to the sum of the income the taxpayer may reasonably be expected to receive during such period. "(c) DEFINITIONS. For purposes of this section- "(1) FILM.-The term 'film' means any motion picture film or video tape. "(2) SOUND RECORDING.-The term 'sound recording' means works that result from the fixation of a series of musical, spoken, or other sounds, regardless of the nature of the material objects, such as discs, tapes, or other phonorecordings, in which such sounds are embodied." (b) CLERICAL AMENDMENT.-The table of sections for such part is amended by adding at the end thereof the following new item: "Sec. 280. Certain expenditures incurred in production of films, books, records, or similar property." (c) EFFECTIVE DATE.-The amendment made by this section applies to amounts paid or incurred after December 31, 1975, with respect to property the principal production of which begins after December 31, 1975. SEC. 211. CLARIFICATION OF DEFINITION OF PRODUCED FILM RENTS. (a) IN GENERAL.-Subparagraph (B) of paragraph (5) of section 543 (a) (defining produced film rents for purposes of personal holding company income) is amended by adding at the end thereof the following new sentence: "In the case of a producer who actively participates in the production of the film, such term includes an interest in the proceeds or profits from the film, but only to the extent such interest is attributable to such active participation." (b) EFFECTIVE DATE.-The amendment made by subsection (a) shall 26 USC 543 apply to taxable years ending on or after December 31, 1975. SEC. 212. BASIS LIMITATION FOR AND RECAPTURE OF DEPRECIATION ON PLAYER CONTRACTS. (a) BASIS LIMITATIONS.— note. (1) IN GENERAL.-Part IV of subchapter O of chapter 1 (relat- 26 USC 1051. ing to special rules applicable to gain or loss on disposition of property) is amended by redesignating section 1056 as section 1057, and by inserting after section 1055 the following new section: "SEC. 1056. BASIS LIMITATION FOR PLAYER CONTRACTS TRANSFERRED 26 USC 1056. IN CONNECTION WITH THE SALE OF A FRANCHISE. "(a) GENERAL RULE.-If a franchise to conduct any sports enterprise is sold or exchanged, and if, in connection with such sale or exchange, there is a transfer of a contract for the services of an athlete, the basis of such contract in the hands of the transferee shall not exceed the sum of "(1) the adjusted basis of such contract in the hands of the transferor immediately before the transfer, plus "(2) the gain (if any) recognized by the transferor on the transfer of such contract. For purposes of this section, gain realized by the transferor on the transfer of such contract, but not recognized by reason of section 337 (a), shall be treated as recognized to the extent recognized by the Post, p. 1772. transferor's shareholders. "(b) EXCEPTIONS.-Subsection (a) shall not apply "(1) to an exchange described in section 1031 (relating to exchange of property held for productive use or investment), and "(2) to property in the hands of a person acquiring the property from a decedent or to whom the property passed from a decedent (within the meaning of section 1014(a)). "(c) TRANSFEROR REQUIRED TO FURNISH CERTAIN INFORMATION.Under regulations prescribed by the Secretary, the transfer shall, at the times and in the manner provided in such regulations, furnish to the Secretary and to the transferee the following information: "(1) the amount which the transferor believes to be the adjusted basis referred to in paragraph (1) of subsection (a), "(2) the amount which the transferor believes to be the gain referred to in paragraph (2) of subsection (a), and "(3) any subsequent modification of either such amount. To the extent provided in such regulations, the amounts furnished pursuant to the preceding sentence shall be binding on the transferor and on the transferee. "(d) PRESUMPTION AS TO AMOUNT ALLOCABLE TO PLAYER CONTRACTS.-In the case of any sale or exchange described in subsection (a), it shall be presumed that not more than 50 percent of the consideration is allocable to contracts for the services of athletes unless it is established to the satisfaction of the Secretary that a specified amount in excess of 50 percent is properly allocable to such contracts. Nothing in the preceding sentence shall give rise to a presumption that an allocation of less than 50 percent of the consideration to contracts for the services of athletes is a proper allocation." 26 USC 1056 note. 26 USC 1245. "Previously unrecaptured depreciation." "Previously unrecaptured depreciation." "Player contract." (2) CLERICAL AMENDMENT.-The tables of sections for such part VI is amended by striking out the last item and inserting in lieu thereof the following: "Sec. 1056. Basis limitation for player contracts transferred in connection with the sale of a franchise. "Sec. 1057. Cross references." (3) EFFECTIVE DATE.-The amendments made by this subsection apply to sales or exchanges of franchises after December 31, 1975, in taxable years ending after such date. (b) RECAPTURE.— (1) IN GENERAL.-Section 1245 (a) (relating to gain from disposition of certain depreciable property) is amended by adding at the end thereof the following new paragraph: "(4) SPECIAL RULE FOR PLAYER CONTRACTS. "(A) IN GENERAL.-For purposes of this section, if a franchise to conduct any sports enterprise is sold or exchanged, and if, in connection with such sale or exchange, there is a transfer of any player contracts, the recomputed basis of such player contracts in the hands of the transferor shall be the adjusted basis of such contracts increased by the greater of "(i) the previously unrecaptured depreciation with respect to player contracts acquired by the transferor at the time of acquisition of such franchise, or "(ii) the previously unrecaptured depreciation with respect to the player contracts involved in such transfer. "(B) PREVIOUSLY RESPECT TO INITIAL CONTRACTS.-For purposes of subparagraph (A)(i), the term 'previously unrecaptured depreciation' means the excess (if any) of UNRECAPTURED DEPRECIATION WITH "(i) the sum of the deduction allowed or allowable to the taxpayer transferor for the depreciation of any player contracts acquired by him at the time of acquisition of such franchise, plus the deduction allowed or allowable for losses with respect to such player contracts acquired at the time of such acquisition, over "(ii) the aggregate of the amounts treated as ordinary income by reason of this section with respect to prior dispositions of such player contracts acquired upon acquisition of the franchise. "(C) PREVIOUSLY RESPECT TO CONTRACTS TRANSFERRED. For purposes of subparagraph (A) (ii), the term 'previously unrecaptured depreciation' means "(i) the amount of any deduction allowed or allowable to the taxpayer transferor for the depreciation of any contracts involved in such transfer, over "(ii) the aggregate of the amounts treated as ordinary income by reason of this section with respect to prior dispositions of such player contracts acquired upon acquisition of the franchise. "(D) PLAYER CONTRACT.-For purposes of this paragraph, the term 'player contract' means any contract for the services of an athlete which, in the hands of the taxpayer, is of a character subject to the allowance for depreciation provided in section 167." (2) EFFECTIVE DATE.-The amendment made by this subsection 26 USC 1245 applies to transfers of player contracts in connection with any note. sale or exchange of a franchise after December 31, 1975. SEC. 213. CERTAIN PARTNERSHIP PROVISIONS. (a) DOLLAR LIMITATION WITH RESPECT TO ADDITIONAL FIRST-YEAR DEPRECIATION ALLOWANCE.-Subsection (d) of section 179 (relating to 26 USC 179. additional first-year depreciation allowance for small business) is amended by redesignating paragraph (8) as paragraph (9) and by inserting after paragraph (7) the following new paragraph: "(8) DOLLAR LIMITATION IN CASE OF PARTNERSHIPS.-In the case of a partnership, the dollar limitation contained in the first sentence of subsection (b) shall apply with respect to the partnership and with respect to each partner. (b) CLARIFICATION OF TREATMENT OF PARTNERSHIP SYNDICATION FEES, ETC. (1) IN GENERAL.-Part I of subchapter K of chapter 1 (relating to determination of tax liability) is amended by adding at the end thereof the following new section: "SEC. 709. TREATMENT OF ORGANIZATION AND SYNDICATION FEES. 26 USC 709. "(a) GENERAL RULE.-Except as provided in subsection (b), no deduction shall be allowed under this chapter to the partnership or to any partner for any amounts paid or incurred to organize a partnership or to promote the sale of (or to sell) an interest in such partnership. "(b) AMORTIZATION OF ORGANIZATION FEES.— "(1) DEDUCTION.-Amounts paid or incurred to organize a partnership may, at the election of the partnership (made in accordance with regulations prescribed by the Secretary), be treated as deferred expenses. Such deferred expenses shall be allowed as a deduction ratably over such period of not less than 60 months as may be selected by the partnership (beginning with the month in which the partnership begins business), or if the partnership is liquidated before the end of such 60-month period, such deferred expenses (to the extent not deducted under this section) may be deducted to the extent provided in section 165. "(2) ORGANIZATIONAL EXPENSES DEFINED.-The organizational "(A) are incident to the creation of the partnership; "(C) are of a character which, if expended incident to the (2) CLERICAL AMENDMENT.-The table of sections for such part is amended by adding at the end thereof the following: "Sec. 709. Treatment of organization and syndication fees." (3) DETERMINATION OF AMOUNTS CHARGEABLE ΤΟ CAPITAL ACCOUNT.-Section 707 (c) (relating to guaranteed payments) is 26 USC 707. amended by striking out "and section 162 (a)" and inserting in lieu thereof "and, subject to section 263, for purposes of section 162(a)". (c) ITEMS MUST BE ALLOCATED TO PORTION OF YEAR PARTNER HELD INTEREST. (1) IN GENERAL.-Subparagraph (B) of section 706 (c) (2) 26 USC 706. (relating to disposition of less than entire interest) is amended |