26 USC 704. 26 USC 761. 26 USC 704. Ante, p. 1531. 26 USC 709 note. by striking out "or with respect to a partner whose interest is reduced" and inserting in lieu thereof "or with respect to a partner whose interest is reduced (whether by entry of a new partner, partial liquidation of a partner's interest, gift, or otherwise)". (2) CERTAIN PROVISIONS OF SUBCHAPTER K MAY NOT BE OVERRIDDEN BY PARTNERSHIP AGREEMENT.-Subsection (a) of section 704 (relating to effect of partnership agreement) is amended by striking out "except as otherwise provided in this section" and inserting in lieu thereof "except as otherwise provided in this chapter' (3) CROSS REFERENCES. (A) Section 704 is amended by adding at the end thereof the following: "(f) CROSS REFERENCE.— "For rules in the case of the sale, exchange, liquidation, or reduction of a partner's interest, see section 706(c)(2).” (B) Section 761 (relating to terms defined) is amended by adding at the end thereof the following: "(e) CROSS REFERENCE.— "For rules in the case of the sale, exchange, liquidation, or reduction of a partner's interest, see sections 704 (b) and 706(c)(2)." (d) DETERMINATION OF PARTNER'S DISTRIBUTIVE SHARE.-Subsection (b) of section 704 (relating to distributive share determined by income or loss ratio) is amended to read as follows: "(b) DETERMINATION OF DISTRIBUTIVE SHARE.-A partner's distributive share of income, gain, loss, deduction, or credit (or item thereof) shall be determined in accordance with the partner's interest in the partnership (determined by taking into account all facts and circumstances), if— "(1) the partnership agreement does not provide as to the partner's distributive share of income, gain, loss, deduction, or credit (or item thereof), or "(2) the allocation to a partner under the agreement of income, gain, loss, deduction, or credit (or item thereof) does not have substantial economic effect." (e) TREATMENT OF PARTNERSHIP LIABILITIES WITH RESPECT TO WHICH THE PARTNER IS NOT PERSONALLY LIABLE.-Section 704 (d) (relating to limitation on allowance of losses) is amended by adding at the end thereof the following new sentences: "For purposes of this subsection, the adjusted basis of any partner's interest in the partnership shall not include any portion of any partnership liability with respect to which the partner has no personal liability. The preceding sentence shall not apply with respect to any activity to the extent that section 465 (relating to limiting deductions to amounts at risk in case of certain activities) applies, nor shall it apply to any partnership the principal activity of which is investing in real property (other than mineral property). (f) EFFECTIVE DATES. (1) IN GENERAL.-Except as otherwise provided in this subsection, the amendments made by this section shall apply in the case of partnership taxable years beginning after December 31, 1975. (2) SUBSECTION (e).-The amendment made by subsection (e) shall apply to liabilities incurred after December 31, 1976. (3) SECTION 709 (b) oF THE CODE.-Section 709 (b) of the Internal Revenue Code of 1954 (as added by the amendment made by subsection (b)(1) of this section) shall apply in the case of amounts paid or incurred in taxable years beginning after December 31, 1976. SEC. 214. SCOPE OF WAIVER OF STATUTE OF LIMITATIONS IN CASE OF ACTIVITIES NOT ENGAGED IN FOR PROFIT. (a) IN GENERAL.-Subsection (e) of section 183 (relating to spe- 26 USC 183. cial rule for activities not engaged in for profit) is amended by adding at the end thereof the following new paragraph: "(4) TIME FOR ASSESSING DEFICIENCY ATTRIBUTABLE TO ACTIVITY. If a taxpayer makes an election under paragraph (1) with respect to an activity, the statutory period for the assessment of any deficiency attributable to such activity shall not expire before the expiration of 2 years after the date prescribed by law (determined without extensions) for filing the return of tax under chapter 1 for the last taxable year in the period of 5 taxable years (or 7 taxable years) to which the election relates. Such deficiency may be assessed notwithstanding the provisions of any law or rule of law which would otherwise prevent such an assessment.". (b) CROSS REFERENCE.-Paragraph (2) of section 6212 (c) (relating to restriction of further deficiency letters) is amended by adding at the end thereof the following new subparagraph: "(E) Deficiency attributable to activities not engaged in for profit, see section 183(e)(4).”. (c) EFFECTIVE DATE-The amendments made by this section shall apply with respect to taxable years beginning after December 31, 1969; except that such amendments shall not apply to any taxable year ending before the date of the enactment of this Act with respect to which the period for assessing a deficiency has expired before such date of enactment. TITLE III-MINIMUM TAX AND MAXIMUM SEC. 301. MINIMUM TAX. TAX Post, p. 1803. 26 USC 6212. Supra. (a) IN GENERAL.-Subsection (a) of section 56 (relating to mini- 26 USC 56. mum tax for tax preferences) is amended to read as follows: "(a) GENERAL RULE.-In addition to the other taxes imposed by this chapter, there is hereby imposed for each taxable year, with respect to the income of every person, a tax equal to 15 percent of the amount by which the sum of the items of tax preference exceeds the greater of "(1) $10,000, or "(2) the regular tax deduction for the taxable year (as determined under subsection (c))." (b) CONFORMING CHANGES. (1) Section 56(b) (relating to deferral of tax liability in case of certain net operating losses) is amended— (A) by striking out "$30,000" in paragraph (1) (B) and inserting in lieu thereof "$10,000", and (B) by striking out "10 percent" in paragraphs (1) and (2) and inserting in lieu thereof "15 percent". Post, p. 1550. 26 USC 56. Post, p. 1643. Post, p. 1563. 26 USC 57. (2) Section 56 (c) (relating to tax carryovers) is amended to read as follows: "(c) REGULAR TAX DEDUCTION DEFINED.-For purposes of this section, the term 'regular tax deduction' means an amount equal to onehalf of (or in the case of a corporation, an amount equal to) the taxes imposed by this chapter for the taxable year (computed without regard to this part and without regard to the taxes imposed by sections 72 (m) (5) (B), 402 (e), 408(f), 531, and 541), reduced by the sum of the credits allowable under "(1) section 33 (relating to foreign tax credit), "(2) section 37 (relating to credit for the elderly), "(3) section 38 (relating to investment credit), (4) section 40 (relating to expenses of work incentive program), 66 "(5) section 41 (relating to contributions to candidates for public office), "(6) section 42 (relating to general tax credit), 8 (7) section 44 (relating to purchase of new principal residence), and 66 (8) section 44A (relating to expenses for household and dependent care services necessary for gainful employment)." (c) ADDITIONAL TAX PREFERENCE ITEMS. (1) ADDITIONAL PREFERENCE ITEMS. (A) Section 57(a) (relating to items of tax preference) is amended by striking out paragraph (1) and inserting in lieu thereof the following: "(1) EXCESS ITEMIZED DEDUCTIONS.-An amount equal to the excess itemized deductions for the taxable year (as determined under subsection (b))." (B) Section 57 (a) (relating to items of tax preference) is amended by striking out the matter following paragraph (10) and inserting in lieu thereof the following: "(11) INTANGIBLE DRILLING COSTS.-The excess of the intangible drilling and development costs described in section 263 (c) paid or incurred in connection with oil and gas wells (other than costs incurred in drilling a nonproductive well) allowable under this chapter for the taxable year over the amount which would have been allowable for the taxable year if such costs had been capitalized and straight line recovery of intangibles (as defined in subsection (d)) had been used with respect to such costs. Paragraphs (1), (3), and (11) shall not apply to a corporation." (C) Section 57(a) (3) (relating to accelerated depreciation on personal property subject to a net lease) is amended to read as follows: "(3) ACCELERATED DEPRECIATION ON LEASED PERSONAL PROPERTY. With respect to each item of section 1245 property (as defined in section 1245 (a) (3)) which is subject to a lease, the amount by which "(A) the deduction allowable for the taxable year for depreciation or amortization, exceeds "(B) the deduction which would have been allowable for the taxable year had the taxpayer depreciated the property under the straight-line method for each taxable year of its useful life for which the taxpayer has held the property. For purposes of subparagraph (B), useful life shall be determined as if section 167 (m) (1) (relating to asset depreciation range) did not include the last sentence thereof." amended to s of this secqual to onezo) the taxes thout regard by sections the sum of rk incentive ndidates for rincipal resi ousehold and yment)." x preference) d inserting in equal to the is determined x preference) ng paragraph the intangible 63 (c) paid or her than costs ole under this h would have had been cap(as defined in costs. poration." ited depreciae) is amended RSONAL PROP property (as o a lease, the able year for allowable for I the property ole year of its e property. be determined ciation range) PUBLIC LAW 94-455-OCT. 4, 1976 (2) EXCESS ITEMIZED DEDUCTIONS DEFINED.-Section 57(b) is amended to read as follows: "(b) EXCESS ITEMIZED DEDUCTIONS.— "(1) IN GENERAL.-For purposes of paragraph (1) of subsection (a), the amount of the excess itemized deductions for any taxable year is the amount by which the sum of the deductions for the taxable year other than "(A) deductions allowable in arriving at adjusted gross "(B) the standard deduction provided by section 141, "(D) the deduction for medical, dental, etc., expenses pro- "(E) the deduction for casualty losses described in section exceeds 60 percent (but does not exceed 100 percent) of the tax- '(2) SPECIAL RULE FOR TRUSTS AND ESTATES.-In the case of a "(A) under section 642 (c) (but only to the extent that the amount of the deduction allowable under such section is included in the income of the beneficiary under section 662 (a) (1) for the taxable year of the beneficiary with which or within which the taxable year of the trust ends); "(B) under section 642 (d), 642 (e), 642 (f), 651 (a), 661 (a), or 691; or "(C) for costs paid or incurred in connection with the shall, for purposes of paragraph (1), be treated as a deduction (3) STRAIGHT LINE RECOVERY OF INTANGIBLES DEFINED.-Section "(d) STRAIGHT LINE RECOVERY OF INTANGIBLES DEFINED.-For purposes of paragraph (11) of subsection (a) "(1) IN GENERAL.-The term 'straight line recovery of intangi- "(2) ELECTION.-If the taxpayer elects, at such time and in (A) PREFERENCE REDUCTION FOR TIMBER.-Section 57 (a) "(C) PREFERENCE REDUCTION FOR TIMBER.-In the case of a corporation, the amount of the tax preference under sub 90 STAT. 1551 26 USC 57. Ante, p. 1550. 90 STAT. 1552 26 USC 56. Ante, p. 1550. Ante, p. 1551. Post, p. 1643. 26 USC 57. PUBLIC LAW 94-455-OCT. 4, 1976 paragraph (B) shall be reduced (but not below zero) sum of "(i) one-third of the corporation's timber pre income (as defined in subsection (e)), plus "(ii) $20,000, but in no event shall this reduction exceed the am (B) REGULAR TAX DEDUCTION ADJUSTMENTS FOR TI Section 56 is amended by adding at the end thereof lowing new subsections: "(d) REGULAR TAX DEDUCTION ADJUSTMENT FOR TIMBER.— case of a corporation, the regular tax deduction (as determined subsection (c)) shall be reduced by an amount equal to the less "(1) one-third of the amount determined under subsect without regard to this subsection, or "(2) the preference reduction for timber determined section 57 (a) (9) (C). "(e) TAX CARRYOVER FOR TIMBER.— "(1) IN GENERAL.-In the case of a corporation, if for a able year, including a taxable year beginning before Janu 1976 "(A) the taxes imposed by this chapter (computed out regard to this part and without regard to the tax in by section 531) which, under regulations prescribed Secretary, are attributable to income from timber, r by the sum of the credits allowable under "(i) section 33 (relating to foreign tax credit), "(ii) section 38 (relating to investment credit "(iii) section 40 (relating to expenses of work tive programs), exceed "(B) the items of tax preference (as determined section 57), then the excess of the taxes described in subparagraph (A the items of tax preference shall be a tax carryover to each 7 taxable years following such year. The entire amount excess shall be carried to the first of such 7 taxable years, an to each of the other such taxable years to the extent tha excess is not used to reduce the amount subject to tax unde section (a) for a prior taxable year to which such excess n carried. "(2) LIMITATION.-The amount of any carryover under graph (1) which may be deducted in a taxable year sh limited to "(A) the excess of "(i) the amount of timber preference income f taxable year (as defined in section 57 (e)), over "(ii) the amount determined under sectio (a) (9) (C) for the taxable year, (B) reduced by the excess of "(i) the regular tax deduction for the taxable (as determined under subsection (c) without rega this subsection), over "(ii) the amount determined under subsection (d the taxable year." (C) TIMBER PREFERENCE INCOME DEFINED.-Section amended by adding at the end thereof the following subsection: Sec. 301(c)(4)(B) 28 |