Taxable Years Beginning in 1946 and 1947 respect to any prior taxable year (ending on or after December 7, 1941) during any part of which he was a member of such forces; and Sec. 421. (b) the tax under this chapter and under the corresponding title of each prior revenue law for taxable years preceding those specified in clause (A) which is unpaid at the date of his death (including interest, additions to the tax, and additional amounts) shall not be assessed, and if assessed the assessment shall be abated, and if collected shall be credited or refunded as an overpayment. Sec. 421 as shown in 1944 Sec. 421 as shown in 1944 15 Credits and refunds growing out of Sec. 421 (a), I. R. C. Sec. 2, Act of Aug. 5, 1947 (61 Stat. 778) reads as follows: "If at any time prior to January 1, 1948, the allowance of a credit or refund of an overpayment of the tax for any taxable year specified in section 421 (a) of the Internal Revenue Code (as amended by this Act) is prevented (except for the provisions of section 3801) by the operation of any law or rule of law, a credit or refund of the overpayment of such tax to the extent that the overpayment is attributable to the change in law made by this Act may, nevertheless, be allowed or made if a claim therefor is filed before January 1, 1949." Taxable Years Beginning in 1945 Taxable Years Beginning in 1944 falls the date of his death, and the tax under this chapter and under the corresponding title of each prior revenue law for preceding taxable years which is unpaid at the date of his death (including interest, additions to the tax, and additional amounts) shall not be assessed, and if assessed the assessment shall be abated, and if collected shall be credited or refunded as an overpayment. Taxable Years Beginning before 1944 Taxable Years Beginning in 1944 to 1949, Inclusive SUPPLEMENT P-FOREIGN PERSONAL HOLDING COMPANIES Sec. 331. Definition of foreign personal holding company. Sec. 331. (a) General rule.-For the purposes of this chapter the term "foreign personal holding company" means any foreign corporation if Sec. 331. (a) (1) Gross income requirement.— At least 60 per centum of its gross income (as defined in section 334 (a)) for the taxable year is foreign personal holding company income as defined in section 332; but if the corporation is a foreign personal holding company with respect to any taxable year ending after August 26, 1937, then, for each subsequent taxable year, the minimum percentage shall be 50 per centum in lieu of 60 per centum, until a taxable year during the whole of which the stock ownership required by paragraph (2) does not exist, or until the expiration of three consecutive taxable years in each of which less than 50 per centum of the gross income is foreign personal holding company income. For the purposes of this paragraph there shall be included in the gross income the amount includible therein as a dividend by reason of the application of section 334 (c) (2); and Sec. 331. (a) (2) Stock ownership requirement. -At any time during the taxable year more than 50 per centum in value of its outstanding stock is owned, directly or indirectly, by or for not more than five individuals who are citizens or residents of the United States, hereinafter called "United States group." Sec. 331. (b) Exceptions.-The term "foreign personal holding company" does not include a corporation exempt from taxation under section 101. Section 331, supra, originated 1937 as Sec. 331, For any amendments prior to 1944, see Eighth Edition, p. 410, Sec. 332. Foreign personal holding company income. For the purposes of this chapter the term "foreign personal holding company income" means the portion, of the gross income determined for the purposes of section 331 (a) (1), which consists of: Sec. 332. (a) Dividends, interest, royalties, annuities. Sec. 332. (b) Stock and securities transactions. -Except in the case of regular dealers in stock or securities, gains from the sale or exchange of stock or securities. Sec. 332. (c) Commodities transactions.-Gains from future transactions in any commodity or subject to the rules of a board of trade or commodity exchange. This subsection shall not apply to gains by a producer, processor, merchant, or handler of the commodity which arise out of bona fide hedging transactions reasonably necessary to the conduct of its business in the manner in which such business is customarily and usually conducted by others. Sec. 332. (d) Estates and trusts.-Amounts includible in computing the net income of the corporation under Supplement E; and gains from the sale or other disposition of any interest in an estate or trust. Sec. 332. (e) Personal service contracts.—(1) Amounts received under a contract under which the corporation is to furnish personal services; if some person other than the corporation has the right to designate (by name or by description) the individual who is to perform the services, or if the individual who is to perform the services is designated (by name or by description) in the contract and (2) amounts received from the sale or other disposition of such a contract. This subsection shall apply with respect to amounts received for services under a particular contract only if at some time during the taxable year 25 per centum or more in value of the outstanding stock of the corporation is owned, directly or indirectly, by or for the individual who has performed, is to perform, or may be designated (by name or by description) as the one to perform such services. Sec. 332. (f) Use of corporation property by shareholder.-Amounts received as compensation (however designated and from whomsoever received) for the use of, or right to use, property of the corporation in any case where, at any time during the taxable year, 25 per centum or more in value of the outstanding stock of the corporation is owned, directly or indirectly, by or for an individual entitled to the use of the property; whether such right is obtained directly from the corporation or by means of a sublease or other arrangement. Sec. 332. (g) Rents.-Rents, unless constituting 50 per centum or more of the gross income. For the purposes of this subsection the term "rents," means compensation, however designated, for the use of, or right to use, property; but does not include amounts constituting foreign personal holding company income under subsection (f). Section 332, supra, originated 1937 as Sec. 332, For any amendments prior to 1944, see- Sec. 333. Stock ownership. Sec. 333. (a) Constructive ownership.-For the purpose of determining whether a foreign corporation is a foreign personal holding company, insofar as such determination is based on stock ownership under section 331 (a) (2), section 332 (e), or seetion 332 (f) Sec. 333. (a) (1) Stock not owned by individual.-Stock owned, directly or indirectly, by or for Taxable Years Beginning in 1944 to 1949, Inclusive a corporation, partnership, estate, or trust shall be considered as being owned proportionately by its shareholders, partners, or beneficiaries. Sec. 333. (a) (2) Family and partnership ownership. An individual shall be considered as owning the stock owned, directly or indirectly, by or for his family or by or for his partner. For the purposes of this paragraph the family of an individual includes only his brothers and sisters (whether by the whole or half blood), spouse, ancestors, and lineal descendants. Sec. 333. (a) (3) Options.-If any person has an option to acquire stock such stock shall be considered as owned by such person. For the purposes of this paragraph an option to acquire such an option, and each one of a series of such options, shall be considered as an option to acquire such stock. Sec. 333. (a) (4) Application of family-partnership and option rules.-Paragraphs (2) and (3) shall be applied (A) For the purposes of the stock ownership requirement provided in section 331 (a) (2), if, but only if, the effect is to make the corporation a foreign personal holding company; (B) For the purposes of section 332 (e) (relating to personal service contracts), or of section 332 (f) (relating to the use of property by shareholders), if, but only if, the effect is to make the amounts therein referred to includible under such subsection as foreign personal holding company income. Sec. 333. (a) (5) Constructive ownership as actual ownership.-Stock constructively owned by a person by reason of the application of paragraph (1) or (3) shall, for the purpose of applying paragraph (1) or (2), be treated as actually owned by such person; but stock constructively owned by an individual by reason of the application of paragraph (2) shall not be treated as owned by him for the purpose of again applying such paragraph in order to make another the constructive owner of such stock. Sec. 333. (a) (6) Option rule in lieu of family and partnership rule.-If stock may be considered as owned by an individual under either paragraph (2) or (3) it shall be considered as owned by him under paragraph (3). Sec. 333. (b) Convertible securities.—Outstanding securities convertible into stock (whether or not convertible during the taxable year) shall be considered as outstanding stock Sec. 333. (b) (1) For the purpose of the stock ownership requirement provided in section 331 (a) (2), but only if the effect of the inclusion of all such securities is to make the corporation a foreign personal holding company; Sec. 333. (b) (2) For the purpose of section 332 (e) (relating to personal service contracts), but only if the effect of the inclusion of all such securities is to make the amounts therein referred to in cludible under such subsection as foreign personal holding company income; and Sec. 333. (b) (3) For the purpose of section 332 (f) (relating to the use of property by shareholders), but only if the effect of the inclusion of all such securities is to make the amounts therein referred to includible under such subsection as foreign personal holding company income. The requirement in paragraphs (1), (2), and (3) that all convertible securities must be included if any are to be included shall be subject to the exception that, where some of the outstanding securities are convertible only after a later date than in the case of others, the class having the earlier conversion date may be included although the others are not included, but no convertible securities shall be included unless all outstanding securities having a prior conversion date are also included. Section 333, supra, originated 1937 as Sec. 333, For any amendments prior to 1944, see- Edition, p. 588. Sec. 334. Gross income of foreign personal holding companies. Sec. 334. (a) General rule.-As used in this Supplement with respect to a foreign corporation the term "gross income" means gross income computed (without regard to the provisions of Supplement I) as if the foreign corporation were a domestic corporation. Sec. 334. (b) Additions to gross income.-In the case of a foreign personal holding company (whether or not a United States group, as defined in section 331 (a) (2), existed with respect to such company on the last day of its taxable year) which was a shareholder in another foreign personal holding company on the day in the taxable year (whether beginning before, on, or after January 1, 1939) of the second company which was the last day on which a United States group existed with respect to the second company, there shall be included, as a dividend, in the gross income of the first company, for the taxable year in which or with which the taxable year of the second company ends, the amount the first company would have received as a dividend if on such last day there had been distributed by the second company, and received by the shareholders, an amount which bears the same ratio to the undistributed Supplement P net income of the second company for its taxable year as the portion of such taxable year up to and including such last day bears to the entire taxable year. Sec. 334. (c) Application of subsection (b).The rule provided in subsection (b) Sec. 334. (c) (1) shall be applied in the case of a foreign personal holding company for the purpose of determining its undistributed Supplement P net income which, or a part of which, is to be included in the gross income of its shareholders, whether Taxable Years Beginning in 1944 to 1949, Inclusive United States shareholders or other foreign personal holding companies; Sec. 334. (c) (2) shall be applied in the case of every foreign corporation with respect to which a United States group exists on some day of its taxable year, for the purpose of determining whether such corporation meets the gross income requirements of section 331 (a) (1). Section 334, supra, originated 1937 as Sec. 334, For any amendments prior to 1944, see Eighth Edition, p. 412, Sec. 335. Undistributed Supplement P net in come. For the purposes of this chapter the term "undistributed Supplement P net income" means the Supplement P net income (as defined in section 336) minus the amount of the basic surtax credit proIvided in section 27 (b) (computed without its reduction, under section 27 (b) (1), by the amount of the credit provided in section 26 (a), relating to interest on certain obligations of the United States and Government corporations). Section 335, supra, originated 1937 as Sec. 335, For any amendments prior to 1944, see- Ninth Edition, p. 594. Sec. 336. Supplement P net income. For the purposes of this chapter the term "Supplement P net income" means the net income with the following adjustments: Sec. 336. (a) Additional deductions.-There shall be allowed as deductions Sec. 336. (a) (1) Federal income war-profits, and excess-profits taxes paid or accrued during the taxable year to the extent not allowed as a deduction under section 23; but not including the tax imposed by section 102, section 500, or a section of a prior income-tax law corresponding to either of such sections. Sec. 336. (a) (2) In lieu of the deduction allowed by section 23 (q), contributions or gifts payment of which is made within the taxable year to or for the use of donees described in section 23 (q) for the purposes therein specified, to an amount which does not exceed 15 per centum of the company's net income, computed without the benefit of this paragraph and section 23 (q), and without the deduction of the amount disallowed under subsection (b) of this section, and without the inclusion in gross income of the amounts includible therein as dividends by reason of the application of the provisions of section 334 (b) (relating to the inclusion in the gross income of a foreign personal holding company of its distributive share of the undistributed Supplement P net income of another foreign personal holding company in which it is a shareholder). For the purposes of the preceding sentence, payment of any contribution or gift shall be considered as made within the taxable year if and only if it is considered for the purposes of section 23 (q) as made within such year. Sec. 336 (a), I. R. C., supra, amended by Sec. 3 (b), H. R. 5268, Act of Oct. 25, 1949, by adding language in italics. Retroactivity Sec. 3 (c) of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1942. See fn. 6a following Sec. 102 (d) (1) (B), I. R. C., supra, with reference to applicability of amendment in case of election. Sec. 336. (b) Deductions not allowed.— Sec. 336. (b) (1) Taxes and pension trusts.-The deductions provided in section 23 (d), relating to taxes of a shareholder paid by the corporation, and in section 23 (p), relating to pension trusts, shall not be allowed. Sec. 336. (b) (2) Expenses and depreciation.— The aggregate of the deductions allowed under section 23 (a), relating to expenses, and section 23 (1), relating to depreciation, which are allocable to the operation and maintenance of property owned or operated by the company, shall be allowed only in an amount equal to the rent or other compensation received for the use or right to use the property, unless it is established (under regulations prescribed by the Commissioner with the approval of the Secretary) to the satisfaction of the Commissioner: (A) That the rent or other compensation received was the highest obtainable, or, if none was received, that none was obtainable; (B) That the property was held in the course of a business carried on bona fide for profit; and (C) Either that there was reasonable expectation that the operation of the property would result in a profit, or that the property was necessary to the conduct of the business. Sec. 336. (b) (3) Net loss carry-over disallowed. -The deduction for net operating losses provided in section 23 (s) shall not be allowed. Sec. 336. (c) 1941 capital loss carry-over denied.—The net income shall be computed without regard to section 117 (e) (2). Sec. 336. (d) Income not placed on annual basis.-The net income shall be computed without regard to section 47 (c). Section 336, supra, originated 1937 as Sec. 336, For any amendments prior to 1944, see Eighth Elition, p. 414, Sec. 337. Corporation income taxed to United States shareholders. Sec. 337 (a) General rule.-The undistributed Supplement P net income of a foreign personal holding company shall be included in the gross income of the citizens or residents of the United States, domestic corporations, domestic partnerships, and estates or trusts (other than estates or trusts the gross |