"(2) TAXABLE YEAR OF CHANGE OF RESIDENCE FROM PUERTO RICO. In the case of an individual citizen of the United States, who has been a bona fide resident of Puerto Rico for a period of at least two years before the date on which he changes his residence from Puerto Rico, income derived from sources therein (except amounts received for services performed as an employee of the United States or any agency thereof) which is attributable to that part of such period of Puerto Rican residence before such date; but such individual shall not be allowed as a deduction from his gross income any deductions properly allocable to or chargeable against amounts excluded from gross income under this paragraph." Sec. 210(a), RA of 1950, amended Sec. 117(a)(1), IRC, to read as follows: "(1) CAPITAL ASSETS.-The term 'capital assets' means property held by the taxpayer (whether or not connected with his trade or business), but does not include "(A) stock in trade of the taxpayer or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business; "(B) property, used in his trade or business, of a character which is subject to the allowance for depreciation provided in section 23 (1), or real property used in his trade or business; "(C) a copyright; a literary, musical, or artistic composition; or similar property; held by "(i) a taxpayer whose personal efforts created such property, or "(ii) taxpayer in whose hands the basis of such property is determined, for the purpose of determining gain from a sale or exchange, in whole or in part by reference to the basis of such property in the hands of the person whose personal efforts created such property; or "(D) an obligation of the United States or any of its possessions, or of a State or Territory, or any political subdivision thereof, or of the District of Columbia, issued on or after March 1, 1941, on a discount basis and payable without interest at a fixed maturity date not exceeding one year from the date of issue." AX LAWS 1950 POCKET SUPPLEMENT 29 CE FROM PUERTO e United States for a period of st ges his residence therein (except employee of the attributable to ence before such deduction from ble to or charge come under this endment ng after Sec. 210(c), RA of 1950, makes amendment applicable to taxable years beginning after Sept. 23, 1950. SECTION 117(c)(1) -- AMENDED. Sec. 301 (c) (2), RA of 1950, amended Sec. 117 (c)(1), IRC, by inserting "421" before "and 500". Sec. 303, RA of 1950, makes amendment applicable to taxable years beginning after Dec. 31, 1950. Sec. 301(c)(3), RA of 1950, amended Sec. 117(c)(2), IRC, by inserting after "sections 11 and 12" the following: "(or, Sec. 303, RA of 1950, makes amendment applicable to taxable years beginning after Dec. 31, 1950. SECTION 117(g) (3) - NEW. Sec. 216(c), RA of 1950, amended Sec. 117(g), IRC, by striking out the period at the end of paragraph (2) thereof and inserting in lieu thereof "; and" and by inserting after paragraph (2) the following: "(3) gain from the sale or exchange of property, to the extent that the adjusted basis of such property is less than its adjusted basis determined without regard to section 124A (relating to amortization deduction), shall be considered as gain from the sale or exchange of property which is neither a capital asset nor property described in subsection (j)." Sec. 210(b), RA of 1950, amended Sec. 117(j) (1), IRC, by inserting before the period at the end of the first sentence the following: ", or (Č) a copyright, a literary, musical, or artistic composition, or similar property, held by a taxpayer described in subsection (a) (1) (C)”. Sec. 210(c), RA of 1950, makes amendment applicable to taxable years beginning after Sept. 23, 1950. SECTION 117(1) - NEW. Sec. 211(a), RA of 1950, amended Sec. 117, IRC, by adding at the end thereof the following: "(1) SHORT SALES, ETC.-In the case of a short sale of property made by the taxpayer after the date of the enactment of the Revenue Act of 1950: "(1) SHORT-TERM GAINS AND HOLDING PERIODS.-If substantially identical property has been held by the taxpayer on the date of such short sale for not more than 6 months (determined without regard to the effect, under subparagraph (B) of this paragraph, of such short sale on the holding period), or if substantially identical property is acquired by the taxpayer after such short sale and on or before the date of the closing thereof "(A) any gain upon the closing of such short sale shall be considered as a gain upon the sale or exchange of a capital asset held for not more than 6 months (notwithstanding the period of time any property used to close such short sale has been held); and "(B) the holding period of such substantially identical property shall be considered to begin (notwithstanding the provisions of subsection (h)) on the date of the closing of the short sale, or on the date of a sale, gift, or other disposition of such property, whichever date occurs first. This WS 1950 POCKET SUPPLEMENT 31 ment r (j) (1), musical.or er described ment fter IRC, of property the Revenue substantiall n the date of ined without is paragraph antially ider ich short sale ort sale shall ze of a capital hstanding the short sale has ially identical hstanding the the closing of other dispos rs first. This subparagraph shall apply to such substantially identical property in the order of the dates of the acquisition of such property, but only to so much of such property as does not exceed the quantity sold short. For the purposes of this paragraph, the acquisition of an option to sell property at a fixed price shall be considered as a short sale, and the exercise or failure to exercise such option shall be considered as a closing of such short sale. "(2) LONG-TERM LOSSES.-If substantially identical property has been held by the taxpayer on the date of such short sale for more than 6 months, any loss upon the closing of such short sale shall be considered as a loss upon the sale or exchange of a capital asset held for more than 6 months (notwithstanding the period of time any property used to close such short sale has been held, and notwithstanding the provisions of subsection (g) (2)). (3) RULES FOR APPLICATION OF SUBSECTION. "(A) The provisions of paragraph (1) (A) or (2) shall not apply to the gain or loss, respectively, on any quantity of property used to close such short sale which is in excess of the quantity of the substantially identical property referred to in the applicable paragraph. "(B) For the purposes of this subsection "(i) the term 'property' includes only stocks and securities (including stocks and securities dealt with on a 'when issued' basis), and commodity futures, which are capital assets in the hands of the taxpayer; "(ii) in the case of futures transactions in any commodity on or subject to the rules of a board of trade or commodity exchange, a commodity future requiring delivery in one calendar month shall not be considered as property substantially identical to another commodity future requiring delivery in a different calendar month; and "(iii) in the case of a short sale of property by an individual, the term 'taxpayer', in the application of this paragraph and paragraphs (1) and (2), shall be read as 'taxpayer or his spouse'; but an individual who is legally separated from the taxpayer under a decree of divorce or of separate maintenance shall not be considered as the spouse of the taxpayer. "(C) Where the taxpayer enters into two commodity futures transactions on the same day, one requiring delivery by him in one market and the other requiring delivery to to him of the same (or substantially identical) commodity in the same calendar month in a different market, and the taxpayer subsequently closes both such transactions on the same day, this subsection shall have no application to so much of the commodity involved in either such transaction as does not exceed in quantity the commodity involved in the other." Sec. 212(a), RA of 1950, amended Sec. 117, IRC, by adding after subsection (1) the following: "(m) COLLAPSIBLE CORPORATIONS.— "(1) TREATMENT OF GAIN TO SHAREHOLDERS.-Gain from the sale or exchange (whether in liquidation or otherwise) of stock of a collapsible corporation, to the extent that it would be considered (but for the provisions of this subsection) as gain from the sale or exchange of a capital asset held for more than 6 months, shall, except as provided in paragraph (3), be considered as gain from the sale or exchange of property which is not a capital asset. "(2) DEFINITIONS. "(A) For the purposes of this subsection, the term 'collapsible corporation' means a corporation formed or availed of principally for the manufacture, construction, or production of property, or for the holding of stock in a corporation so formed or availed of, with a view to "(i) the sale or exchange of stock by its shareholders (whether in liquidation or otherwise), or a distribution to its shareholders, prior to the realization by the corporation manufacturing, constructing, or producing the property of a substantial part of the net income to be derived from such property, and "(ii) the realization by such shareholders of gain attributable to such property. "(B) For the purposes of subparagraph (A), a corporation shall be deemed to have manufactured, constructed, or produced property, if— "(i) it engaged in the manufacture, construction, or production of such property to any extent, "(ii) it holds property having a basis determined, in whole or in part, by reference to the cost of such property in the hands of a person who manufactured, constructed, or produced the property, or "(iii) it holds property having a basis determined, in whole or in part, by reference to the cost of property manufactured, constructed, or produced by the corporation. "(3) LIMITATIONS ON APPLICATION OF SUBSECTION.-In the case of gain realized by a shareholder upon his stock in a collapsible corporation "(A) this subsection shall not apply unless, at any time after the commencement of the manufacture, construction, or |