production of the property, such shareholder (i) owned (or was considered as owning) more than 10 per centum in value of the outstanding stock of the corporation, or (ii) owned stock which was considered as owned at such time by another shareholder who then owned (or was considered as owning) more than 10 per centum in value of the outstanding stock of the corporation;

"(B) this subsection shall not apply to the gain recognized during a taxable year unless more than 70 per centum of such gain is attributable to the property so manufactured, constructed, or produced; and

"(C) this subsection shall not apply to gain realized after the expiration of three years following the completion of such manufacture, construction, or production.

For purposes of subparagraph (A), the ownership of stock shall be determined in accordance with the rules prescribed by paragraphs (1), (2), (3), (5), and (6) of section 503 (a), except that, In addition to the persons prescribed by paragraph (2) of that section, the family of an individual shall include the spouses of that individual's brothers and sisters (whether by the whole or half blood) and the spouses of that individual's lineal descendants."

Sec. 212(b) provides that the amendment
shall be applicable to taxable years
ending after December 31, 1949, but shall
apply only with respect to gain realized
after such date. The determination of the
tax treatment of gains realized prior to
January 1, 1950, shall be made as if this
section had not been enacted and without
inferences drawn from the fact that the
amendment made by this section is not
expressly made applicable to gains realized
prior to such date and without inferences
drawn from the limitations contained in
section 117 (m), added to the Internal
Revenue Code by this section.

SECTION 120- AMENDED.

Sec. 208(d)(6), Social Security Act Amendments of 1950, amended Sec. 120, IRC, by inserting immediately after the words "amount of income" the following:

"(determined without regard to subchapter E, relating to tax on self-employment income)".

SECTION 122(b) - AMENDED.

Sec. 215 (a), RA of 1950, amended Sec. 122(b), IRC, to read as follows:

"(b) AMOUNT OF CARRY-BACK AND CARRY-OVER.— "(1) NET OPERATING LOSS CARRY-BACK.—

"(A) Loss for Taxable Year Beginning Before 1950.-If for any taxable year beginning after December 31, 1941, and before January 1, 1950, the taxpayer has a net operating loss, such net operating loss shall be a net operating loss carryback for each of the two preceding taxable years, except that the carry-back in the case of the first preceding taxable year shall be the excess, if any, of the amount of such net operating loss over the net income for the second preceding taxable year computed

"(i) with the exceptions, additions, and limitations provided in subsection (d) (1), (2), (4), and (6), and "(ii) by determining the net operating loss deduction for such second preceding taxable year without regard to such net operating loss and, without regard to any reduction specified in subsection (c).

"(B) Loss for Taxable Year Beginning After 1949.-If for any taxable year beginning after December 31, 1949, the taxpayer has a net operating loss, such net operating loss shall be a net operating loss carry-back for the preceding taxable

year.

"(2) NET OPERATING LOSS CARRY-OVER.

"(A) Loss for Taxable Year Beginning Before 1950.-If for any taxable year beginning before January 1, 1950, the taxpayer has a net operating loss, such net operating loss shall be a net operating loss carry-over for each of the two succeeding taxable years, except that the carry-over in the case of the second succeeding taxable year shall be the excess, if any, of the amount of such net operating loss over the net income for the intervening taxable year computed

"(i) with the exceptions, additions, and limitationsprovided in subsection (d) (1), (2), (4), and (6), and "(ii) by determining the net operating loss deduction for such intervening taxable year without regard to such net operating loss, without regard to any net operating loss carry-back, and without regard to any reduction specified in subsection (c).

For the purposes of the preceding sentence, the net operating loss for any taxable year beginning after December 31, 1941, shall be reduced by the sum of the net income for each of the two preceding taxable years computed

"(iii) with the exceptions, additions, and limitations provided in subsection (d) (1), (2), (4), and (6), and

"(iv) by determining the net operating loss deduction without regard to such net operating loss or to the net operating loss for the succeeding taxable year, and without regard to any reduction specified in subsection (c). "(B) Loss for Taxable Year Beginning After 1949.-If for any taxable year beginning after December 31, 1949, the taxpayer has a net operating loss, such net operating loss shall be a net operating loss carry-over for each of the five succeeding taxable years, except that the carry-over in the case of

TAX LAWS

1950 POCKET SUPPLEMENT

35

each such succeeding taxable year (other than the first succeeding taxable year) shall be the excess, if any, of the amount of such net operating loss over the sum of the net income for each of the intervening years computed

"(i) with the exceptions, additions, and limitations provided in subsection (d) (1), (2), (4), and (6), and "(ii) by determining the net operating loss deduction for each intervening taxable year, without regard to such net operating loss or to the net operating loss for any succeeding taxable year and without regard to any reduction specified in subsection (c).

For the purpose of the preceding sentence, the net operating loss for any taxable year beginning after December 31, 1949, shall be reduced by the amount, if any, of the net income for the preceding taxable year computed

"(i) with the exceptions, additions, and limitations provided in subsection (d) (1), (2), (4), and (6), and "(ii) by determining the net operating loss deduction for such preceding taxable year without regard to such net operating loss and without regard to any reduction specified in subsection (c)."

Sec. 215(b), RA of 1950, makes amendment applicable in computing the net-operatingloss deduction for taxable years beginning after Dec. 31, 1947.

SECTION 122(c) - AMENDED.

Sec. 121(g)(2), RA of 1950, amended Sec. 122(c), IRC, by striking out

"without the credit provided in section 26(e)"

and inserting in lieu thereof

"without the credits provided in section 26 (h) and (i)".

Sec. 123, RA of 1950, makes amendment, applicable to taxable years ending after Dec. 31, 1949. But see Sec. 131, post.

Sec. 304(e), Excess Profits Tax Act of 1950, provided that Sec. 122(d)(6), IRC, shall not apply with respect to any taxable year ending after June 30, 1950.

Sec. 216(a), RA of 1950, amends Chapter 1, IRC, by inserting the following:

"SEC. 124A. AMORTIZATION DEDUCTION.

"(a) GENERAL RULE.-Every person, at his election, shall be entitled to a deduction with respect to the amortization of the adjusted basis (for determining gain) of any emergency facility (as defined in subsection (d)), based on a period of sixty months. Such amortization deduction shall be an amount, with respect to each month of such period within the taxable year, equal to the adjusted basis of the facility at the end of such month divided by the number of months (including the month for which the deduction is computed) remaining in the period. Such adjusted basis at the end of the month shall be computed without regard to the amortization deduction for such month. The amortization deduction above provided with respect to any month shall, except to the extent provided in subsection (f) of this section, be in lieu of the deduction with respect to such facility for such month provided by section 23 (1), relating to exhaustion, wear and tear, and obsolescence. The sixty-month period shall begin as to any emergency facility, at the election of the taxpayer, with the month following the month in which the facility was completed or acquired, or with the succeeding taxable year.

(b) ELECTION OF AMORTIZATION.-The election of the taxpayer to take the amortization deduction and to begin the sixty-month period with the month following the month in which the facility was completed or acquired, or with the taxable year succeeding the taxable year in which such facility was completed or acquired, shall be made by filing with the Secretary, in such manner, in such form, and within such time, as the Secretary may by regulations prescribe, a statement of such election.

"(c) TERMINATION OF AMORTIZATION DEDUCTION.--A taxpayer which has elected under subsection (b) to take the amortization deduction provided in subsection (a) may, at any time after making

such election, discontinue the amortization deductions with respect to the remainder of the amortization period, such discontinuance to begin as of the beginning of any month specified by the taxpayer in a notice in writing filed with the Secretary before the beginning of such month. The deduction provided under section 23 (I) shall be allowed, beginning with the first month as to which the amortization deduction is not applicable, and the taxpayer shall not be entitled to any further amortization deductions with respect to such emergency facility.

"(d) DEFINITIONS.

"(1) EMERGENCY FACILITY.-As used in this section, the term 'emergency facility' means any facility, land, building, machinery, or equipment, or any part thereof, the construction, reconstruction, erection, installation, or acquisition of which was completed after December 31, 1949, and with respect to which a certificate under subsection (e) has been made. În no event shall an amortization deduction be allowed in respect of any emergency facility for any taxable year unless a certificate in respect thereof under this paragraph shall have been made prior to the filing of the taxpayer's return for such taxable year, or, in the case of an emergency facility completed or acquired by a taxpayer after December 31, 1949, and before the date of enactment of the Revenue Act of 1950, unless a certificate in respect thereof under this paragraph shall have been made prior to the expiration of twelve months after the date of enactment of the Revenue Act of 1950.

"(2) EMERGENCY PERIOD.-As used in this section, the term 'emergency period' means the period beginning January 1, 1950, and ending on the date on which the President proclaims that the utilization of a substantial portion of the emergency facilities with respect to which certifications under subsection (e) have be made is no longer required in the interest of national defense. "(e) DETERMINATION OF ADJUSTED BASIS OF EMERGENCY FACILITY.— In determining, for the purposes of subsection (a) or subsection (g), the adjusted basis of an emergency facility

"(1) There shall be included only so much of the amount of the adjusted basis of such facility (computed without regard to this section) as is properly attributable to such construction, reconstruction, erection, installation, or acquisition after December 31, 1949, as the certifying authority, designated by the President by Executive order, has certified as necessary in the interest of national defense during the emergency period, and only such portion of such amount as such authority has certified as attributable to defense purposes. Such certification shall be under such regulations as may be prescribed from time to time by such certifying authority with the approval of the President. An application for a certificate must be filed at such time and in such manner as may be prescribed by such certifying authority under such regulations but in no event shall such certificate have any effect unless an application therefor is filed before the expiration of six months after the beginning of such construction, reconstruction, erection, or installation or the date of such acquisition, or before the expiration of six months after the date of enactment of the Revenue Act of 1950, whichever is later.