,i  #aai? ,,congress  #a/ ,session  ,h4 
,r4 #bfba  ,,9 ,,! ,,h\se ,,(           
,,repres5tatives  ,april #c1 #bjbe,mr4  
,coh5 7= himself & ,mr4 ,c>son7         
introduc$ ! foll[+ bill2 :i* 0 ref]r$ to
 ! ,committee on ,ways & ,means  ,a     
,,bill  ,to am5d ! ,int]nal ,rev5ue     
,code ( #aihf to e/abli% d$uctions = ca%
 tips1 repeal ! inclusion ( social      
security b5efits 9 gross income1 & = o!r
 purposes4  #a4 ,%ort title2 ,etc  7a7  
,%ort title ,?is ,act may be cit$ z !   
,rew>d ,ea* ,am]ican's ,labor ,& ,make  
,e ,ri* ,individual ,contribute ,aga9   
,act or ! ,,real ,,am]ica ,act4  7b7    
,am5dm5t ( #aihf ,code ,except z o!rwise
 expressly provid$1 :5ev] 9 ?is ,act an 
am5dm5t or repeal is express$ 9 t]ms (  
an am5dm5t to1 or repeal (1 a section or
 o!r provision1 ! ref]5ce %all be       
consid]$ to be made to a section or o!r 
provision ( ! ,int]nal ,rev5ue ,code (  
#aihf4  #b4 ,d$uction = ca% tips  7a7   
,d$uction all[$  7#a7 ,9 g5]al ,"p ,,vii
 ( sub*apt] ,b ( *apt] #a is am5d$ by   

r$esignat+ section #bbd z section #bbe &
 by ins]t+ aft] section #bbc ! foll[+   
new section3  #bbd4 ,ca% tips  7a7 ,9   
g5]al ,!re %all be all[$ z a d$uction an
 am\nt equal to ! ca% tips receiv$ dur+ 
! taxable ye> t are includ$ on /atem5ts 
furni%$ to ! employ] pursuant to section
 #fjec7;a74  7b7 ,limitation bas$ on    
modifi$ adju/$ gross income  7#a7 ,9    
g5]al ,no d$uction %all be all[$ by ?is 
section = any taxpay] if su* taxpay]'s  
modifi$ adju/$ gross income = ! taxable 
ye> exce$s #dej1jjj 7#ijj1jjj1 9 ! case 
( a jo9t return74  7#b7 ,modifi$ adju/$ 
gross income ,= purposes ( ?is          
subsection1 ! t]m modifi$ adju/$ gross  
income means ! adju/$ gross income ( !  
taxpay] = ! taxable ye> increas$ by any 
am\nt exclud$ f gross income "u section 
#iaa1 #ica1 or #icc4  4  7#b7 ,cl]ical  
am5dm5t ,! table ( sections = "p ,,vii (
 sub*apt] ,b ( *apt] #a is am5d$ by     
r$esignat+ ! item relat+ to section #bbd
 z relat+ to section #bbe & by ins]t+   
aft] ! item relat+ to section #bbc !    

foll[+ new item3  ,sec4 #bbd4 ,ca% tips4
  4  7b7 ,d$uction all[$ to non-itemiz]s
 ,section #fc7;b7 is am5d$ by /rik+ & at
 ! end ( p>agraph 7#c71 by /rik+ ! p]iod
 at ! end ( p>agraph 7#d7 & ins]t+ 1 &1 
& by add+ at ! end ! foll[+ new         
p>agraph3  7#e7 ! d$uction provid$ 9    
section #bbd4  4  7c7 ,)hold+ ,!        
,secret>y ( ! ,treasury 7or !           
,secret>y's delegate7 %all modify !     
tables & proc$ures prescrib$ "u section 
#cdjb7;a7 ( ! ,int]nal ,rev5ue ,code (  
#aihf to take into acc\nt ! d$uction    
all[$ "u section #bbd ( su* ,code 7z    
add$ by ?is ,act74  7d7 ,effective date 
,! am5dm5ts made by ?is section %all    
apply to taxable ye>s beg9n+ aft]       
,decemb] #ca1 #bjbe4  #c4 ,repeal (     
inclusion ( social security b5efits 9   
gross income  7a7 ,9 g5]al ,section #hf 
is am5d$ by add+ at ! end ! foll[+ new  
subsection3  7g7 ,t]m9ation ,?is section
 %all n apply to any taxable ye> beg9n+ 
aft] ,decemb] #ca1 #bjbe4  4  7b7       
,social ,security tru/ funds held       

h>mless ,!re are h]eby appropriat$ 7out 
( any money 9 ! ,treasury n o!rwise     
appropriat$7 = ea* fiscal ye> to ea*    
fund "u ! ,social ,security ,act        
7includ+ ! ,f$]al ,hospital ,insurance  
,tru/ ,fund7 or ! ,railroad ,retirem5t  
,act ( #aigd an am\nt equal to !        
r$uction 9 ! transf]s to su* fund = su* 
fiscal ye> by reason ( section #hf7;g7 (
 ! ,int]nal ,rev5ue ,code ( #aihf4  #d4 
,d$uction = qualifi$ ov]time comp5sation
  7a7 ,d$uction all[$  7#a7 ,9 g5]al ,"p
 ,,vii ( sub*apt] ,b ( *apt] #a1 z am5d$
 by ! prec$+ provisions ( ?is ,act1 is  
am5d$ by r$esignat+ section #bbe z      
section #bbf & by ins]t+ aft] section   
#bbd ! foll[+ new section3  #bbe4       
,qualifi$ ov]time comp5sation  7a7 ,9   
g5]al ,!re %all be all[$ z a d$uction an
 am\nt equal to ! qualifi$ ov]time      
comp5sation receiv$ dur+ ! taxable ye>4 
7b7 ,limitation bas$ on modifi$ adju/$  
gross income  7#a7 ,9 g5]al ,no d$uction
 %all be all[$ by ?is section = any     
taxpay] if su* taxpay]'s modifi$ adju/$ 

gross income = ! taxable ye> exce$s     
#dej1jjj 7#ijj1jjj1 9 ! case ( a jo9t   
return74  7#b7 ,modifi$ adju/$ gross    
income ,= purposes ( ?is subsection1 !  
t]m modifi$ adju/$ gross income means ! 
adju/$ gross income ( ! taxpay] = !     
taxable ye> increas$ by any am\nt       
exclud$ f gross income "u section #iaa1 
#ica1 or #icc4  7c7 ,qualifi$ ov]time   
comp5sation ,= purposes ( ?is section1 !
 t]m qualifi$ ov]time comp5sation means 
ov]time comp5sation t is paid to an     
individual z requir$ "u section #g ( !  
,fair ,labor ,/&>ds ,act ( #aich & is 9 
excess ( ! regul> rate 7z us$ 9 su*     
section7 at :i* su* individual is       
employ$4 ,su* t]m %all n include any    
am\nt d$uct$ "u section #bbd4  4  7#b7  
,cl]ical am5dm5t ,! table ( sections =  
"p ,,vii ( sub*apt] ,b ( *apt] #a1 z    
am5d$ by ! prec$+ provisions ( ?is ,act1
 is am5d$ by r$esignat+ ! item relat+ to
 section #bbe z relat+ to section #bbf &
 by ins]t+ aft] ! item relat+ to section
 #bbd ! foll[+ new item3  #bbe4         

,qualifi$ ov]time comp5sation4  4  7b7  
,d$uction all[$ to non-itemiz]s ,section
 #fc7;b71 z am5d$ by ! prec$+ provisions
 ( ?is ,act1 is am5d$ by /rik+ & at !   
end ( p>agraph 7#d71 by /rik+ ! p]iod at
 ! end ( p>agraph 7#e7 & ins]t+ 1 &1 &  
by add+ at ! end ! foll[+ new p>agraph3 
7#f7 ! d$uction provid$ 9 section #bbe4 
4  7c7 ,requirem5t ,to include ov]time  
comp5sation on ,w-#b ,section #fjea7;a7 
is am5d$ by /rik+ & at ! end ( p>agraph 
7#af71 by /rik+ ! p]iod at ! end (      
p>agraph 7#ag7 & ins]t+ 1 &1 & by ins]t+
 aft] p>agraph 7#ag7 ! foll[+ new       
p>agraph3  7#ah7 ! total am\nt (        
qualifi$ ov]time comp5sation 7z def9$ 9 
section #bbe7;b774  4  7d7 ,)hold+ ,!   
,secret>y ( ! ,treasury 7or !           
,secret>y's delegate7 %all modify !     
tables & proc$ures prescrib$ "u section 
#cdjb7;a7 ( ! ,int]nal ,rev5ue ,code (  
#aihf to take into acc\nt ! d$uction    
all[$ "u section #bbe ( su* ,code 7z    
add$ by ?is ,act74  7e7 ,effective date 
,! am5dm5ts made by ?is section %all    

apply to taxable ye>s beg9n+ aft]       
,decemb] #ca1 #bjbe4  #e4 ,p>tn]%ip     
int]e/s transf]r$ 9 connection )        
p]=mance ( s]vices  7a7 ,modification to
 election ,to include p>tn]%ip int]e/ 9 
gross income 9 ye> ( transf] ,subsection
 7c7 ( section #hc is am5d$ by          
r$esignat+ p>agraph 7#d7 z p>agraph 7#e7
 & by ins]t+ aft] p>agraph 7#c7 ! foll[+
 new p>agraph3  7#d7 ,p>tn]%ip int]e/s  
,except z provid$ by ! ,secret>y-- 7,a7 
,9 g5]al ,9 ! case ( any transf] ( an   
int]e/ 9 a p>tn]%ip 9 connection ) !    
provision ( s]vices to 7or = ! b5efit (7
 su* p>tn]%ip-- 7i7 ! fair m>ket value (
 su* int]e/ %all be treat$ = purposes ( 
?is section z be+ equal to ! am\nt ( !  
di/ribution :i* ! p>tn] w\ld receive if 
! p>tn]%ip sold 7at ! "t ( ! transf]7   
all ( its assets at fair m>ket value &  
di/ribut$ ! proce$s ( su* sale 7r$uc$ by
 ! liabilities ( ! p>tn]%ip7 to its     
p>tn]s 9 liquidation ( ! p>tn]%ip1 &    
7ii7 ! p]son receiv+ su* int]e/ %all be 
treat$ z hav+ made ! election "u        

subsection 7b77#a7 unless su* p]son     
makes an election "u ?is p>agraph to h  
su* subsection n apply4  7,b7 ,election 
,! election "u subp>agraph 7,a77ii7 %all
 be made "u rules simil> to ! rules (   
subsection 7b77#b74  4  7b7 ,effective  
date ,! am5dm5ts made by ?is section    
%all apply to int]e/s 9 p>tn]%ips       
transf]r$ aft] ! date ( ! enactm5t ( ?is
 ,act4  #f4 ,special rules = p>tn]s     
provid+ inve/m5t managem5t s]vices to   
p>tn]%ips  7a7 ,9 g5]al ,"p ,i (        
sub*apt] ,k ( *apt] #a is am5d$ by add+ 
at ! end ! foll[+ new section3  #gaj4   
,special rules = p>tn]s provid+ inve/m5t
 managem5t s]vices to p>tn]%ips  7a7    
,treatm5t ( di/ributive %>e ( p>tn]%ip  
items ,= purposes ( ?is title1 9 ! case 
( an inve/m5t s]vices p>tn]%ip int]e/-- 
7#a7 ,9 g5]al ,not)/&+ section          
#gjb7;b7-- 7,a7 an am\nt equal to ! net 
capital ga9 ) respect to su* int]e/ =   
any p>tn]%ip taxable ye> %all be treat$ 
z ord9>y income1 &  7,b7 subject to !   
limitation ( p>agraph 7#b71 an am\nt    

equal to ! net capital loss ) respect to
 su* int]e/ = any p>tn]%ip taxable ye>  
%all be treat$ z an ord9>y loss4  7#b7  
,re*>act]ization ( losses limit$ to     
re*>act]iz$ ga9s ,! am\nt treat$ z      
ord9>y loss "u p>agraph 7#a77;,b7 = any 
taxable ye> %all n exce$ ! excess 7if   
any7 (-- 7,a7 ! aggregate am\nt treat$ z
 ord9>y income "u p>agraph 7#a77;,a7 )  
respect to ! inve/m5t s]vices p>tn]%ip  
int]e/ = all prec$+ p>tn]%ip taxable    
ye>s to :i* ?is section applies1 ov]    
7,b7 ! aggregate am\nt treat$ z ord9>y  
loss "u p>agraph 7#a77;,b7 ) respect to 
su* int]e/ = all prec$+ p>tn]%ip taxable
 ye>s to :i* ?is section applies4  7#c7 
,allocation to items ( ga9 & loss  7,a7 
,net capital ga9 ,! am\nt treat$ z      
ord9>y income "u p>agraph 7#a77;,a7 %all
 be allocat$ ratably among ! items (    
long-t]m capital ga9 tak5 into acc\nt 9 
det]m9+ su* net capital ga94  7,b7 ,net 
capital loss ,! am\nt treat$ z ord9>y   
loss "u p>agraph 7#a77;,b7 %all be      
allocat$ ratably among ! items (        

long-t]m capital loss & %ort-t]m capital
 loss tak5 into acc\nt 9 det]m9+ su* net
 capital loss4  7#d7 ,t]ms relat+ to    
capital ga9s & losses ,= purposes ( ?is 
section-- 7,a7 ,9 g5]al ,net capital    
ga91 long-t]m capital ga91 & long-t]m   
capital loss1 ) respect to any inve/m5t 
s]vices p>tn]%ip int]e/ = any taxable   
ye>1 %all be det]m9$ "u section #abbb1  
except t su* section %all be appli$--   
7i7 )\t reg>d to ! re*>act]ization ( any
 item z ord9>y income or ord9>y loss "u 
?is section1  7ii7 by only tak+ into    
acc\nt items ( ga9 & loss tak5 into     
acc\nt by ! hold] ( su* int]e/ "u       
section #gjb 7o!r ?an subsection 7a77#i7
 !re(7 ) respect to su* int]e/ = su*    
taxable ye>1 &  7iii7 by treat+ prop]ty 
:i* is tak5 into acc\nt 9 det]m9+ ga9s &
 losses to :i* section #abca applies z  
capital assets held = m ?an #a ye>4     
7,b7 ,net capital loss ,! t]m net       
capital loss means ! excess ( ! losses f
 sales or ex*anges ( capital assets ov] 
! ga9s f su* sales or ex*anges4 ,rules  

simil> to ! rules ( clauses 7i7 ?r\gh   
7iii7 ( subp>agraph 7,a7 %all apply =   
purposes ( ! prec$+ s5t5ce4  7#e7       
,special rule = divid5ds ,any divid5d   
allocat$ ) respect to any inve/m5t      
s]vices p>tn]%ip int]e/ %all n be treat$
 z qualifi$ divid5d income = purposes ( 
section #a7;h74  7#f7 ,special rule =   
qualifi$ small bus9ess /ock ,section    
#abjb %all n apply to any ga9 f ! sale  
or ex*ange ( qualifi$ small bus9ess /ock
 7z def9$ 9 section #abjb7;c77 allocat$ 
) respect to any inve/m5t s]vices       
p>tn]%ip int]e/4  7b7 ,dispositions (   
p>tn]%ip int]e/s  7#a7 ,ga9  7,a7 ,9    
g5]al ,any ga9 on ! disposition ( an    
inve/m5t s]vices p>tn]%ip int]e/ %all   
be-- 7i7 treat$ z ord9>y income1 &  7ii7
 recogniz$ not)/&+ any o!r provision (  
?is subtitle4  7,b7 ,gift & transf]s at 
dea? ,9 ! case ( a disposition ( an     
inve/m5t s]vices p>tn]%ip int]e/ by gift
 or by reason ( dea? ( ! taxpay]-- 7i7  
subp>agraph 7,a7 %all n apply1  7ii7 su*
 int]e/ %all be treat$ z an inve/m5t    

s]vices p>tn]%ip int]e/ 9 ! h&s ( !     
p]son acquir+ su* int]e/1 &  7iii7 any  
am\nt t w\ld h be5 treat$ z ord9>y      
income "u ?is subsection _h ! dec$5t    
sold su* int]e/ imm$iately be=e dea?    
%all be treat$ z an item ( income 9     
respect ( a dec$5t "u section #fia4     
7#b7 ,loss ,any loss on ! disposition ( 
an inve/m5t s]vices p>tn]%ip int]e/ %all
 be treat$ z an ord9>y loss to ! ext5t (
 ! excess 7if any7 (-- 7,a7 ! aggregate 
am\nt treat$ z ord9>y income "u         
subsection 7a7 ) respect to su* int]e/ =
 all p>tn]%ip taxable ye>s to :i* ?is   
section applies1 ov]  7,b7 ! aggregate  
am\nt treat$ z ord9>y loss "u subsection
 7a7 ) respect to su* int]e/ = all      
p>tn]%ip taxable ye>s to :i* ?is section
 applies4  7#c7 ,election ) respect to  
c]ta9 ex*anges ,p>agraph 7#a77;,a77ii7  
%all n apply to ! contribution ( an     
inve/m5t s]vices p>tn]%ip int]e/ to a   
p>tn]%ip 9 ex*ange = an int]e/ 9 su*    
p>tn]%ip if-- 7,a7 ! taxpay] makes an   
irrevocable election to treat ! p>tn]%ip

 int]e/ receiv$ 9 ! ex*ange z an        
inve/m5t s]vices p>tn]%ip int]e/1 &     
7,b7 ! taxpay] agrees to comply ) su*   
report+ & recordkeep+ requirem5ts z !   
,secret>y may prescribe4  7#d7          
,di/ributions ( p>tn]%ip prop]ty  7,a7  
,9 g5]al ,9 ! case ( any di/ribution (  
prop]ty by a p>tn]%ip ) respect to any  
inve/m5t s]vices p>tn]%ip int]e/ held by
 a p>tn]1 ! p>tn] receiv+ su* prop]ty   
%all recognize ga9 equal to ! excess 7if
 any7 (-- 7i7 ! fair m>ket value ( su*  
prop]ty at ! "t ( su* di/ribution1 ov]  
7ii7 ! adju/$ basis ( su* prop]ty 9 !   
h&s ( su* p>tn] 7det]m9$ )\t reg>d to   
subp>agraph 7,c774  7,b7 ,treatm5t ( ga9
 z ord9>y income ,any ga9 recogniz$ by  
su* p>tn] "u subp>agraph 7,a7 %all be   
treat$ z ord9>y income to ! same ext5t &
 9 ! same mann] z ! increase 9 su*      
p>tn]'s di/ributive %>e ( ! taxable     
income ( ! p>tn]%ip w\ld be treat$ "u   
subsection 7a7 if1 imm$iately prior to !
 di/ribution1 ! p>tn]%ip _h sold !      
di/ribut$ prop]ty at fair m>ket value & 

all ( ! ga9 f su* disposition 7 allocat$
 to su* p>tn]4 ,= purposes ( apply+     
subsection 7a77#b71 any ga9 treat$ z    
ord9>y income "u ?is subp>agraph %all be
 treat$ z an am\nt treat$ z ord9>y      
income "u subsection 7a77#a77;,a74  7,c7
 ,adju/m5t ( basis ,9 ! case ( a        
di/ribution to :i* subp>agraph 7,a7     
applies1 ! basis ( ! di/ribut$ prop]ty 9
 ! h&s ( ! di/ributee p>tn] %all be !   
fair m>ket value ( su* prop]ty4  7,d7   
,special rules ) respect to m]g]s &     
divisions ,9 ! case ( a taxpay] :i*     
satisfies requirem5ts simil> to !       
requirem5ts ( subp>agraphs 7,a7 & 7,b7 (
 p>agraph 7#c71 ?is p>agraph & p>agraph 
7#a77;,a77ii7 %all n apply to !         
di/ribution ( a p>tn]%ip int]e/ if su*  
di/ribution is 9 connection ) a         
contribution 7or deem$ contribution7 (  
any prop]ty ( ! p>tn]%ip to :i* section 
#gba applies pursuant to a transaction  
describ$ 9 section #gjh7;b77#b74  7c7   
,inve/m5t s]vices p>tn]%ip int]e/ ,=    
purposes ( ?is section-- 7#a7 ,9 g5]al  

,! t]m inve/m5t s]vices p>tn]%ip int]e/ 
means any int]e/ 9 an inve/m5t p>tn]%ip 
acquir$ or held by any p]son 9          
connection ) ! conduct ( a trade or     
bus9ess describ$ 9 p>agraph 7#b7 by su* 
p]son 7or any p]son relat$ to su*       
p]son74 ,an int]e/ 9 an inve/m5t        
p>tn]%ip held by any p]son-- 7,a7 %all n
 be treat$ z an inve/m5t s]vices        
p>tn]%ip int]e/ = any p]iod be=e ! fir/ 
date on :i* x is s held 9 connection )  
su* a trade or bus9ess1  7,b7 %all n    
cease to be an inve/m5t s]vices p>tn]%ip
 int]e/ m]ely because su* p]son holds   
su* int]e/ o!r ?an 9 connection ) su* a 
trade or bus9ess1 &  7,c7 %all be treat$
 z an inve/m5t s]vices p>tn]%ip int]e/  
if acquir$ f a relat$ p]son 9 ^: h&s su*
 int]e/ 0 an inve/m5t s]vices p>tn]%ip  
int]e/4  7#b7 ,bus9esses to :i* ?is     
section applies ,a trade or bus9ess is  
describ$ 9 ?is p>agraph if su* trade or 
bus9ess prim>ily involves ! p]=mance (  
any ( ! foll[+ s]vices ) respect to     
assets held 7directly or indirectly7 by 

"o or m inve/m5t p>tn]%ips ref]r$ to 9  
p>agraph 7#a73 7,a7 ,advis+ z to !      
advisability ( inve/+ 91 pur*as+1 or    
sell+ any specifi$ asset4  7,b7 ,manag+1
 acquir+1 or dispos+ ( any specifi$     
asset4  7,c7 ,arrang+ f9anc+ ) respect  
to acquir+ specifi$ assets4  7,d7 ,any  
activity 9 support ( any s]vice describ$
 9 subp>agraphs 7,a7 ?r\gh 7,c74  7#c7  
,inve/m5t p>tn]%ip  7,a7 ,9 g5]al ,! t]m
 inve/m5t p>tn]%ip means any p>tn]%ip   
if1 at ! end ( any two consecutive      
cal5d> qu>t]s end+ aft] ! date (        
enactm5t ( ?is section-- 7i7            
sub/antially all ( ! assets ( ! p>tn]%ip
 are specifi$ assets 7det]m9$ )\t reg>d 
to any section #aig intangible )9 !     
mean+ ( section #aig7;d771 &  7ii7 less 
?an #ge p]c5t ( ! capital ( ! p>tn]%ip  
is attributable to qualifi$ capital     
int]e/s :i* con/itute prop]ty held 9    
connection ) a trade or bus9ess ( ! own]
 ( su* int]e/4  7,b7 ,look-?r\gh ( c]ta9
 :olly own$ entities = purposes (       
det]m9+ assets ( ! p>tn]%ip  7i7 ,9     

g5]al ,= purposes ( det]m9+ ! assets ( a
 p>tn]%ip "u subp>agraph 7,a77i7-- 7,i7 
any int]e/ 9 a specifi$ entity %all n be
 treat$ z an asset ( su* p>tn]%ip1 &    
7,,ii7 su* p>tn]%ip %all be treat$ z    
hold+ its proportionate %>e ( ea* ( !   
assets ( su* specifi$ entity4  7ii7     
,specifi$ entity ,= purposes ( clause   
7i71 ! t]m specifi$ entity means1 )     
respect to any p>tn]%ip 7h]eaft] ref]r$ 
to z ! upp]-ti] p>tn]%ip71 any p]son :i*
 engages 9 ! same trade or bus9ess z !  
upp]-ti] p>tn]%ip & is-- 7,i7 a p>tn]%ip
 all ( ! capital & pr(its int]e/s ( :i* 
are held directly or indirectly by !    
upp]-ti] p>tn]%ip1 or  7,,ii7 a =eign   
corporation :i* does n engage 9 a trade 
or bus9ess 9 ! ,unit$ ,/ates & all ( !  
/ock ( :i* is held directly or          
indirectly by ! upp]-ti] p>tn]%ip4  7,c7
 ,special rules = det]m9+ if prop]ty    
held 9 connection ) trade or bus9ess    
7i7 ,9 g5]al ,except z o!rwise provid$  
by ! ,secret>y1 solely = purposes (     
det]m9+ :e!r any int]e/ 9 a p>tn]%ip    

con/itutes prop]ty held 9 connection ) a
 trade or bus9ess "u subp>agraph        
7,a77ii7-- 7,i7 a trade or bus9ess ( any
 p]son closely relat$ to ! own] ( su*   
int]e/ %all be treat$ z a trade or      
bus9ess ( su* own]1  7,,ii7 su* int]e/  
%all be treat$ z held by a p]son 9      
connection ) a trade or bus9ess dur+ any
 taxable ye> if su* int]e/ 0 s held by  
su* p]son dur+ any #c taxable ye>s      
prec$+ su* taxable ye>1 &  7,,iii7      
p>agraph 7#e77;,b7 %all n apply4  7ii7  
,closely relat$ p]sons ,= purposes (    
clause 7i77,i71 a p]son %all be treat$ z
 closely relat$ to ano!r p]son if1 tak+ 
into acc\nt ! rules ( section #bfg7;c71 
! relation%ip betwe5 su* p]sons is      
describ$ 9-- 7,i7 p>agraph 7#a7 or 7#i7 
( section #bfg7;b71 or  7,,ii7 section  
#bfg7;b77#d71 b solely 9 ! case ( a tru/
 ) respect to :i* ea* curr5t b5efici>y  
is ! grantor or a p]son ^: relation%ip  
to ! grantor is describ$ 9 p>agraph 7#a7
 or 7#i7 ( section #bfg7;b74  7,d7      
,antiabuse rules ,! ,secret>y may issue 

regulations or o!r guidance :i* prev5t !
 avoidance ( ! purposes ( subp>agraph   
7,a71 includ+ regulations or o!r        
guidance :i* treat conv]tible & cont+5t 
debt 7& o!r debt hav+ ! attributes (    
equity7 z a capital int]e/ 9 ! p>tn]%ip4
  7,e7 ,controll$ gr\ps ( entities  7i7 
,9 g5]al ,9 ! case ( a controll$ gr\p ( 
entities1 if an int]e/ 9 ! p>tn]%ip     
receiv$ 9 ex*ange = a contribution to ! 
capital ( ! p>tn]%ip by any memb] ( su* 
controll$ gr\p w\ld 79 ! h&s ( su*      
memb]7 con/itute prop]ty held 9         
connection ) a trade or bus9ess1 !n any 
int]e/ 9 su* p>tn]%ip held by any memb] 
( su* gr\p %all be treat$ = purposes (  
subp>agraph 7,a7 z con/itut+ 79 ! h&s ( 
su* memb]7 prop]ty held 9 connection ) a
 trade or bus9ess4  7ii7 ,controll$ gr\p
 ( entities ,= purposes ( clause 7i71 ! 
t]m controll$ gr\p ( entities means a   
controll$ gr\p ( corporations z def9$ 9 
section #aefc7;a77#a71 appli$ )\t reg>d 
to subsections 7a77#d7 & 7b77#b7 (      
section #aefc4 ,a p>tn]%ip or any o!r   

entity 7o!r ?an a corporation7 %all be  
treat$ z a memb] ( a controll$ gr\p (   
entities if su* entity is controll$ 7)9 
! mean+ ( section #ied7;d77#c77 by      
memb]s ( su* gr\p 7includ+ any entity   
treat$ z a memb] ( su* gr\p by reason ( 
?is s5t5ce74  7,f7 ,special rule =      
corporations ,= purposes ( ?is p>agraph1
 9 ! case ( a corporation1 ! det]m9ation
 ( :e!r prop]ty is held 9 connection ) a
 trade or bus9ess %all be det]m9$ z if !
 taxpay] 7 an individual4  7#d7         
,specifi$ asset ,! t]m specifi$ asset   
means securities 7z def9$ 9 section     
#dge7;c77#b7 )\t reg>d to ! la/ s5t5ce  
!re(71 real e/ate held = r5tal or       
inve/m5t1 int]e/s 9 p>tn]%ips1          
commodities 7z def9$ 9 section          
#dge7;e77#b771 ca% or ca% equival5ts1 or
 options or d]ivative contracts )       
respect to any ( ! =ego+4  7#e7 ,relat$ 
p]sons  7,a7 ,9 g5]al ,a p]son %all be  
treat$ z relat$ to ano!r p]son if !     
relation%ip betwe5 su* p]sons is        
describ$ 9 section #bfg7;b7 or #gjg7;b74

  7,b7 ,attribution ( p>tn] s]vices ,any
 s]vice describ$ 9 p>agraph 7#b7 :i* is 
provid$ by a p>tn] ( a p>tn]%ip %all be 
treat$ z also provid$ by su* p>tn]%ip4  
7d7 ,exception = c]ta9 capital int]e/s  
7#a7 ,9 g5]al ,9 ! case ( any portion ( 
an inve/m5t s]vices p>tn]%ip int]e/ :i* 
is a qualifi$ capital int]e/1 all items 
( ga9 & loss 7& any divid5ds7 :i* are   
allocat$ to su* qualifi$ capital int]e/ 
%all n be tak5 into acc\nt "u subsection
 7a7 if-- 7,a7 allocations ( items are  
made by ! p>tn]%ip to su* qualifi$      
capital int]e/ 9 ! same mann] z su*     
allocations are made to o!r qualifi$    
capital int]e/s held by p>tn]s :o d n   
provide any s]vices describ$ 9          
subsection 7c77#b7 & :o are n relat$ to 
! p>tn] hold+ ! qualifi$ capital int]e/1
 &  7,b7 ! allocations made to su* o!r  
int]e/s are significant comp>$ to !     
allocations made to su* qualifi$ capital
 int]e/4  7#b7 ,au?ority to provide     
exceptions to allocation requirem5ts ,to
 ! ext5t provid$ by ! ,secret>y 9       

regulations or o!r guidance-- 7,a7      
,allocations to portion ( qualifi$      
capital int]e/ ,p>agraph 7#a7 may be    
appli$ sep>ately ) respect to a portion 
( a qualifi$ capital int]e/4  7,b7 ,no  
or insignificant allocations to         
nons]vice provid]s ,9 any case 9 :i* !  
requirem5ts ( p>agraph 7#a77;,b7 are n  
satisfi$1 items ( ga9 & loss 7& any     
divid5ds7 %all n be tak5 into acc\nt "u 
subsection 7a7 to ! ext5t t su* items   
are prop]ly allocable "u su* regulations
 or o!r guidance to qualifi$ capital    
int]e/s4  7,c7 ,allocations to s]vice   
provid]s' qualifi$ capital int]e/s :i*  
are less ?an o!r allocations            
,allocations %all n be treat$ z fail+ to
 meet ! requirem5t ( p>agraph 7#a77;,a7 
m]ely because ! allocations to !        
qualifi$ capital int]e/ repres5t a l[]  
return ?an ! allocations made to ! o!r  
qualifi$ capital int]e/s ref]r$ to 9 su*
 p>agraph4  7#c7 ,special rule = *anges 
9 s]vices & capital contributions ,9 !  
case ( an int]e/ 9 a p>tn]%ip :i* 0 n an

 inve/m5t s]vices p>tn]%ip int]e/ & :i*1
 by reason ( a *ange 9 ! s]vices )      
respect to assets held 7directly or     
indirectly7 by ! p>tn]%ip or by reason (
 a *ange 9 ! capital contributions to   
su* p>tn]%ip1 becomes an inve/m5t       
s]vices p>tn]%ip int]e/1 ! qualifi$     
capital int]e/ ( ! hold] ( su* p>tn]%ip 
int]e/ imm$iately aft] su* *ange %all n1
 = purposes ( ?is subsection1 be less   
?an ! fair m>ket value ( su* int]e/     
7det]m9$ imm$iately be=e su* *ange74    
7#d7 ,special rule = ti]$ p>tn]%ips     
,except z o!rwise provid$ by !          
,secret>y1 9 ! case ( ti]$ p>tn]%ips1   
all items :i* are allocat$ 9 a mann] :i*
 meets ! requirem5ts ( p>agraph 7#a7 to 
qualifi$ capital int]e/s 9 a l[]-ti]    
p>tn]%ip %all reta9 su* "* to ! ext5t   
allocat$ on ! basis ( qualifi$ capital  
int]e/s 9 any upp]-ti] p>tn]%ip4  7#e7  
,exception = no-self-*>g$ c>ry &        
managem5t fee provisions ,except z      
o!rwise provid$ by ! ,secret>y1 an      
int]e/ %all n fail to be treat$ z       

satisfy+ ! requirem5t ( p>agraph        
7#a77;,a7 m]ely because ! allocations   
made by ! p>tn]%ip to su* int]e/ d n    
reflect ! co/ ( s]vices describ$ 9      
subsection 7c77#b7 :i* are provid$      
7directly or indirectly7 to ! p>tn]%ip  
by ! hold] ( su* int]e/ 7or a relat$    
p]son74  7#f7 ,special rule =           
dispositions ,9 ! case ( any inve/m5t   
s]vices p>tn]%ip int]e/ any portion (   
:i* is a qualifi$ capital int]e/1       
subsection 7b7 %all n apply to s mu* (  
any ga9 or loss z be>s ! same proportion
 to ! entire am\nt ( su* ga9 or loss z--
 7,a7 ! di/ributive %>e ( ga9 or loss t 
w\ld h be5 allocat$ to ! qualifi$       
capital int]e/ 7consi/5t ) ! requirem5ts
 ( p>agraph 7#a77 if ! p>tn]%ip _h sold 
all ( its assets at fair m>ket value    
imm$iately be=e ! disposition1 be>s to  
7,b7 ! di/ributive %>e ( ga9 or loss t  
w\ld h be5 s allocat$ to ! inve/m5t     
s]vices p>tn]%ip int]e/ ( :i* su*       
qualifi$ capital int]e/ is a "p4  7#g7  
,qualifi$ capital int]e/ ,= purposes (  

?is section-- 7,a7 ,9 g5]al ,! t]m      
qualifi$ capital int]e/ means s mu* ( a 
p>tn]'s int]e/ 9 ! capital ( ! p>tn]%ip 
z is attributable to-- 7i7 ! fair m>ket 
value ( any money or o!r prop]ty        
contribut$ to ! p>tn]%ip 9 ex*ange = su*
 int]e/ 7det]m9$ )\t reg>d to section   
#geb7;a771  7ii7 any am\nts :i* h be5   
includ$ 9 gross income "u section #hc ) 
respect to ! transf] ( su* int]e/1 &    
7iii7 ! excess 7if any7 (-- 7,i7 any    
items ( income & ga9 tak5 into acc\nt "u
 section #gjb ) respect to su* int]e/1  
ov]  7,,ii7 any items ( d$uction & loss 
s tak5 into acc\nt4  7,b7 ,adju/m5t to  
qualifi$ capital int]e/  7i7            
,di/ributions & losses ,! qualifi$      
capital int]e/ %all be r$uc$ by         
di/ributions f ! p>tn]%ip ) respect to  
su* int]e/ & by ! excess 7if any7 ( !   
am\nt describ$ 9 subp>agraph            
7,a77iii77,,ii7 ov] ! am\nt describ$ 9  
subp>agraph 7,a77iii77,i74  7ii7        
,special rule = contributions ( prop]ty 
,9 ! case ( any contribution ( prop]ty  

describ$ 9 subp>agraph 7,a77i7 ) respect
 to :i* ! fair m>ket value ( su* prop]ty
 is n equal to ! adju/$ basis ( su*     
prop]ty imm$iately be=e su*             
contribution1 prop] adju/m5ts %all be   
made to ! qualifi$ capital int]e/ to    
take into acc\nt su* diff]5ce consi/5t )
 su* regulations or o!r guidance z !    
,secret>y may provide4  7,c7 ,m]g]s1    
consolidations1 etc41 disreg>d$ ,no     
increase or decrease 9 ! qualifi$       
capital int]e/ ( any p>tn] %all result f
 a m]g]1 consolidation1 or division     
describ$ 9 section #gjh1 or any simil>  
transaction4  7#h7 ,treatm5t ( c]ta9    
loans  7,a7 ,proce$s ( p>tn]%ip loans n 
treat$ z qualifi$ capital int]e/ (      
s]vice provid+ p>tn]s ,= purposes ( ?is 
subsection1 an inve/m5t s]vices p>tn]%ip
 int]e/ %all n be treat$ z a qualifi$   
capital int]e/ to ! ext5t t su* int]e/  
is acquir$ 9 connection ) ! proce$s (   
any loan or o!r advance made or         
gu>ante$1 directly or indirectly1 by any
 o!r p>tn] or ! p>tn]%ip 7or any p]son  

relat$ to any su* o!r p>tn] or !        
p>tn]%ip74 ,! prec$+ s5t5ce %all n apply
 to ! ext5t ! loan or o!r advance is    
repaid be=e ! date ( ! enactm5t ( ?is   
section unless su* repaym5t is made ) ! 
proce$s ( a loan or o!r advance describ$
 9 ! prec$+ s5t5ce4  7,b7 ,r$uction 9   
allocations to qualifi$ capital int]e/s 
= loans f nons]vice-provid+ p>tn]s to ! 
p>tn]%ip ,= purposes ( ?is subsection1  
any loan or o!r advance to ! p>tn]%ip   
made or gu>ante$1 directly or           
indirectly1 by a p>tn] n provid+ s]vices
 describ$ 9 subsection 7c77#b7 to !     
p>tn]%ip 7or any p]son relat$ to su*    
p>tn]7 %all be tak5 into acc\nt 9       
det]m9+ ! qualifi$ capital int]e/s ( !  
p>tn]s 9 ! p>tn]%ip4  7#i7 ,special rule
 = qualifi$ family p>tn]%ips  7,a7 ,9   
g5]al ,9 ! case ( any specifi$ family   
p>tn]%ip int]e/1 p>agraph 7#a77;,a7 %all
 be appli$ )\t reg>d to ! phrase & :o   
are n relat$ to ! p>tn] hold+ ! qualifi$
 capital int]e/4  7,b7 ,specifi$ family 
p>tn]%ip int]e/ ,= purposes ( ?is       

p>agraph1 ! t]m specifi$ family p>tn]%ip
 int]e/ means any inve/m5t s]vices      
p>tn]%ip int]e/ if-- 7i7 su* int]e/ is  
an int]e/ 9 a qualifi$ family p>tn]%ip1 
7ii7 su* int]e/ is held by a natural    
p]son or by a tru/ ) respect to :i* ea* 
b5efici>y is a grantor or a p]son ^:    
relation%ip to ! grantor is describ$ 9  
section #bfg7;b77#a71 &  7iii7 all o!r  
int]e/s 9 su* qualifi$ family p>tn]%ip )
 respect to :i* significant allocations 
are made 7)9 ! mean+ ( p>agraph         
7#a77;,b7 & 9 comp>ison to ! allocations
 made to ! int]e/ describ$ 9 clause     
7ii77 are held by p]sons :o-- 7,i7 are  
relat$ to ! natural p]son or tru/ ref]r$
 to 9 clause 7ii71 or  7,,ii7 provide   
s]vices describ$ 9 subsection 7c77#b74  
7,c7 ,qualifi$ family p>tn]%ip ,=       
purposes ( ?is p>agraph1 ! t]m qualifi$ 
family p>tn]%ip means any p>tn]%ip if-- 
7i7 all ( ! capital & pr(its int]e/s (  
su* p>tn]%ip are held by-- 7,i7 specifi$
 family memb]s1  7,,ii7 any p]son       
closely relat$ 7)9 ! mean+ ( subsection 

7c77#c77;,c77ii77 to a specifi$ family  
memb]1 or  7,,iii7 any o!r p]son 7n     
describ$ 9 subclause 7,i7 or 7,,ii77 if 
su* int]e/ is an inve/m5t s]vices       
p>tn]%ip int]e/ ) respect to su* p]son1 
&  7ii7 su* p>tn]%ip does n hold itself 
out to ! public z an inve/m5t advisor4  
7,d7 ,specifi$ family memb]s ,= purposes
 ( subp>agraph 7,c71 individuals %all be
 treat$ z specifi$ family memb]s if su* 
individuals w\ld be treat$ z "o p]son "u
 ! rules ( section #acfa7;c77#a7 if !   
applicable date 7)9 ! mean+ (           
subp>agraph 7,b77iii7 !re(7 7 ! late/   
(-- 7i7 ! date ( ! e/abli%m5t ( !       
p>tn]%ip1  7ii7 ! e>lie/ date t ! common
 ance/or holds a capital or pr(its      
int]e/ 9 ! p>tn]%ip1 or  7iii7 ! date ( 
! enactm5t ( ?is section4  7e7 ,o!r     
income & ga9 9 connection ) inve/m5t    
managem5t s]vices  7#a7 ,9 g5]al ,if--  
7,a7 a p]son p]=ms 7directly or         
indirectly7 inve/m5t managem5t s]vices =
 any inve/m5t entity or special purpose 
acquisition company1  7,b7 su* p]son    

holds 7directly or indirectly7 a        
disqualifi$ int]e/ ) respect to su*     
entity or su* company 7z ! case may be71
 &  7,c7 ! value ( su* int]e/ 7or       
paym5ts !reund]7 is sub/antially relat$ 
to ! am\nt ( income or ga9 7:e!r or n   
realiz$7 f ! assets ) respect to :i* !  
inve/m5t managem5t s]vices are p]=m$1   
any income or ga9 ) respect to su*      
int]e/ %all be treat$ z ord9>y income4  
,rules simil> to ! rules ( subsections  
7a77#e7 & 7d7 %all apply = purposes (   
?is subsection4  7#b7 ,def9itions ,=    
purposes ( ?is subsection-- 7,a7        
,disqualifi$ int]e/  7i7 ,9 g5]al ,! t]m
 disqualifi$ int]e/ means1 ) respect to 
any inve/m5t entity-- 7,i7 any int]e/ 9 
su* entity o!r ?an indebt$ness1  7,,ii7 
conv]tible or cont+5t debt ( su* entity1
  7,,iii7 any option or o!r "r to       
acquire prop]ty describ$ 9 subclause    
7,i7 or 7,,ii71 &  7,,iv7 any d]ivative 
in/rum5t ent]$ into 7directly or        
indirectly7 ) su* entity or any inve/or 
9 su* entity4  7ii7 ,exceptions ,su* t]m

 %all n include-- 7,i7 a p>tn]%ip       
int]e/1  7,,ii7 except z provid$ by !   
,secret>y1 any int]e/ 9 a taxable       
corporation 7o!r ?an a special purpose  
acquisition company71 &  7,,iii7 except 
z provid$ by ! ,secret>y1 /ock 9 an ,s  
corporation4  7,b7 ,taxable corporation 
,! t]m taxable corporation means-- 7i7 a
 dome/ic ,c corporation1 or  7ii7 a     
=eign corporation sub/antially all ( !  
income ( :i* is-- 7,i7 effectively      
connect$ ) ! conduct ( a trade or       
bus9ess 9 ! ,unit$ ,/ates1 or  7,,ii7   
subject to a compreh5sive =eign income  
tax 7z def9$ 9 section #deg;,a7d77#b774 
7,c7 ,inve/m5t managem5t s]vices ,! t]m 
inve/m5t managem5t s]vices means a      
sub/antial quantity ( any ( ! s]vices   
describ$ 9 subsection 7c77#b74  7,d7    
,inve/m5t entity ,! t]m inve/m5t entity 
means any entity :i*1 if x 7 a p>tn]%ip1
 w\ld be an inve/m5t p>tn]%ip4  7,e7    
,special purpose acquisition company ,! 
t]m special purpose acquisition company 
means any corporation t-- 7i7 is =m$ = !

 purpose ( acquir+ a privately held     
company1  7ii7 is publicly trad$ on an  
e/abli%$ securities m>ket or its int]e/s
 are readily tradable on a second>y     
m>ket 7or ! sub/antial equival5t !re(71 
&  7iii7 is requir$ to report an        
acquisition "u ,item #b4ja or make a    
disclosure "u ,item #e4jf ( ,=m #h-,k   
7or any successor =m7 ) ! ,securities & 
,ex*ange ,commission4  7f7 ,exception = 
dome/ic ,c corporations ,except z       
o!rwise provid$ by ! ,secret>y1 9 ! case
 ( a dome/ic ,c corporation 7o!r ?an a  
special purpose acquisition company1 z  
def9$ 9 subsection 7e77#b77;,e77-- 7#a7 
subsections 7a7 & 7b7 %all n apply to   
any item allocat$ to su* corporation )  
respect to any inve/m5t s]vices p>tn]%ip
 int]e/ 7or to any ga9 or loss ) respect
 to ! disposition ( su* an int]e/71 &   
7#b7 subsection 7e7 %all n apply4  7g7  
,regulations ,! ,secret>y %all prescribe
 su* regulations or o!r guidance z is   
necess>y or appropriate to c>ry out !   
purposes ( ?is section1 includ+         

regulations or o!r guidance to-- 7#a7   
require su* report+ & recordkeep+ by any
 p]son 9 su* mann] & at su* "t z !      
,secret>y may prescribe = purposes (    
enabl+ ! p>tn]%ip to meet ! requirem5ts 
( section #fjca ) respect to any item   
describ$ 9 section #gjb7;a77#i71  7#b7  
provide modifications to ! application (
 ?is section 7includ+ treat+ relat$     
p]sons z n relat$ to "o ano!r7 to !     
ext5t su* modification is consi/5t ) !  
purposes ( ?is section1  7#c7 prev5t !  
avoidance ( ! purposes ( ?is section    
7includ+ ?r\gh ! use ( qualifi$ family  
p>tn]%ips71 &  7#d7 coord9ate ?is       
section ) ! o!r provisions ( ?is title4 
7h7 ,cross ref]5ce ,= #dj p]c5t p5alty  
on c]ta9 und]paym5ts due to ! avoidance 
( ?is section1 see section #fffb4  4    
7b7 ,application ( section #gea to      
indirect dispositions ( inve/m5t s]vices
 p>tn]%ip int]e/s  7#a7 ,9 g5]al        
,subsection 7a7 ( section #gea is am5d$ 
by /rik+ or at ! end ( p>agraph 7#a71 by
 ins]t+ or at ! end ( p>agraph 7#b71 &  

by ins]t+ aft] p>agraph 7#b7 ! foll[+   
new p>agraph3  7#c7 inve/m5t s]vices    
p>tn]%ip int]e/s held by ! p>tn]%ip1  4 
7#b7 ,c]ta9 di/ributions treat$ z sales 
or ex*anges ,subp>agraph 7,a7 ( section 
#gea7;b77#a7 is am5d$ by /rik+ or at !  
end ( clause 7i71 by ins]t+ or at ! end 
( clause 7ii71 & by ins]t+ aft] clause  
7ii7 ! foll[+ new clause3  7iii7        
inve/m5t s]vices p>tn]%ip int]e/s held  
by ! p>tn]%ip1  4  7#c7 ,application (  
special rules 9 ! case ( ti]$ p>tn]%ips 
,subsection 7f7 ( section #gea is       
am5d$-- 7,a7 by /rik+ or at ! end (     
p>agraph 7#a71 by ins]t+ or at ! end (  
p>agraph 7#b71 & by ins]t+ aft] p>agraph
 7#b7 ! foll[+ new p>agraph3  7#c7 an   
inve/m5t s]vices p>tn]%ip int]e/ held by
 ! p>tn]%ip1  1 &  7,b7 by /rik+ p>tn]4 
& ins]t+ p>tn] 7o!r ?an a p>tn]%ip 9 :i*
 x holds an inve/m5t s]vices p>tn]%ip   
int]e/744  7#d7 ,inve/m5t s]vices       
p>tn]%ip int]e/s2 qualifi$ capital      
int]e/s ,section #gea is am5d$ by add+  
at ! end ! foll[+ new subsection3  7g7  

,inve/m5t s]vices p>tn]%ip int]e/s ,=   
purposes ( ?is section-- 7#a7 ,9 g5]al  
,! t]m inve/m5t s]vices p>tn]%ip int]e/ 
has ! mean+ giv5 su* t]m by section     
#gaj7;c74  7#b7 ,adju/m5ts = qualifi$   
capital int]e/s ,! am\nt to :i*         
subsection 7a7 applies by reason (      
p>agraph 7#c7 !re( %all n include s mu* 
( su* am\nt z is attributable to any    
portion ( ! inve/m5t s]vices p>tn]%ip   
int]e/ :i* is a qualifi$ capital int]e/ 
7det]m9$ "u rules simil> to ! rules (   
section #gaj7;d774  7#c7 ,exception =   
publicly trad$ p>tn]%ips ,except z      
o!rwise provid$ by ! ,secret>y1 9 ! case
 ( an ex*ange ( an int]e/ 9 a publicly  
trad$ p>tn]%ip 7z def9$ 9 section #ggjd7
 to :i* subsection 7a7 applies-- 7,a7   
?is section %all be appli$ )\t reg>d to 
subsections 7a77#c71 7b77#a77;,a77iii71 
& 7f77#c71 &  7,b7 su* p>tn]%ip %all be 
treat$ z own+ its proportionate %>e ( ! 
prop]ty ( any o!r p>tn]%ip 9 :i* x is a 
p>tn]4  7#d7 ,recognition ( ga9s ,any   
ga9 ) respect to :i* subsection 7a7     

applies by reason ( p>agraph 7#c7 !re(  
%all be recogniz$ not)/&+ any o!r       
provision ( ?is title4  7#e7            
,coord9ation ) inv5tory items ,an       
inve/m5t s]vices p>tn]%ip int]e/ held by
 ! p>tn]%ip %all n be treat$ z an       
inv5tory item ( ! p>tn]%ip4  7#f7       
,prev5tion ( d\ble c\nt+ ,"u regulations
 or o!r guidance prescrib$ by !         
,secret>y1 subsection 7a77#c7 %all n    
apply ) respect to any am\nt to :i*     
section #gaj applies4  7#g7 ,valuation  
me?ods ,! ,secret>y %all prescribe      
regulations or o!r guidance :i* provide 
! acceptable me?ods = valu+ inve/m5t    
s]vices p>tn]%ip int]e/s = purposes (   
?is section4  4  7c7 ,treatm5t =        
purposes ( section #ggjd ,subsection 7d7
 ( section #ggjd is am5d$ by add+ at !  
end ! foll[+ new p>agraph3  7#f7 ,income
 f c]ta9 c>ri$ int]e/s n qualifi$  7,a7 
,9 g5]al ,specifi$ c>ri$ int]e/ income  
%all n be treat$ z qualify+ income4     
7,b7 ,specifi$ c>ri$ int]e/ income ,=   
purposes ( ?is p>agraph-- 7i7 ,9 g5]al  

,! t]m specifi$ c>ri$ int]e/ income     
means-- 7,i7 any item ( income or ga9   
allocat$ to an inve/m5t s]vices p>tn]%ip
 int]e/ 7z def9$ 9 section #gaj7;c77    
held by ! p>tn]%ip1  7,,ii7 any ga9 on !
 disposition ( an inve/m5t s]vices      
p>tn]%ip int]e/ 7z s def9$7 or a        
p>tn]%ip int]e/ to :i* 79 ! h&s ( !     
p>tn]%ip7 section #gea applies1 &       
7,,iii7 any income or ga9 tak5 into     
acc\nt by ! p>tn]%ip "u subsection      
7b77#d7 or 7e7 ( section #gaj4  7ii7    
,exception = qualifi$ capital int]e/s ,a
 rule simil> to ! rule ( section        
#gaj7;d7 %all apply = purposes ( clause 
7i74  7,c7 ,coord9ation ) o!r provisions
 ,subp>agraph 7,a7 %all n apply to any  
item describ$ 9 p>agraph 7#a77;,e7 7or s
 mu* ( p>agraph 7#a77;,f7 z relates to  
p>agraph 7#a77;,e774  7,d7 ,special     
rules = c]ta9 p>tn]%ips  7i7 ,c]ta9     
p>tn]%ips own$ by real e/ate inve/m5t   
tru/s ,subp>agraph 7,a7 %all n apply 9 !
 case ( a p>tn]%ip :i* meets ea* ( !    
foll[+ requirem5ts3 7,i7 ,su* p>tn]%ip  

is treat$ z publicly trad$ "u ?is       
section solely by reason ( int]e/s 9 su*
 p>tn]%ip be+ conv]tible into int]e/s 9 
a real e/ate inve/m5t tru/ :i* is       
publicly trad$4  7,,ii7 ,fifty p]c5t or 
m ( ! capital & pr(its int]e/s ( su*    
p>tn]%ip are own$1 directly or          
indirectly1 at all times dur+ ! taxable 
ye> by su* real e/ate inve/m5t tru/     
7det]m9$ ) ! application ( section      
#bfg7;c774  7,,iii7 ,su* p>tn]%ip meets 
! requirem5ts ( p>agraphs 7#b71 7#c71 & 
7#d7 ( section #hef7;c74  7ii7 ,c]ta9   
p>tn]%ips own+ o!r publicly trad$       
p>tn]%ips ,subp>agraph 7,a7 %all n apply
 9 ! case ( a p>tn]%ip :i* meets ea* ( !
 foll[+ requirem5ts3 7,i7 ,sub/antially 
all ( ! assets ( su* p>tn]%ip consi/ (  
int]e/s 9 "o or m publicly trad$        
p>tn]%ips 7det]m9$ )\t reg>d to         
subsection 7b77#b774  7,,ii7            
,sub/antially all ( ! income ( su*      
p>tn]%ip is ord9>y income or section    
#abca ga9 7z def9$ 9 section            
#abca7;a77#c774  7,e7 ,transitional rule

 ,subp>agraph 7,a7 %all n apply to any  
taxable ye> ( ! p>tn]%ip beg9n+ be=e !  
date :i* is #aj ye>s aft] ! date ( !    
enactm5t ( ?is p>agraph4  4  7d7        
,imposition ( p5alty on und]paym5ts     
7#a7 ,9 g5]al ,subsection 7b7 ( section 
#fffb is am5d$ by ins]t+ aft] p>agraph  
7#aj7 ! foll[+ new p>agraph3  7#aa7 ,!  
application ( section #gaj7;e7 or !     
regulations or o!r guidance prescrib$ "u
 section #gaj7;g7 to prev5t ! avoidance 
( ! purposes ( section #gaj4  4  7#b7   
,am\nt ( p5alty  7,a7 ,9 g5]al ,section 
#fffb is am5d$ by add+ at ! end ! foll[+
 new subsection3  7m7 ,increase 9 p5alty
 9 case ( prop]ty transf]r$ = inve/m5t  
managem5t s]vices ,9 ! case ( any       
portion ( an und]paym5t to :i* ?is      
section applies by reason ( subsection  
7b77#aj71 subsection 7a7 %all be appli$ 
) respect to su* portion by sub/itut+   
#dj p]c5t = #bj p]c5t4  4  7,b7 ,con=m+ 
am5dm5t ,subp>agraph 7,b7 ( section     
#fffb;,a7e77#b7 is am5d$ by /rik+ or 7i7
 & ins]t+ 1 7i71 or 7m74  7#c7 ,special 

rules = application ( reasonable cause  
exception ,subsection 7c7 ( section     
#fffd is am5d$-- 7,a7 by r$esignat+     
p>agraphs 7#c7 & 7#d7 z p>agraphs 7#d7 &
 7#e71 respectively2  7,b7 by /rik+     
p>agraph 7#c7 9 p>agraph 7#e77;,a71 z s 
r$esignat$1 & ins]t+ p>agraph 7#d72 &   
7,c7 by ins]t+ aft] p>agraph 7#b7 !     
foll[+ new p>agraph3  7#c7 ,special rule
 = und]paym5ts attributable to inve/m5t 
managem5t s]vices  7,a7 ,9 g5]al        
,p>agraph 7#a7 %all n apply to any      
portion ( an und]paym5t to :i* section  
#fffb applies by reason ( subsection    
7b77#aa7 unless-- 7i7 ! relevant facts  
affect+ ! tax treatm5t ( ! item are     
adequately disclos$1  7ii7 !re is or 0  
sub/antial au?ority = su* treatm5t1 &   
7iii7 ! taxpay] reasonably believ$ t su*
 treatm5t 0 m likely ?an n ! prop]      
treatm5t4  7,b7 ,rules relat+ to        
reasonable belief ,rules simil> to !    
rules ( subsection 7d77#d7 %all apply = 
purposes ( subp>agraph 7,a77iii74  4    
7e7 ,income & loss f inve/m5t s]vices   

p>tn]%ip int]e/s tak5 into acc\nt 9     
det]m9+ net e>n+s f self-,employm5t     
7#a7 ,int]nal ,rev5ue ,code  7,a7 ,9    
g5]al ,section #adjb7;a7 is am5d$ by    
/rik+ & at ! end ( p>agraph 7#af71 by   
/rik+ ! p]iod at ! end ( p>agraph 7#ag7 
& ins]t+ 2 &1 & by ins]t+ aft] p>agraph 
7#ag7 ! foll[+ new p>agraph3  7#ah7     
not)/&+ ! prec$+ provisions ( ?is       
subsection1 9 ! case ( any individual   
engag$ 9 ! trade or bus9ess ( provid+   
s]vices describ$ 9 section #gaj7;c77#b7 
) respect to any entity1 inve/m5t       
s]vices p>tn]%ip income or loss 7z def9$
 9 subsection 7m77 ( su* individual )   
respect to su* entity %all be tak5 into 
acc\nt 9 det]m9+ ! net e>n+s f          
self-employm5t ( su* individual4  4     
7,b7 ,inve/m5t s]vices p>tn]%ip income  
or loss ,section #adjb is am5d$ by add+ 
at ! end ! foll[+ new subsection3  7m7  
,inve/m5t s]vices p>tn]%ip income or    
loss ,= purposes ( subsection 7a7-- 7#a7
 ,9 g5]al ,! t]m inve/m5t s]vices       
p>tn]%ip income or loss means1 ) respect

 to any inve/m5t s]vices p>tn]%ip int]e/
 7z def9$ 9 section #gaj7;c77 or        
disqualifi$ int]e/ 7z def9$ 9 section   
#gaj7;e771 ! net (-- 7,a7 ! am\nts      
treat$ z ord9>y income or ord9>y loss "u
 subsections 7b7 & 7e7 ( section #gaj ) 
respect to su* int]e/1  7,b7 all items (
 income1 ga91 loss1 & d$uction allocat$ 
to su* int]e/1 &  7,c7 ! am\nts treat$ z
 realiz$ f ! sale or ex*ange ( prop]ty  
o!r ?an a capital asset "u section #gea 
) respect to su* int]e/4  7#b7          
,exception = qualifi$ capital int]e/s ,a
 rule simil> to ! rule ( section        
#gaj7;d7 %all apply = purposes ( apply+ 
p>agraph 7#a77;,b74  4  7#b7 ,social    
,security ,act ,section #baa7;a7 ( !    
,social ,security ,act is am5d$ by /rik+
 & at ! end ( p>agraph 7#ae71 by /rik+ !
 p]iod at ! end ( p>agraph 7#af7 &      
ins]t+ 2 &1 & by ins]t+ aft] p>agraph   
7#af7 ! foll[+ new p>agraph3  7#ag7     
,not)/&+ ! prec$+ provisions ( ?is      
subsection1 9 ! case ( any individual   
engag$ 9 ! trade or bus9ess ( provid+   

s]vices describ$ 9 section #gaj7;c77#b7 
( ! ,int]nal ,rev5ue ,code ( #aihf )    
respect to any entity1 inve/m5t s]vices 
p>tn]%ip income or loss 7z def9$ 9      
section #adjb7m7 ( su* ,code7 %all be   
tak5 into acc\nt 9 det]m9+ ! net e>n+s f
 self-employm5t ( su* individual4  4    
7f7 ,sep>ate acc\nt+ by p>tn] ,section  
#gjb7;a7 is am5d$ by /rik+ & at ! end ( 
p>agraph 7#g71 by /rik+ ! p]iod at ! end
 ( p>agraph 7#h7 & ins]t+ 1 &1 & by     
ins]t+ aft] p>agraph 7#h7 ! foll[+3     
7#i7 any am\nt treat$ z ord9>y income or
 loss "u subsection 7a71 7b71 or 7e7 (  
section #gaj4  4  7g7 ,con=m+ am5dm5ts  
7#a7 ,subsection 7d7 ( section #gca is  
am5d$ by ins]t+ section #gaj7;b77#d7    
7relat+ to di/ributions ( p>tn]%ip      
prop]ty71 aft] to ! ext5t o!rwise       
provid$ by4  7#b7 ,section #gda is am5d$
 by ins]t+ or section #gaj 7relat+ to   
special rules = p>tn]s provid+ inve/m5t 
managem5t s]vices to p>tn]%ips7 be=e !  
p]iod at ! end4  7#c7 ,! table (        
sections = "p ,i ( sub*apt] ,k ( *apt]  

#a is am5d$ by add+ at ! end ! foll[+   
new item3  ,sec4 #gaj4 ,special rules = 
p>tn]s provid+ inve/m5t managem5t       
s]vices to p>tn]%ips4  4  7#d7 7,a7 ,"p 
,,iv ( sub*apt] ,o ( *apt] #a is am5d$  
by /rik+ section #ajfa4  7,b7 ,! table (
 sections = "p ,,iv ( sub*apt] ,o (     
*apt] #a is am5d$ by /rik+ ! item relat+
 to section #ajfa4  7h7 ,effective date 
7#a7 ,9 g5]al ,except z o!rwise provid$ 
9 ?is subsection1 ! am5dm5ts made by ?is
 section %all apply to taxable ye>s end+
 aft] ! date ( ! enactm5t ( ?is ,act4   
7#b7 ,p>tn]%ip taxable ye>s :i* include 
effective date ,9 apply+ section        
#gaj7;a7 ( ! ,int]nal ,rev5ue ,code (   
#aihf 7z add$ by ?is section7 9 ! case (
 any p>tn]%ip taxable ye> :i* includes !
 date ( ! enactm5t ( ?is ,act1 ! am\nt (
 ! net capital ga9 ref]r$ to 9 su*      
section %all be treat$ z be+ ! less] ( !
 net capital ga9 = ! entire p>tn]%ip    
taxable ye> or ! net capital ga9 det]m9$
 by only tak+ into acc\nt items         
attributable to ! portion ( ! p>tn]%ip  

taxable ye> :i* is aft] su* date4  7#c7 
,dispositions ( p>tn]%ip int]e/s  7,a7  
,9 g5]al ,section #gaj7;b7 ( su* ,code  
7z add$ by ?is section7 %all apply to   
dispositions & di/ributions aft] ! date 
( ! enactm5t ( ?is ,act4  7,b7 ,indirect
 dispositions ,! am5dm5ts made by       
subsection 7b7 %all apply to            
transactions aft] ! date ( ! enactm5t ( 
?is ,act4  7#d7 ,o!r income & ga9 9     
connection ) inve/m5t managem5t s]vices 
,section #gaj7;e7 ( su* ,code 7z add$ by
 ?is section7 %all take effect on ! date
 ( ! enactm5t ( ?is ,act4