,,ii #aai? ,,congress #a/ ,session ,s4 #bhde ,,9 ,,! ,,s5ate ,,( ,,! ,,unit$ ,,/ates ,septemb] #ag 7legislative day1 ,septemb] #af71 #bjbe,mr4 ,wyd5 7= himself1 ,mr4 ,:iteh\se1 ,ms4 ,w>r51 ,mr4 ,s&]s1 ,ms4 ,smi?1 ,mr4 ,lujn1 ,mr4 ,wel*1 ,ms4 ,alsobrooks1 ,ms4 ,baldw91 ,mr4 ,blum5?al1 ,ms4 ,duckwor?1 ,mr4 ,fett]man1 ,mr4 ,he9ri*1 ,ms4 ,hirono1 ,mr4 ,m>key1 ,mr4 ,m]kley1 ,mr4 ,murphy1 ,mrs4 ,murray1 ,mr4 ,re$1 ,mr4 ,s*atz1 & ,mr4 ,van ,holl57 introduc$ ! foll[+ bill2 :i* 0 read twice & ref]r$ to ! ,committee on ,f9ance ,a ,,bill ,to am5d ! ,int]nal ,rev5ue ,code ( #aihf to elim9ate tax loopholes t all[ billionaires to def] tax indef9itely ?r\gh plann+ /rategies su* z buy1 borr[1 die1 to modify ov] #cj tax provisions s t billionaires are requir$ to pay taxes annually1 & = o!r purposes4 #a4 ,%ort title2 am5dm5t ( #aihf ,code2 table ( cont5ts 7a7 ,%ort ,title ,?is ,act may be cit$ z ! ,billionaires ,income ,tax ,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 7c7 ,table ( cont5ts ,! table ( cont5ts ( ?is ,act is z foll[s3 ,sec4 #a4 ,%ort title2 am5dm5t ( #aihf ,code2 table ( cont5ts4,sec4 #b4 ,purpose4,,title ,i--,elim9ation ( def]ral = applicable taxpayers,sec4 #aja4 ,elim9ation ( def]ral ( tax4,sec4 #ajb4 ,c>ryback ( capital losses attributable to m>k-to-m>ket rules4,,title ,,ii--,application ( o!r provisions to applicable taxpay]s & entities,subtitle ,a--,individuals,sec4 #bja4 ,applicable taxpay]s n eligible = adju/$ gross income limitation on net inve/m5t tax4,sec4 #bjb4 ,treatm5t ( cov]$ expatriates4,subtitle ,b--,rules = applicable entities & trusts,sec4 #baa4 ,treatm5t ( l-k9d ex*anges by applicable entities4,sec4 #bab4 ,treatm5t ( transf]s by applicable entities 9 ex*ange = /ock4,sec4 #bac4 ,special rules = applicable tru/s4,subtitle ,c--,treatm5t ( def]r$ comp5sation & c]ta9 life insurance & annuity contracts,sec4 #bba4 ,elim9ation ( def]ral ( tax on c]ta9 comp5sation4,sec4 #bbb4 ,rules relat+ to c]ta9 life insurance & annuity contracts ( applicable taxpay]s4,subtitle ,d--,repeal ( special treatm5t = c]ta9 investments,sec4 #bca4 ,treatm5t ( exclusion = c]ta9 small bus9ess /ock4,sec4 #bcb4 ,modifications = inve/m5ts 9 qualifi$ opportunity funds4 #b4 ,purpose ,! purpose ( ?is ,act is to require billionaires to pay taxes annually by elim9at+ ! ability ( high income & high net wor? taxpay]s to use tax plann+ /rategies su* z buy1 borr[1 die to def] pay+ taxes indef9itely1 specifically by-- 7#a7 "u ! provisions ( title ,i ( ?is ,act-- 7,a7 requir+ high income & high net wor? taxpay]s to pay tax on ! income !y e>n on an annual basis1 j l work+ p d on _! income f wages1 ?r\gh m>k-to-m>ket taxation1 & 7,b7 %utt+ d[n ! ability ( ! ultra weal?y to buy & hold appreciat+ assets & borr[ aga9/ ^? assets to support _! lavi% life/yles1 all completely tax-free1 & 7#b7 "u ! provisions ( title ,,ii ( ?is ,act1 clos+ loopholes 9 ! tax code t all[ high income & high net wor? taxpay]s to %ield _! income f taxation1 includ+ ! loophole t all[s ultra weal?y taxpay]s to transf] untax$ appreciat$ assets to _! heirs at dea? & su* heirs to sell su* assets completely tax-free4 ,i ,elim9ation ( def]ral = applicable taxpay]s #aja4 ,elim9ation ( def]ral ( tax 7a7 ,9 g5]al ,sub*apt] ,e ( *apt] #a is am5d$ by add+ at ! end ! foll[+ new "p3 ,,iv ,elim9ation ( def]ral = applicable taxpay]s ,subp>t ,a4 ,g5]al provisions4,subp>t ,b4 ,def9itions & rules relat+ to applicable taxpay]s4,subp>t ,c4 ,o!r def9itions & rules4 ,a ,g5]al provisions ,sec4 #dij4 ,elim9ation ( def]ral ( tax = applicable taxpay]s4,sec4 #dia4 ,treatm5t ( tradable cov]$ assets4,sec4 #dib4 ,def]ral recapture am\nt on applicable transf]s ( nontradable cov]$ assets4,sec4 #dic4 ,special rules = application ( nondef]ral rules to c]ta9 pass-?r\gh entities4,sec4 #did4 ,treatm5t ( gifts1 beque/s1 & transf]s 9 tru/4 #dij4 ,elim9ation ( def]ral ( tax = applicable taxpay]s ,9 ! case ( an applicable taxpay] = any taxable ye>-- 7#a7 if !re is a taxable ev5t ) respect to any tradable cov]$ asset ( ! taxpay] dur+ ! taxable ye>1 ga9 or loss %all be recogniz$ z provid$ 9 section #dia1 7#b7 if !re is an applicable transf] by ! taxpay] dur+ ! taxable ye> ( any nontradable cov]$ asset-- 7,a7 if su* applicable transf] is a disreg>d$ nonrecognition ev5t1 ga9 or loss %all be recogniz$ z provid$ 9 section #dib7;a77#a71 & 7,b7 ! tax impos$ by ?is *apt] = ! taxable ye> %all be increas$ z provid$ 9 section #dib ) respect to any ga9 f any su* transf]1 7#c7 ga9 or loss ) respect to any applicable entity held by ! taxpay] %all be tak5 into acc\nt z provid$ 9 section #dic1 & 7#d7 9 ! case ( any gift1 beque/1 or transf] 9 tru/ by an applicable taxpay] or applicable entity held by an applicable taxpay]1 section #did %all apply4 #dia4 ,treatm5t ( tradable cov]$ assets 7a7 ,9 g5]al ,= purposes ( ?is title1 9 ! case ( a taxable ev5t ) respect to any tradable cov]$ asset ( an applicable taxpay]-- 7#a7 not)/&+ any o!r provision ( ?is title-- 7,a7 ga9 or loss %all be recogniz$ & tak5 into acc\nt 9 ! taxable ye> 9 :i* ! taxable ev5t occurs z if ! taxpay] _h sold ! tradable cov]$ asset = its fair m>ket value-- 7i7 9 ! case ( a taxable ev5t describ$ 9 subsection 7b77#a71 on ! date ( ! taxable ev5t1 & 7ii7 9 ! case ( a taxable ev5t describ$ 9 subsection 7b77#b71 imm$iately be=e ! taxable ev5t1 & 7,b7 except z provid$ 9 subsection 7c77#a71 ga9 or loss tak5 into acc\nt by reason ( a taxable ev5t describ$ 9 subsection 7b77#a7 ) respect to a tradable cov]$ asset :i* is a capital asset %all be treat$ z long-t]m capital ga9 or long-t]m capital loss1 respectively1 & 7#b7 prop] adju/m5ts %all be made 9 ! am\nt ( ga9 or loss subsequ5tly realiz$ = ga9 or loss tak5 into acc\nt "u p>agraph 7#a74 7b7 ,taxable ev5t ,= purposes ( ?is "p1 ! t]m taxable ev5t means1 ) respect to any tradable cov]$ asset-- 7#a7 ! hold+ ( su* asset z ( ! close ( any taxable ye> ) respect to :i* a taxpay] is an applicable taxpay]1 & 7#b7 any disreg>d$ nonrecognition ev5t4 7c7 ,special rules 7#a7 ,*>act]ization z ord9>y income or loss ,except z provid$ by ! ,secret>y1 subsection 7a77#a77;,b7 %all n apply to any ga9 or loss f a tradable cov]$ asset if1 "u any o!r provision ( ?is title1 su* ga9 or loss-- 7,a7 is treat$ z ga9 or loss f ! sale or ex*ange ( an asset :i* is n a capital asset1 or 7,b7 is treat$ z ord9>y income or loss on a basis o!r ?an ! taxpay]'s hold+ p]iod 9 su* asset4 7#b7 ,hold+ p]iod ,= purposes ( ?is title1 any taxable ev5t describ$ 9 subsection 7b77#a7 ) respect to any tradable cov]$ asset %all n be tak5 into acc\nt 9 det]m9+ ! hold+ p]iod ( ! taxpay] ) respect to su* tradable cov]$ asset4 7#c7 ,prop] adju/m5ts = subsequ5t ga9 or loss ,= purposes ( subsection 7a77#b71 section #dib7;a77#a77;,b71 section #dic7;c77#a77;,a77ii71 & section #dic7;c77#c77;,c71 ! prop] adju/m5ts requir$ "u su* provisions %all include su* adju/m5ts 9 basis ( prop]ty1 or su* o!r adju/m5ts 9 respect ( prop]ty1 z ! ,secret>y det]m9es necess>y or appropriate4 #dib4 ,def]ral recapture am\nt on applicable transf]s ( nontradable cov]$ assets 7a7 ,9 g5]al ,if !re is an applicable transf] dur+ a taxable ye> ( a nontradable cov]$ asset ( an applicable taxpay]-- 7#a7 9 ! case ( an applicable transf] :i* is a disreg>d$ nonrecognition ev5t-- 7,a7 not)/&+ any o!r provision ( ?is title1 ga9 or loss %all be recogniz$ & tak5 into acc\nt by ! taxpay] 7includ+ = purposes ( p>agraph 7#b7 & subsection 7c77 9 ! taxable ye> 9 :i* ! transf] occurs z if ! taxpay] _h sold ! nontradable cov]$ asset = its fair m>ket value imm$iately be=e su* transf]1 & 7,b7 prop] adju/m5ts %all be made 9 ! am\nt ( ga9 or loss subsequ5tly realiz$ = ga9 or loss tak5 into acc\nt "u subp>agraph 7,a71 & 7#b7 if !re is ga9 f ! applicable transf]1 ! tax impos$ by ?is *apt] = ! taxable ye> 7det]m9$ )\t reg>d to ?is section7 %all be increas$ by ! sum ( ! def]ral recapture am\nts det]m9$ "u subsection 7b7 = ea* su* transf]4 7b7 ,def]ral recapture am\nt 7#a7 ,9 g5]al ,= purposes ( ?is "p-- 7,a7 ,9 g5]al ,! t]m def]ral recapture am\nt means1 ) respect to any applicable transf] ( any nontradable cov]$ asset1 ! aggregate am\nt ( int]e/ 7det]m9$ 9 ! mann] provid$ "u p>agraph 7#c77 on ! deem$ tax am\nt det]m9$ "u p>agraph 7#b7 = ea* taxable ye> to :i* ga9 is allocat$ "u p>agraph 7#b77;,a7 & :i* prec$es ! taxable ye> ( ! applicable transf]4 7,b7 ,limitation on am\nt ,! am\nt det]m9$ "u subp>agraph 7,a7 ) respect to any applicable transf] %all n exce$ ! applicable p]c5tage ( ! ga9 f su* transf]4 ,= purposes ( ?is subp>agraph1 ! applicable p]c5tage is ! excess (-- 7i7 #di p]c5t1 ov] 7ii7 9 ! case ( ! transf] ( a nontradable cov]$ asset :i*-- 7,i7 is a capital asset1 ! rate ( tax 9 effect "u section #a7;h77#a77;,d7 = ! taxable ye> ( ! transf]1 or 7,,ii7 is n a capital asset1 ! highe/ rate ( tax 9 effect "u section #a = su* taxable ye>4 7#b7 ,deem$ tax am\nt ,= purposes ( p>agraph 7#a7-- 7,a7 ,9 g5]al ,! deem$ tax am\nt = any taxable ye> prec$+ ! taxable ye> ( any applicable transf] ( a nontradable cov]$ asset %all be ! am\nt det]m9$-- 7i7 fir/1 except z provid$ 9 subp>agraph 7,b71 by allocat+ ! am\nt ( ga9 f su* transf] ratably to ea* day 9 ! taxpay]'s hold+ p]iod ( su* asset1 & 7ii7 !n by multiply+ ! am\nt allocat$ "u clause 7i7 to days 9 su* prec$+ taxable ye> by-- 7,i7 if su* asset is a capital asset1 ! rate ( tax 9 effect "u section #a7;h77#a77;,d7 = ! taxable ye> ( su* transf]1 or 7,,ii7 if su* asset is n a capital asset1 ! highe/ rate ( tax 9 effect "u section #a = su* taxable ye>4 7,b7 ,special rule = p]iods be=e becom+ applicable taxpay] ,not)/&+ subp>agraph 7,a77i71 any ga9 allocat$ "u su* subp>agraph to any taxable ye> prec$+ ! fir/ taxable ye> = :i* ! taxpay] is treat$ z an applicable taxpay] %all be allocat$ to su* fir/ taxable ye>4 7,c7 ,increase 9 deem$ tax am\nt by tax on net inve/m5t income ,if ga9 f a transf] to :i* ?is section applies = any taxable ye> is ( a type tak5 into acc\nt 9 comput+ net inve/m5t income 7z def9$ 9 section #adaa71 ! deem$ tax am\nt "u ?is p>agraph = any prec$+ taxable ye> to :i* su* ga9 is allocat$ "u subp>agraph 7,a77i7 %all be increas$ by an am\nt equal to ! am\nt ( su* allocat$ ga9 multipli$ by ! rate ( tax 9 effect "u section #adaa7;a77#a7 = ! taxable ye> ( su* transf]4 7#c7 ,computation ( int]e/ 7,a7 ,9 g5]al ,! am\nt ( int]e/ ref]r$ to 9 p>agraph 7#a7 on any deem$ tax am\nt det]m9$ "u p>agraph 7#b7 = any prec$+ taxable ye> %all be det]m9$ = ! p]iod-- 7i7 beg9n+ on ! due date = su* prec$+ taxable ye>1 & 7ii7 end+ on ! date on :i* ! applicable transf] occurs1 by us+ ! rates det]m9$ "u section #ffba7;b7 7plus #a p]c5tage po9t71 & ! me?od applicable "u section #ffba1 = und]paym5ts ( tax = su* p]iod4 7,b7 ,due date ,= purposes ( ?is p>agraph1 ! t]m due date means1 ) respect to any prec$+ taxable ye>1 ! date prescrib$ by law 7det]m9$ )\t reg>d to ext5sions7 = fil+ ! return ( ! tax impos$ by ?is *apt] = su* taxable ye>4 7c7 ,special rule = taxpay]s ) net capital losses 7#a7 ,9 g5]al ,if a taxpay] has a net capital loss = any taxable ye> = :i* !re is an increase 9 tax "u subsection 7a77#b71 su* increase 9 tax %all be r$uc$ 7b n bel[ z]o7 by ! cr$it equival5t ( su* net capital loss4 7#b7 ,cr$it equival5t ,= purposes ( ?is subsection1 ! t]m cr$it equival5t means1 ) respect to any net capital loss = any taxable ye>1 an am\nt equal to su* loss multipli$ by ! rate ( tax 9 effect "u section #a7;h77#a77;,d7 = su* taxable ye>4 7#c7 ,coord9ation ) c>ryov]s ( loss ,= purposes ( subsection 7b7 ( section #abab1 ! net capital loss = a taxable ye> to :i* p>agraph 7#a7 applies 7det]m9$ )\t reg>d to ?is subsection7 %all be r$uc$ 7b n bel[ z]o7 by an am\nt equal to ! am\nt ( ! r$uction "u p>agraph 7#a7 = su* taxable ye> divid$ by ! rate ( tax 9 effect "u section #a7;h77#a77;,d7 = su* taxable ye>4 7d7 ,special rules = c]ta9 divid5d di/ributions 7#a7 ,excess divid5d di/ributions 7,a7 ,9 g5]al ,= purposes ( apply+ ?is section1 any excess divid5d %all be treat$ z ga9 f an applicable transf] ( a nontradable cov]$ asset occurr+ on ! date su* divid5d is receiv$4 7,b7 ,excess divid5d ,= purposes ( ?is "p1 ! t]m excess divid5d means1 ) respect to any nontradable cov]$ asset :i* consi/s ( /ock 9 a ,c corporation1 any divid5d 9 respect ( su* /ock receiv$ dur+ any taxable ye> to ! ext5t su* divid5d does n exce$ its ratable portion ( ! total excess divid5ds 7if any7 = su* taxable ye>4 7,c7 ,total excess divid5ds ,= purposes ( ?is p>agraph-- 7i7 ,9 g5]al ,! t]m total excess divid5ds means1 ) respect to /ock 9 a ,c corporation describ$ 9 subp>agraph 7,b71 ! excess 7if any7 (-- 7,i7 ! am\nt ( ! divid5ds 9 respect ( su* /ock receiv$ by ! taxpay] dur+ ! taxable ye>1 ov] 7,,ii7 #abe p]c5t ( ! av]age am\nt ( divid5ds receiv$ 9 respect ( su* /ock by ! taxpay] dur+ ! #c prec$+ taxable ye>s 7or1 if %ort]1 ! portion ( ! taxpay]'s hold+ p]iod be=e ! taxable ye>74 7ii7 ,no excess = #a/ ye> ,except z provid$ by ! ,secret>y1 ! total excess divid5ds ) respect to any /ock %all be z]o = ! taxable ye> 9 :i* ! taxpay]'s hold+ p]iod 9 su* /ock beg9s4 7,d7 ,adju/m5ts ,"u regulations prescrib$ by ! ,secret>y-- 7i7 det]m9ations "u ?is p>agraph %all be made on a %>e-by-%>e basis1 except t %>es ) ! same hold+ p]iod may be aggregat$ & o!r %>es may be aggregat$ to ! ext5t provid$ by ! ,secret>y1 7ii7 prop] adju/m5ts %all be made = /ock splits & /ock divid5ds1 7iii7 if ! taxpay] does n hold ! /ock dur+ ! entire taxable ye>1 divid5ds receiv$ dur+ su* ye> %all be annualiz$1 & 7iv7 if ! taxpay]'s hold+ p]iod includes p]iods dur+ :i* ! /ock 0 held by #a or m o!r p]sons1 divid5ds ) respect to su* /ock receiv$ by su* o!r p]son %all be tak5 into acc\nt z if receiv$ by ! taxpay]4 7#b7 ,capital ga9 divid5ds ( c]ta9 ,,reits 7,a7 ,9 g5]al ,= purposes ( apply+ ?is section1 if an applicable taxpay] holds directly 7or indirectly ?r\gh #a or m nontradable int]e/s7 /ock 9 a real e/ate inve/m5t tru/ :i* is a nontradable cov]$ asset1 any capital ga9 divid5d receiv$ by su* taxpay] f su* entity %all be treat$ z ga9 f an applicable transf] ( a nontradable cov]$ asset occurr+ on ! date su* divid5d is receiv$4 7,b7 ,report+ ,a real e/ate inve/m5t tru/ %all include 9 ! writt5 notice = a capital ga9 divid5d "u section #heg7;b77#c77;,b7 its hold+ p]iod 9 ! asset giv+ rise to ! capital ga9 divid5d4 ,! ,secret>y %all provide rules = ! det]m9ation ( hold+ p]iods 9 cases :]e ! divid5d is prop]ly allocable to ga9 f m ?an #a asset4 7#c7 ,hold+ p]iod ,except z prescrib$ by ! ,secret>y1 if an applicable taxpay] is treat$ "u ?is subsection z receiv+ ga9 f an applicable transf] ( a nontradable cov]$ asset1 ! taxpay]'s hold+ p]iod = purposes ( comput+ ! def]ral recapture am\nt "u ?is section %all be ! taxpay]'s hold+ p]iod ) respect to ! /ock or own]%ip int]e/ 9 ! entity to :i* p>agraph 7#a7 or 7#b7 applies 7or1 if %ort]1 ! hold+ p]iod includ$ 9 ! notice describ$ 9 p>agraph 7#b77;,b7 9 ! case ( a capital ga9 divid5d74 7e7 ,hold+ p]iod ,= purposes ( ?is section-- 7#a7 ,9 g5]al ,! taxpay]'s hold+ p]iod %all be det]m9$ "u section #abbc1 except t if a tradable cov]$ asset ( an applicable taxpay] is conv]t$ to1 or ex*ang$ =1 a nontradable cov]$ asset1 su* p]iod %all only include ! p]iod aft] ! mo/ rec5t taxable ev5t "u ?is "p ) respect to su* tradable cov]$ asset4 7#b7 ,secret>ial au?ority ,! ,secret>y %all prescribe su* regulations1 rules1 or guidance provid+ = o!r modifications to hold+ p]iods z may be necess>y to c>ry out ! purposes ( ?is section4 #dic4 ,special rules = application ( nondef]ral rules to c]ta9 pass-?r\gh entities 7a7 ,treatm5t ( own]%ip int]e/s 9 applicable entities ,= purposes ( apply+ ?is "p1 except z provid$ 9 ?is section1 any own]%ip int]e/ 9 an applicable entity held directly 7or indirectly ?r\gh #a or m nontradable int]e/s7 by an applicable taxpay] :i* is a tradable or nontradable cov]$ asset %all be treat$ 9 ! same mann] z any o!r su* asset4 7b7 ,additional requirem5ts = applicable taxpay]s :o are significant own]s ,= purposes ( ?is "p-- 7#a7 ,9 g5]al ,9 ! case ( any applicable taxpay] :i* is a significant own] ( an applicable entity-- 7,a7 su* taxpay] %all meet ! report+ requirem5ts "u p>agraph 7#b7 ) respect to su* entity1 & 7,b7 su* taxpay] %all take into acc\nt am\nts ) respect to su* entity z requir$ "u p>agraph 7#c74 7#b7 ,report+ requirem5ts = significant own]s 7,a7 ,notice to entity ( /atus 7i7 ,9 g5]al ,9 ! case ( ! fir/ taxable ye> = :i* a taxpay]-- 7,i7 is an applicable taxpay]1 7,,ii7 is a significant own] ( an applicable entity1 & 7,,iii7 holds directly a nontradable int]e/ 9 su* applicable entity1 su* taxpay] %all1 at su* "t & 9 su* mann] z ! ,secret>y %all prescribe1 notify su* applicable entity t su* taxpay] is a taxpay] meet+ ! requirem5ts ( subclauses 7,i71 7,,ii71 & 7,,iii7 & t ! applicable entity is subject to ! notice requirem5ts "u subsection 7c7 ) respect to su* taxpay]4 ,su* taxpay] %all include ) su* notice su* in=mation z ! ,secret>y may prescribe4 7ii7 ,p]iod ( notice ,any notice provid$ by a taxpay] "u clause 7i7 %all rema9 9 effect1 & su* entity %all cont9ue to be subject to ! report+ requirem5ts "u subsection 7c7 ) respect to su* taxpay]1 = ! p]iod specifi$ by ! ,secret>y4 ,! ,secret>y may require additional report+ by ! taxpay] = purposes ( c>ry+ out ?is clause4 7,b7 ,report+ ( elections to treat nontradable int]e/s z tradable assets ,if-- 7i7 section #dif7;a77#a7 applies to an applicable taxpay] = any taxable ye> = :i* a notice ) respect to su* taxpay] is 9 effect "u subp>agraph 7,a71 & 7ii7 ! applicable taxpay] made ! election "u section #dif7;a77#c7 to treat any nontradable int]e/ 9 an applicable entity z a tradable cov]$ asset = purposes ( section #dif7;a77#a71 ! applicable taxpay] %all1 at su* times & 9 su* mann] z ! ,secret>y %all prescribe1 report to su* applicable entity notice ( su* election1 ! am\nt ( ga9 describ$ 9 section #dif7;c77#a7 ) respect to su* treatm5t1 & ! requirem5t = ! entity to make ! basis adju/m5ts describ$ 9 section #dif7;c77#b74 7#c7 ,c]ta9 ga9 or loss ( applicable entity tak5 into acc\nt by significant own]s 7,a7 ,9 g5]al ,ea* applicable taxpay] = :i* a notice ) respect to su* taxpay] is 9 effect "u p>agraph 7#b77;,a7 or subsection 7c77#b7 ) respect to an applicable entity = any taxable ye> ( ! taxpay] %all1 9 comput+ ! taxpay]'s tax liability "u ?is *apt] = su* taxable ye>1 take into acc\nt su* taxpay]'s %>e ( any ga9 or loss report$ "u subsection 7c77#a77;,a77i7 or 7c77#a77;,b77i7 to ! taxpay] = any taxable ye> ( su* entity end+ ) or )9 su* taxable ye> ( ! taxpay]4 7,b7 ,basis adju/m5ts ,"u rules prescrib$ by ! ,secret>y1 if ga9 or loss is tak5 into acc\nt by an applicable taxpay] "u subp>agraph 7,a7 ) respect to any tradable cov]$ asset by reason ( ! taxpay] hold+ a nontradable int]e/ 9 an applicable entity-- 7i7 ! applicable entity's adju/$ basis ( su* asset 7solely = purposes ( comput+ ! taxpay]'s %>e ( su* adju/$ basis71 & 7ii7 ! taxpay]'s adju/$ basis ( su* nontradable int]e/1 %all ea* be appropriately adju/$ to reflect ga9 or loss s tak5 into acc\nt4 ,su* rules %all also provide prop] adju/m5ts to adju/$ bases :]e su* own]%ip is held ?r\gh ti]$ entities4 7,c7 ,special rules = def]ral recapture am\nt 7i7 ,hold+ p]iod ,except z prescrib$ by ! ,secret>y1 if an applicable taxpay] takes into acc\nt ga9 "u subp>agraph 7,a7 = any taxable ye> f an applicable transf] by su* applicable entity ( a nontradable cov]$ asset1 ! taxpay]'s hold+ p]iod ) respect to su* asset = purposes ( comput+ ! def]ral recapture am\nt "u section #dib %all be ! %ort] (-- 7,i7 ! entity's hold+ p]iod 9 su* asset1 or 7,,ii7 ! taxpay]'s hold+ p]iod 9 su* entity4 7ii7 ,o!r rules ,! ,secret>y %all prescribe rules = purposes ( ?is section-- 7,i7 = ! treatm5t ( fragm5t$ hold+ p]iods1 7,,ii7 = ! det]m9ation ( hold+ p]iods 9 ! case ( ti]$ /ructures1 & 7,,iii7 to prev5t ! %ift+ ( any def]ral recapture am\nt betwe5 taxpay]s hold+ own]%ip int]e/s 9 an applicable entity4 7,d7 ,taxpay]s fail+ to file notice ,"u rules requir$ by ! ,secret>y1 if a taxpay] fails to file a notice ) any applicable entity z requir$ "u p>agraph 7#b77;,a71 su* taxpay] %all take into acc\nt1 9 comput+ ! taxpay]'s tax liability "u ?is *apt] = any taxable ye> = :i* su* notice 7or a relat$ notice "u subsection 7c77#b77 w\ld o!rwise h be5 9 effect1 ga9 or loss describ$ 9 subp>agraph 7,a7 :i* w\ld h be5 report$ if su* notice _h be5 fil$4 7#d7 ,significant own] ,= purposes ( ?is subsection-- 7,a7 ,9 g5]al ,! t]m significant own] means1 ) respect to any applicable entity1 an applicable taxpay] :o1 at any "t dur+ ! applicable taxpay]'s taxable ye>-- 7i7 is a #e-p]c5t own] ) respect to su* entity1 or 7ii7 holds nontradable int]e/s 9 su* entity ) an aggregate applicable value ( great] ?an #ej1jjj1jjj4 7,b7 #e-p]c5t own] 7i7 ,9 g5]al ,! t]m #e-p]c5t own] means1 ) respect to any applicable entity1 an applicable taxpay] :o owns 7or is consid]$ z own+ )9 ! mean+ ( section #cah7 at lea/ #e p]c5t (-- 7,i7 9 ! case ( a corporation1 ! /ock 7by vote or value7 9 su* corporation1 or 7,,ii7 9 ! case ( an applicable entity o!r ?an a corporation1 ! capital or pr(its int]e/s 9 su* entity4 7ii7 ,con/ructive own]%ip rules ,= purposes ( ?is subp>agraph-- 7,i7 subp>agraph 7,c7 ( section #cah7;a77#b7 %all be appli$ by sub/itut+ #e p]c5t = #ej p]c5t1 & 7,,ii7 9 ! case ( an applicable entity :i* is n a corporation1 own]%ip 9 su* entity %all be det]m9$ 9 accordance ) regulations prescrib$ by ! ,secret>y :i* %all be bas$ on pr9ciples simil> to ! pr9ciples ( section #cah 7z modifi$ by subclause 7,i774 7c7 ,additional entity report+ requirem5ts 7#a7 ,9 g5]al ,except z provid$ 9 p>agraph 7#d71 an applicable entity = any taxable ye> %all1 at su* times & 9 su* mann] z ! ,secret>y %all prescribe1 report to ea* applicable taxpay] ) respect to :i* a notice is 9 effect "u subsection 7b77#b77;,a7 or p>agraph 7#b7-- 7,a7 9 ! case ( tradable cov]$ assets held by su* entity1 su* taxpay]'s %>e (-- 7i7 ga9 or loss det]m9$ by ! entity "u rules simil> to ! rules "u section #dia1 & 7ii7 prop] adju/m5ts %all be made 9 ! am\nt ( ga9 or loss subsequ5tly realiz$ = ga9 or loss tak5 into acc\nt "u clause 7i71 7,b7 9 ! case ( nontradable cov]$ assets held by su* entity-- 7i7 su* p]son's %>e ( any ga9 or loss on any applicable transf] dur+ su* taxable ye> ( any su* asset1 & 7ii7 ! hold+ p]iod 9 ea* su* asset1 & 7,c7 su* o!r in=mation z ! ,secret>y det]m9es necess>y to c>ry out ?is "p4 7#b7 ,notice ( taxpay]s hold+ indirect int]e/s 9 o!r applicable entities 7,a7 ,9 g5]al ,"u rules prescrib$ by ! ,secret>y1 except z provid$ 9 subp>agraph 7,b71 if an applicable entity 9 a ti] ( entities-- 7i7 receives a notice "u subsection 7b77#b77;,a7 ) respect to an applicable taxpay]1 su* entity %all notify ea* o!r applicable entity 9 :i* su* applicable taxpay] holds1 by reason ( hold+ a nontradable int]e/ 9 su* entity1 a nontradable int]e/ 9 su* o!r entity t ! p]son hold+ su* int]e/ 9 su* o!r entity is an applicable taxpay] ) respect to :i* ! notice requirem5ts ( p>agraph 7#a7 apply to su* o!r entity1 or 7ii7 receives a notice "u clause 7i7 or ?is clause1 su* entity %all notify ea* o!r applicable entity 9 :i* ! applicable taxpay] holds1 by reason ( hold+ an int]e/ 9 ! entity receiv+ su* notice1 a nontradable int]e/ 9 su* o!r entity t ! p]son hold+ su* int]e/ 9 su* o!r entity is an applicable taxpay] ) respect to :i* ! notice requirem5ts ( p>agraph 7#a7 apply to su* o!r entity4 ,any su* notice %all rema9 9 effect1 & any entity receiv+ su* notice %all treat su* taxpay] z an applicable taxpay]1 = ! p]iod specifi$ by ! ,secret>y4 ,! ,secret>y may require additional report+ by su* entities = purposes ( c>ry+ out ?is clause4 7,b7 ,requirem5t only applies if applicable taxpay] is significant own] ,an applicable entity %all be requir$ to report "u subp>agraph 7,a7 to ano!r applicable entity only if ! applicable taxpay] is a significant own] 7)9 ! mean+ ( subsection 7b77#d77 ( su* o!r entity1 det]m9$ only by tak+ into acc\nt int]e/s 9 su* o!r entity :i* su* applicable taxpay] holds by reason ( its own]%ip int]e/s 9 ! entity o!rwise requir$ to report & su* o!r own]%ip int]e/s 9 su* o!r entity z ! ,secret>y may require to be tak5 into acc\nt to prev5t ! avoidance ( ! purposes ( ?is "p4 7#c7 ,special rules = disreg>d$ nonrecognition ev5ts ,9 ! case ( an applicable transf] ( a nontradable cov]$ asset ( an applicable entity :i* is a disreg>d$ nonrecognition ev5t-- 7,a7 not)/&+ any o!r provision ( ?is title1 ga9 or loss %all be recogniz$ & tak5 into acc\nt 9 ! taxable ye> 9 :i* ! transf] occurs z if ! entity _h sold ! nontradable cov]$ asset = its fair m>ket value imm$iately be=e su* transf] 7or su* o!r value z is det]m9$ z ( su* "t "u rules prescrib$ by ! ,secret>y71 7,b7 su* entity %all report ! am\nt ( ga9 or loss requir$ to be tak5 into acc\nt "u subp>agraph 7,a7 to-- 7i7 ea* applicable taxpay] ) respect to :i* a notice is 9 effect :i* su* entity has receiv$ "u subsection 7b77#a71 & 7ii7 ea* o!r applicable entity f :i* x has receiv$ a notice "u p>agraph 7#b7 ) respect to su* an applicable taxpay]1 & 7,c7 prop] adju/m5ts %all be made 9 ! am\nt ( ga9 or loss subsequ5tly realiz$ = ga9 or loss tak5 into acc\nt "u subp>agraph 7,a74 7#d7 ,delay 9 report+ requirem5t ,if-- 7,a7 a notice is receiv$ by an applicable entity "u subsection 7b77#b77;,a7 or p>agraph 7#b7 = any taxable ye> ( ! entity ) respect to any p]son hold+ directly 7or indirectly ?r\gh #a or m nontradable int]e/s7 a nontradable int]e/ 9 su* entity1 & 7,b7 no notice is 9 effect ) respect to su* p]son or any o!r p]son = ! prec$+ taxable ye>1 !n1 except z provid$ by ! ,secret>y1 su* notice %all be treat$ z fir/ tak+ effect = purposes ( ?is subsection1 section #cea7;h71 & section #ajca7;i7 = ! taxable ye> imm$iately foll[+ ! taxable ye> 9 :i* ! notice is receiv$4 ,?is p>agraph %all n apply to a notice describ$ 9 subp>agraph 7,a7 receiv$ by an applicable entity f a p]son :o 0 a significant own] 7)9 ! mean+ ( subsection 7b77#d77 ( su* entity 7or any pr$ecessor entity7 on ! date ( ! enactm5t ( ?is "p4 7#e7 ,secret>ial au?ority ,9 prescrib+ rules = ! application ( ?is subsection1 ! ,secret>y may provide-- 7,a7 simplifi$ me?ods = applicable entities to meet ! requirem5ts ( ?is subsection1 includ+ ! aggregation ( ga9s & losses :]e appropriate1 7,b7 rules = det]m9+ a hold]'s %>e ( am\nts requir$ to be report$ by an applicable entity "u p>agraph 7#a71 & 7,c7 any rules necess>y to prev5t ! avoidance ( ! purposes ( ?is section1 includ+ ?r\gh ! delay 9 ! report+ requirem5t "u p>agraph 7#d74 7d7 ,def9itions & rules relat+ to application ( section ,= purposes ( ?is "p-- 7#a7 ,applicable entity ,! t]m applicable entity means any-- 7,a7 p>tn]%ip1 7,b7 ,s corporation1 or 7,c7 o!r pass-?r\gh entity specifi$ 9 regulations or guidance prescrib$ by ! ,secret>y4 7#b7 ,election to treat entity z applicable taxpay] = taxable ev5ts involv+ tradable assets ,if an applicable entity elects ! application ( ?is p>agraph = any taxable ye>-- 7,a7 ?is section %all n apply ) respect to any ga9 or loss 9 connection ) a taxable ev5t involv+ any tradable cov]$ asset held directly 7or indirectly ?r\gh #a or m nontradable int]e/s7 by su* entity1 & 7,b7 su* entity %all be treat$ z an applicable taxpay] = purposes ( apply+ sections #dij7a7 & #dia to su* taxable ev5t4 ,su* an election %all be made at su* "t & 9 su* mann] z ! ,secret>y may prescribe &1 once made1 %all be irrevocable )\t ! cons5t ( ! ,secret>y4 7e7 ,nontradable int]e/ ,= purposes ( ?is "p1 ! t]m nontradable int]e/ means any own]%ip int]e/ 9 an applicable entity :i* is a nontradable cov]$ asset4 7f7 ,regulations & guidance ,! ,secret>y %all prescribe su* regulations & guidance z are necess>y to c>ry out ! provisions ( ?is section1 includ+ regulations or guidance necess>y-- 7#a7 to prev5t ! use ( pass-?r\gh entities to avoid ! purposes ( ?is "p1 & 7#b7 to simplify ! application ( ?is "p4 #did4 ,treatm5t ( gifts1 beque/s1 & transf]s 9 tru/ 7a7 ,9 g5]al 7#a7 ,deem$ sale ,if any p]son describ$ 9 p>agraph 7#c7 transf]s any cov]$ asset by gift1 ^u dea?1 or 9 tru/1 su* cov]$ asset %all be treat$ z sold by su* p]son = its fair m>ket value to ! transf]ee on ! date ( su* gift1 dea?1 or transf]4 7#b7 ,no recognition = losses on transf]s by gift or 9 tru/ 7,a7 ,9 g5]al ,no loss %all be recogniz$ ) respect to any cov]$ asset :i* is treat$ z sold "u subsection 7a7 by reason ( a transf] by gift or 9 tru/4 7,b7 ,am\nt ( ga9 = transf]ee ,if a loss is n recogniz$ by ! transf]or by reason ( subp>agraph 7,a7 & ! transf]ee sells or o!rwise disposes ( ! cov]$ asset 7or ( o!r prop]ty ! basis ( :i* 9 ! taxpay]'s h&s is det]m9$ directly or indirectly by ref]5ce to su* prop]ty7 at a ga91 !n su* ga9 %all be recogniz$ only to ! ext5t t x exce$s s mu* ( su* loss z is prop]ly allocable to ! cov]$ asset sold or o!rwise dispos$ ( by ! transf]ee4 7#c7 ,p]son describ$ ,a p]son is describ$ 9 ?is section if su* p]son is-- 7,a7 an individual :o is an applicable taxpay] = ! taxable ye> 9 :i* ! transf] is made1 or 7,b7 an applicable entity ) respect to :i* a notice receiv$ by ! entity "u subsection 7b77#b77;,a7 or 7c77#b7 ( section #dic is 9 effect at ! "t ( su* transf]4 7b7 ,special rules = c]ta9 grantor tru/s 7#a7 ,transf]s ( nontradable cov]$ assets into c]ta9 grantor tru/s ,= purposes ( apply+ ?is section to any transf] 9 tru/1 except z o!rwise provid$ 9 ?is p>agraph1 any transf] ( a nontradable cov]$ asset f ! p]son treat$ z ! own] ( an applicable grantor tru/ 7o!r ?an a grantor tru/ :i* is a :olly revocable tru/7 to su* tru/ %all be treat$ z a transf] to :i* subsection 7a7 applies4 7#b7 ,deem$ di/ributions ,9 ! case ( any applicable grantor tru/1 any prop]ty held by su* tru/ %all be treat$ z transf]r$ by ! own] 9 a transf] to :i* subsection 7a7 applies-- 7,a7 on any date t-- 7i7 ! own] ceases to be treat$ z ! own] "u ?is *apt]1 7ii7 su* prop]ty is di/ribut$ to any p]son o!r ?an ! own]1 or 7iii7 ! prop]ty w\ld no long] be includ$ 9 ! own]'s gross e/ate "u *apt] #aa1 or 7,b7 on ! date ( ! dea? ( ! own]4 7#c7 ,applicable grantor tru/ ,= purposes ( ?is subsection-- 7,a7 ,9 g5]al ,! t]m applicable grantor tru/ means ! portion ( any tru/ ) respect to :i* an applicable taxpay] is consid]$ ! own] "u subp>t ,e ( "p ,i ( sub*apt] ,j4 7,b7 ,exceptions ,! ,secret>y %all provide = appropriate exceptions to ! treatm5t ( categories ( tru/s z applicable grantor tru/s "u subp>agraph 7,a71 includ+ arrangem5ts :i* are ord9>ily us$ 9 ! c\rse ( a trade or bus9ess1 employee b5efit arrangem5ts1 & arrangem5ts = securitization transactions4 7c7 ,exceptions 7#a7 ,sp\sal exception 7,a7 ,9 g5]al ,subsection 7a7 %all n apply to any transf] if su* transf]-- 7i7 is-- 7,i7 made to ! sp\se or ! surviv+ sp\se ( ! transf]or1 or 7,,ii7 made to a =m] sp\se ( ! transf]or if ! transf] is incid5t to divorce1 or 7ii7 is a transf] ( qualifi$ t]m9able int]e/ prop]ty or ( prop]ty to :i* section #bjef7;b77#e7 or #bebc7;e7 applies4 7,b7 ,c]ta9 rema9d] int]e/s treat$ z transf]r$ by sp\se ,prop]ty describ$ 9 subp>agraph 7,a77ii7 %all be treat$ z sold by ! sp\se or surviv+ sp\se on ! e>li] ( ! date ( ! disposition ( su* prop]ty by su* sp\se or surviv+ sp\se or ! date ( ! dea? ( su* sp\se or surviv+ sp\se4 7,c7 ,qualifi$ t]m9able int]e/ prop]ty ,= purposes ( ?is p>agraph1 ! t]m qualifi$ t]m9able int]e/ prop]ty means any prop]ty describ$ 9 section #bjef7;b77#g7 or #bebc7;f77#b74 7,d7 ,disall[ance ( sp\sal exception :]e sp\se or surviv+ sp\se n ,unit$ ,/ates citiz5 or long-t]m resid5t 7i7 ,9 g5]al ,subp>agraph 7,a7 %all n apply if ! sp\se or surviv+ sp\se ( ! dec$5t is n a citiz5 or long-t]m resid5t ( ! ,unit$ ,/ates4 7ii7 ,long-t]m resid5t ,= purposes ( clause 7i71 ! t]m long-t]m resid5t means any individual 7o!r ?an a citiz5 ( ! ,unit$ ,/ates7 :o is a lawful p]man5t resid5t ( ! ,unit$ ,/ates-- 7,i7 = ! taxable ye> 9 :i* ! transf] describ$ 9 subsection 7a7 occurs1 & 7,,ii7 9 at lea/ #h taxable ye>s dur+ ! p]iod ( #ae taxable ye>s end+ ) ! taxable ye> dur+ :i* ! transf] describ$ 9 subsection 7a7 or 7b77#a7 occurs4 ,= purposes ( ! prec$+ s5t5ce1 an individual %all n be treat$ z a lawful p]man5t resid5t = any taxable ye> if su* individual is treat$ z a resid5t ( a =eign c\ntry = ! taxable ye> "u ! provisions ( a tax treaty betwe5 ! ,unit$ ,/ates & ! =eign c\ntry & does n waive ! b5efits ( su* treaty applicable to resid5ts ( ! =eign c\ntry4 7#b7 ,gifts & beque/s to *>ity 7,a7 ,9 g5]al ,subsection 7a7 %all n apply to any transf] if su* transf] is made to or = ! use ( an organization describ$ 9 section #agj7;c74 7,b7 ,special rule = split-int]e/ tru/s ,9 ! case ( any transf]-- 7i7 to a *>itable rema9d] annuity tru/ 7z def9$ 9 section #ffd7 or a *>itable rema9d] unitru/ 7z def9$ 9 section #ffd71 or 7ii7 ( an int]e/ describ$ 9 section #agj7;f77#b77;,b71 subsection 7a7 %all n apply to ! portion ( su* transf] :i* is to or = ! use ( an organization describ$ 9 section #agj7;c74 7,c7 ,special rule = pool$ income funds ,9 ! case ( any transf] to a pool$ income fund 7z def9$ 9 section #fdb7;c77#e771 subsection 7a7 %all n apply to ! portion ( su* transf] :i* is to or = ! use ( an organization describ$ 9 section #agj7;b77#a77;,a7 7o!r ?an 9 clauses 7vii7 or 7viii774 7#c7 ,qualifi$ disability tru/s & cemet]y p]petual c>e funds ,subsection 7a7 %all n apply to transf]s to any qualifi$ disability tru/ 7z def9$ 9 section #fdb7;b77#b77;,c77ii77 or to transf]s to any cemet]y p]petual c>e fund describ$ 9 section #fdb7;i74 7d7 ,basis ( transf]ee 7#a7 ,9 g5]al ,not)/&+ sections #ajad & #ajae1 to ! ext5t t subsection 7a7 applies to any transf] ( prop]ty-- 7,a7 except z provid$ 9 subp>agraph 7,b71 ! basis ( ! prop]ty 9 ! h&s ( ! transf]ee %all be ! fair m>ket value ( ! prop]ty 7consi/5t ) ! am\nt tak5 into acc\nt by ! transf]or "u subsection 7a771 & 7,b7 9 ! case su* transf] is a transf] ^u dea? to any individual describ$ 9 subsection 7c77#a77;,a77i71 ! basis ( ! prop]ty 9 ! h&s ( ! transf]ee %all be ! same z x w\ld be 9 ! h&s ( ! transf]or1 except t if su* basis 7adju/$ = ! p]iod be=e ! date ( ! transf] z provid$ 9 section #ajaf7 is great] ?an ! fair m>ket value ( ! prop]ty at ! "t ( dea?1 !n = ! purpose ( det]m9+ loss ! basis %all be su* fair m>ket value4 7#b7 ,consi/5t basis rules = transf]s by dea? ,9 ! case ( any transf] ^u dea?1 rules simil> to section #ajad7;f7 %all apply = purposes ( ?is section4 7e7 ,application ( depreciation recapture rules ,p>agraphs 7#a7 & 7#b7 ( section #abde7;b7 & p>agraphs 7#a7 & 7#b7 ( section #abej7;d7 %all n apply to any prop]ty treat$ z sold by reason ( subsection 7a74 ,b ,def9itions & rules relat+ to applicable taxpay]s ,sec4 #die4 ,applicable taxpay] def9$4,sec4 #dif4 ,special rules = taxpay]s ent]+ or *ang+ /atus z applicable taxpay]s4 #die4 ,applicable taxpay] def9$ 7a7 ,9 g5]al ,= purposes ( ?is "p-- 7#a7 ,9 g5]al ,! t]m applicable taxpay] means1 ) respect to any taxable ye>1 any taxpay]-- 7,a7 :i* is an individual :o met ei!r ! income te/ ( p>agraph 7#b7 or ! asset te/ ( p>agraph 7#c7 = ea* ( ! #c imm$iately prec$+ taxable ye>s 7includ+ taxable ye>s beg9n+ be=e ! date ( ! enactm5t ( ?is "p :i* are includ$ 9 any su* #c-taxable-ye> p]iod71 or 7,b7 :i* is-- 7i7 an applicable tru/1 or 7ii7 ! e/ate ( an individual :o 0 an applicable taxpay] = any taxable ye> dur+ ! #d-taxable-ye> p]iod end+ ) ! taxable ye> 9 :i* ! individual di$4 7#b7 ,income te/ ,! requirem5ts ( ?is p>agraph are met = any taxable ye> if ! applicable adju/$ gross income ( ! taxpay] = ! taxable ye> exce$s #ajj1jjj1jjj 7#ej1jjj1jjj 9 ! case ( a m>ri$ individual fil+ sep>ately74 7#c7 ,asset te/ ,! requirem5ts ( ?is p>agraph are met = any taxable ye> if ! aggregate applicable value ( all tradable & nontradable cov]$ assets held by ! taxpay] z ( ! close ( ! taxable ye> exce$s #a1jjj1jjj1jjj 7#ejj1jjj1jjj 9 ! case ( a m>ri$ individual fil+ sep>ately74 7#d7 ,special rules relat+ to applicable taxpay] /atus 7,a7 ,t]m9ation ( /atus ( individual taxpay]s ,a taxpay] :o is treat$ z an applicable taxpay] "u p>agraph 7#a77;,a7 = any taxable ye> %all cont9ue to be s treat$ until ! fir/ taxable ye> ) respect to :i*-- 7i7 ! taxpay] does n1 = ea* ( ! #c taxable ye>s imm$iately prec$+ su* taxable ye>1 meet ei!r-- 7,i7 ! income te/ ( p>agraph 7#b7 9 effect = su* prec$+ taxable ye>1 or 7,,ii7 ! asset te/ ( p>agraph 7#c7 9 effect = su* prec$+ taxable ye>1 except t ea* su* p>agraph %all be appli$ = purposes ( ?is clause by sub/itut+ an am\nt equal to "o-half ( ! doll> am\nt o!rwise 9 effect = su* taxpay] "u su* p>agraph = ea* su* prec$+ taxable ye> = su* doll> am\nt1 & 7ii7 ! taxpay] elects1 9 su* mann] & =m & at su* "t z ! ,secret>y may prescribe1 n to be s treat$ = su* fir/ taxable ye>4 7,b7 ,e>li] t]m9ation election ( applicable taxpay] /atus = divorc$ individuals ,if-- 7i7 an applicable taxpay] ceases to be a m>ri$ individual by reason ( a decree ( divorce or sep>ate ma9t5ance issu$ dur+ any taxable ye>1 & 7ii7 su* taxpay]1 = ! fir/ taxable ye> foll[+ ! taxable ye> describ$ 9 clause 7i71 does n meet ei!r-- 7,i7 ! income te/ ( p>agraph 7#b71 except t su* p>agraph %all be appli$ = purposes ( ?is subclause by sub/itut+ #a1jjj1jjj = ! doll> am\nt o!rwise 9 effect = su* taxpay] "u su* p>agraph1 or 7,,ii7 ! asset te/ ( p>agraph 7#c71 except t su* p>agraph %all be appli$ = purposes ( ?is subclause by sub/itut+ #aj1jjj1jjj = ! doll> am\nt o!rwise 9 effect = su* taxpay] "u su* p>agraph1 !n su* taxpay] may elect1 9 su* mann] & =m & at su* "t z ! ,secret>y may prescribe1 n to be treat$ z an applicable taxpay] beg9n+ ) su* fir/ taxable ye>4 7,c7 ,election ,an election "u subp>agraph 7,a7 or 7,b7-- 7i7 %all be made ) ! taxpay]'s return ( tax = ! taxable ye> to :i* su* election fir/ applies 7or su* o!r "t z ! ,secret>y %all prescribe7 & %all be 9 su* =m & mann] z ! ,secret>y may prescribe1 & 7ii7 %all apply to su* fir/ taxable ye> & all subsequ5t taxable ye>s until ! fir/ taxable ye> = :i* ! taxpay] is aga9 treat$ z an applicable taxpay] by reason ( meet+ ! requirem5ts ( p>agraph 7#a77;,a74 7#e7 ,special rules = m>ri$ individuals 7,a7 ,applicable taxpay]s becom+ m>ri$ individuals ,if an individual 0 an applicable taxpay] = ! taxable ye> be=e ! individual became a m>ri$ individual 7)9 ! mean+ ( section #ggjc71 su* individual & ! individual's sp\se %all be treat$ z applicable taxpay]s = su* taxable ye> ( m>riage & subsequ5t taxable ye>s until su* /atus is o!rwise t]m9at$ "u ?is section4 7,b7 ,m>ri$ individuals fil+ sep>ately ,if a m>ri$ individual fil+ sep>ately is treat$ z an applicable taxpay] = any taxable ye>1 su* individual's sp\se %all be treat$ z an applicable taxpay] = su* taxable ye>4 7,c7 ,fir/-ye> elections ,"u rules prescrib$ by ! ,secret>y1 if an individual is fir/ treat$ z an applicable taxpay] = a taxable ye> by reason ( ! application ( subp>agraph 7,a7 or 7,b71 section #dif %all apply to su* taxpay] = su* fir/ taxable ye> only ) respect to assets held sep>ately by su* individual unless su* taxable ye> is also ! fir/ taxable ye> = :i* ! individual's sp\se is an applicable taxpay]4 7#f7 ,regulatory au?ority ,! ,secret>y %all prescribe su* regulations & guidance z may be necess>y to c>ry out ! provisions ( ?is subsection1 includ+-- 7,a7 rules waiv+ ! application ( p>agraph 7#e77;,b7 9 cases :]e ! ,secret>y det]m9es equitable relief is appropriate1 7,b7 rules provid+ = ! application ( ?is subsection 9 cases :]e ! fil+ /atus ( a taxpay] *anges betwe5 any taxable ye> & any ( ! #c imm$iately prec$+ taxable ye>s1 includ+ ! fir/ taxable ye> 9 :i* a taxpay] files a jo9t return aft] becom+ m>ri$1 & 7,c7 rules requir+ su* in=mation report+ z ! ,secret>y det]m9es necess>y to det]m9e :e!r a taxpay] is an applicable taxpay]4 7b7 ,applicable adju/$ gross income ,= purposes ( ?is section1 ! t]m applicable adju/$ gross income means modifi$ adju/$ gross income z def9$ 9 section #cf;,b7d77#b77;,b71 except t-- 7#a7 clause 7i7 !re( %all be appli$ by sub/itut+ sections #iaa1 #ica1 & #icc = section #iaa1 & 7#b7 9 ! case ( a tru/1 no d$uction "u section #fea or #ffa %all be all[$4 7c7 ,applicable tru/ ,= purposes ( ?is section-- 7#a7 ,9 g5]al ,! t]m applicable tru/ means a tru/ 7o!r ?an a grantor tru/7 :i*1 = ea* ( ! #c taxable ye>s imm$iately prec$+ su* taxable ye> 7includ+ taxable ye>s beg9n+ be=e ! date ( ! enactm5t ( ?is "p :i* are includ$ 9 any su* #c-taxable-ye> p]iod71 meets ei!r-- 7,a7 ! income te/ ( subsection 7a77#b71 except t su* subsection %all be appli$ = purposes ( ?is subp>agraph by sub/itut+ #aj1jjj1jjj = ! doll> am\nt o!rwise 9 effect = su* taxable ye> "u su* p>agraph1 or 7,b7 ! asset te/ ( subsection 7a77#c71 except t su* subsection %all be appli$ = purposes ( ?is subp>agraph by sub/itut+ #ajj1jjj1jjj = ! doll> am\nt o!rwise 9 effect = su* taxable ye> "u su* p>agraph4 7#b7 ,exceptions ,su* t]m %all n include-- 7,a7 a qualifi$ disability tru/ 7z def9$ 9 section #fdb7;b77#b77;,c77ii771 7,b7 any portion ( a tru/ :i* consi/s ( prop]ty p]man5tly set aside = ! exclusive use ( an organization describ$ 9 section #agj7;c71 7,c7 a pool$ income fund 7z def9$ 9 section #fdb7;c77#e77 or a cemet]y p]petual c>e fund 7z describ$ 9 section #fdb7;i771 7,d7 a settlem5t tru/ 7z def9$ 9 section #fdf71 7,e7 any *>itable rema9d] annuity tru/ 7z def9$ 9 section #ffd71 7,f7 any *>itable rema9d] unitru/ 7z def9$ 9 section #ffd71 or 7,g7 any o!r category ( tru/ id5tifi$ 9 regulations or guidance provid$ by ! ,secret>y4 7#c7 ,grantor tru/s 7,a7 ,grantor tru/ def9$ ,= purposes ( ?is section1 ! t]m grantor tru/ means any portion ( a tru/ ) respect to :i* ! grantor or any o!r p]son is consid]$ ! own] "u subp>t ,e ( "p ,i ( sub*apt] ,j4 7,b7 ,assets ( grantor tru/ tak5 into acc\nt ,= purposes ( subsection 7a77#a77;,a71 ! assets ( a grantor tru/ %all be includ$ 9 ! assets (-- 7i7 ! grantor ( su* tru/ if ! grantor is consid]$ ! own] ( su* assets1 & 7ii7 if a p]son o!r ?an ! grantor is consid]$ ! own] ( su* assets1 bo? ! grantor & su* p]son4 7d7 ,special rules = =eign p]sons & expatriates ,= purposes ( ?is "p-- 7#a7 ,nonresid5t ali5 individuals ,! foll[+ rules %all apply 9 det]m9+ :e!r a nonresid5t ali5 individual is an applicable taxpay]3 7,a7 ,income te/ ,= purposes ( ! income te/ "u subsection 7a77#b7-- 7i7 su* subsection %all be appli$ = purposes ( ?is subp>agraph by sub/itut+ #ej1jjj1jjj = ! doll> am\nt o!rwise 9 effect = su* taxable ye> "u su* p>agraph1 & 7ii7 ! applicable adju/$ gross income ( su* individual %all be equal to ! taxable income ( su* individual1 det]m9$ by only tak+ into acc\nt items ( income1 ga91 d$uction1 & loss :i* are effectively connect$ ) ! conduct ( trades or bus9esses )9 ! ,unit$ ,/ates4 7,b7 ,asset te/ ,= purposes ( ! asset te/ "u subsection 7a77#c7-- 7i7 su* subsection %all be appli$ = purposes ( ?is subp>agraph by sub/itut+ #ejj1jjj1jjj = ! doll> am\nt o!rwise 9 effect = su* taxable ye> "u su* p>agraph1 & 7ii7 only assets :i* produce income describ$ 9 subp>agraph 7,a7 %all be tak5 into acc\nt4 7#b7 ,expatriates 7,a7 ,9 g5]al ,if1 = ! taxable ye> :i* includes a cov]$ expatriate's expatriation date1 su* expatriate-- 7i7 0 an applicable taxpay] 7)\t reg>d to ?is p>agraph71 or 7ii7 is an applicable taxpay] "u ! rules ( subp>agraph 7,b71 su* expatriate %all be treat$ z an applicable taxpay] dur+ ea* ( ! taxable ye>s dur+ ! #aj-taxable-ye> p]iod beg9n+ ) su* taxable ye> 7& su* /atus %all n be t]m9at$ dur+ su* p]iod by reason ( any o!r provision ( ?is "p74 7,b7 ,special rules = det]m9+ /atus ,= purposes ( subp>agraph 7,a77ii71 a cov]$ expatriate n o!rwise treat$ z an applicable taxpay] %all be treat$ z an applicable taxpay] if1 dur+ any ( ! #e taxable ye>s imm$iately prec$+ ! taxable ye> :i* includes ! cov]$ expatriate's expatriation date 7includ+ taxable ye>s beg9n+ be=e ! date ( ! enactm5t ( ?is "p :i* are includ$ 9 any su* #e-taxable-ye> p]iod71 ! expatriate meets ei!r-- 7i7 ! income te/ ( subsection 7a77#b71 except t su* subsection %all be appli$ = purposes ( ?is subp>agraph by sub/itut+ #ej1jjj1jjj = ! doll> am\nt o!rwise 9 effect = su* taxable ye> "u su* p>agraph1 or 7ii7 ! asset te/ ( subsection 7a77#c71 except t su* subsection %all be appli$ = purposes ( ?is subp>agraph by sub/itut+ #ejj1jjj1jjj = ! doll> am\nt o!rwise 9 effect = su* taxable ye> "u su* p>agraph4 7,c7 ,def9itions ,any t]m us$ 9 ?is p>agraph :i* is also us$ 9 section #hgg;,a %all h ! same mean+ z :5 us$ 9 su* section4 #dif4 ,special rules = taxpay]s ent]+ or *ang+ /atus z applicable taxpay]s 7a7 ,initial treatm5t z applicable taxpay] 7#a7 ,9 g5]al ,9 ! case ( ! fir/ taxable ye> = :i* a taxpay] is an applicable taxpay]-- 7,a7 ! taxpay] may make ! election "u p>agraph 7#c7 ) respect to nontradable cov]$ assets1 & 7,b7 if ! taxpay] elects ! application ( ?is subp>agraph1 ! net fir/-ye> tax liability ( ! taxpay] = su* taxable ye> %all be payable 9 #e equal annual in/allm5ts ov] ! #e-taxable-ye> p]iod beg9n+ ) su* taxable ye>4 7#b7 ,net fir/-ye> tax liability ,= purposes ( ?is section-- 7,a7 ,9 g5]al ,! t]m net fir/-ye> tax liability means1 ) respect to ! fir/ taxable ye> describ$ 9 p>agraph 7#a71 ! excess 7if any7 (-- 7i7 su* taxpay]'s net income tax = su* taxable ye>1 ov] 7ii7 su* taxpay]'s net income tax = su* taxable ye> det]m9$ )\t reg>d to ga9 or loss ( ! taxpay] tak5 into acc\nt = su* taxable ye> by reason ( a taxable ev5t describ$ 9 section #dia7;b77#a74 7,b7 ,net income tax ,! t]m net income tax means ! regul> tax liability r$uc$ by ! cr$its all[$ "u subp>ts ,a1 ,b1 & ,d ( "p ,,iv ( sub*apt] ,a4 7#c7 ,election to pay & def] tax on nontradable assets 7,a7 ,9 g5]al ,except z provid$ 9 subp>agraph 7,c71 a taxpay] may elect to treat any nontradable cov]$ asset held by ! taxpay] z ( ! end ( ! fir/ taxable ye> describ$ 9 p>agraph 7#a7 z a tradable cov]$ asset = purposes ( apply+ section #dia7;b77#a7 & ?is subsection4 7,b7 ,det]m9ation ( ga9 7i7 ,9 g5]al ,= purposes ( apply+ section #dia7;a77#a77;,a71 ! fair m>ket value ( any asset ) respect to :i* an election is 9 effect "u subp>agraph 7,a7 %all be ! am\nt specifi$ by ! taxpay] 9 su* election1 except t su* value may n1 unless o!rwise provid$ by ! ,secret>y1 be less ?an ! taxpay]'s adju/$ basis 9 su* asset z ( ! end ( ! fir/ taxable ye> describ$ 9 p>agraph 7#a74 7ii7 ,no d$uctions or cr$its = basis increases ,if !re is any increase "u ?is "p 9 ! taxpay]'s adju/$ basis ( any asset by reason ( an election "u ?is p>agraph1 no d$uction or cr$it %all be all[$ "u ?is title ) respect to ! portion ( su* adju/$ basis attributable to su* increase4 7,c7 ,only significant own] ( applicable entity may elect ,9 ! case ( a nontradable cov]$ asset :i* is a nontradable int]e/ 9 an applicable entity1 an applicable taxpay] may make an election "u subp>agraph 7,a7 ) respect to su* asset only if su* taxpay] is a significant own] 7z def9$ 9 section #dic7;b77#d77;,a77 ( su* entity ) respect to :om a notice is 9 effect "u section #dic7;b77#b77;,a7 = ! taxable ye> = :i* ! election is be+ made4 7#d7 ,special rule :]e delay 9 report+ by applicable entity 7,a7 ,9 g5]al ,if-- 7i7 !re is a delay 9 report+ to an applicable taxpay] by #a or m applicable entities by reason ( section #dic7;c77#d71 & 7ii7 any ga9 or loss is report$ by su* entities to su* taxpay] "u section #dic7;c77#a77;,a77i7 & is tak5 into acc\nt 9 su* taxpay]'s taxable ye> imm$iately succe$+ ! fir/ taxable ye> describ$ 9 p>agraph 7#a71 !n1 subject to su* rules z ! ,secret>y may prescribe1 ! taxpay] may elect "u p>agraph 7#a77;,b7 to treat ! net tax liability describ$ 9 subp>agraph 7,b7 z net fir/-ye> tax liability payable 9 #e equal annual in/allm5ts beg9n+ ) su* succe$+ taxable ye>4 ,! rules ( p>agraph 7#e7 %all apply to su* in/allm5ts 9 ! same mann] z su* rules apply to in/allm5ts = su* fir/ taxable ye>4 7,b7 ,net tax liability ,= purposes ( subp>agraph 7,a71 ! net tax liability describ$ 9 ?is subp>agraph is1 ) respect to ! taxable ye> describ$ 9 su* subp>agraph1 ! excess 7if any7 (-- 7i7 su* taxpay]'s net income tax = su* taxable ye>1 ov] 7ii7 su* taxpay]'s net income tax = su* taxable ye> det]m9$ )\t reg>d to ga9 or loss ( ! taxpay] describ$ 9 subp>agraph 7,a77ii74 7#e7 ,rules relat+ to in/allm5t paym5ts 7,a7 ,date = paym5t ( in/allm5ts ,if an election is made "u p>agraph 7#a71 ! fir/ in/allm5t %all be paid on ! due date 7det]m9$ )\t reg>d to any ext5sion ( "t = fil+ ! return7 = ! return ( tax = ! fir/ taxable ye> describ$ 9 p>agraph 7#a7 & ea* succe$+ in/allm5t %all be paid on ! due date 7z s det]m9$7 = ! return ( tax = ! taxable ye> foll[+ ! taxable ye> ) respect to :i* ! prec$+ in/allm5t 0 made4 7,b7 ,accel]ation ( paym5t 7i7 ,disposition ( assets 7,i7 ,9 g5]al ,if1 be=e ! close ( ! #e-ye> p]iod describ$ 9 p>agraph 7#a71 a taxpay] sells or ex*anges1 transf]s1 or o!rwise disposes ( an asset ) respect to :i* an election is 9 effect "u p>agraph 7#a77;,b71 !n ! applicable p]c5tage ( ! unpaid portion ( all rema9+ in/allm5ts describ$ 9 p>agraph 7#a77;,b7 %all be due on ! date ( su* disposition 7or su* lat] date z ! ,secret>y may prescribe74 7,,ii7 ,applicable p]c5tage ,= purposes ( ?is subp>agraph1 ! applicable p]c5tage is ! p]c5tage det]m9$ by divid+ ! ga9 n tak5 into acc\nt 9 det]m9+ net income tax "u p>agraph 7#b77;,a77ii7 ) respect to ! asset describ$ 9 subclause 7,i7 by ! aggregate am\nt ( all ga9 n s tak5 into acc\nt4 7ii7 ,failure to pay1 etc ,9 ! case ( an addition to tax = failure to timely pay any in/allm5t requir$ "u ?is subsection1 ! dea? ( ! taxpay]1 or ! fil+ ( a petition by ! taxpay] 9 a title #aa or simil> case1 !n ! unpaid portion ( all rema9+ in/allm5ts %all be due on ! date ( su* ev5t 7or 9 ! case ( a title #aa or simil> case1 ! day be=e ! petition is fil$74 7,c7 ,proration ( defici5cy to in/allm5ts ,if an election is made "u p>agraph 7#a7 to pay ! net fir/-ye> tax liability "u ?is section 9 in/allm5ts & a defici5cy has be5 assess$ ) respect to su* net tax liability1 ! defici5cy %all be prorat$ to ! in/allm5ts payable "u p>agraph 7#a74 ,! "p ( ! defici5cy s prorat$ to any in/allm5t ! date = paym5t ( :i* has n arriv$ %all be collect$ at ! same "t z1 & z a "p (1 su* in/allm5t4 ,! "p ( ! defici5cy s prorat$ to any in/allm5t ! date = paym5t ( :i* has arriv$ %all be paid ^u notice & dem& f ! ,secret>y4 ,?is subsection %all n apply if ! defici5cy is due to neglig5ce1 to int5tional disreg>d ( rules & regulations1 or to fraud4 7,d7 ,in/allm5ts n to prev5t cr$it or refund ( ov]paym5ts or increase e/imat$ taxes ,if an election is made "u p>agraph 7#a7 to pay ! net fir/-ye> tax liability "u ?is subsection 9 in/allm5ts-- 7i7 no in/allm5t ( su* liability %all-- 7,i7 9 ! case ( a reque/ = cr$it or refund1 be tak5 into acc\nt z a liability = purposes ( det]m9+ :e!r an ov]paym5t exi/s = purposes ( section #fdjb be=e ! date on :i* su* in/allm5t is due1 or 7,,ii7 be treat$ z a tax impos$ by section #a = purposes ( section #ffed1 & 7ii7 ! fir/ s5t5ce ( section #fdjc %all n apply ) respect to any su* in/allm5t4 7#f7 ,elections 7,a7 ,9 g5]al ,any election "u p>agraph 7#a71 7#c77;,a71 or 7#d77;,a7 %all be made n lat] ?an ! due date = ! return ( tax = ! fir/ taxable ye> describ$ 9 p>agraph 7#a7 & %all be made 9 su* mann] z ! ,secret>y %all provide4 7,b7 ,ext5sions ,! ,secret>y %all by regulation prescribe su* circum/ances & proc$ures "u :i* ext5sions ( "t w be grant$ to make any election "u p>agraph 7#a71 7#c77;,a71 or 7#d77;,a74 ,9 det]m9+ :e!r to grant relief "u ?is subp>agraph1 ! ,secret>y %all take into acc\nt all relevant circum/ances & ! "t = mak+ ! election %all be treat$ z n expressly provid$ by /atute4 7b7 ,treatm5t ( taxpay]s leav+ & re5t]+ applicable /atus ,if a taxpay]'s /atus z an applicable taxpay] is t]m9at$ "u section #die7;a77#d7 & ! taxpay] is aga9 treat$ z an applicable taxpay] = a subsequ5t taxable ye> by reason ( meet+ ! requirem5ts ( section #die7;a77#a77;,a71 ! foll[+ rules %all apply3 7#a7 ,subsequ5t ye> n treat$ z fir/ ye> ( applicable taxpay] /atus ,subsection 7a7 %all n apply to any taxable ye> 9 :i* ! taxpay] is aga9 treat$ z an applicable taxpay] & su* subsequ5t taxable ye> %all n be treat$ z ! fir/ taxable ye> = :i* ! taxpay] is an applicable taxpay] = any o!r purpose ( ?is "p4 7#b7 ,nontradable assets ,if !re is an applicable transf] by a taxpay] ( a nontradable cov]$ asset aft] ! taxpay] is aga9 treat$ z an applicable taxpay]1 ! taxpay]'s hold+ p]iod ( su* asset = purposes ( section #dib %all include all p]iods dur+ :i* ! taxpay]'s /atus z an applicable taxpay] 0 previ\sly t]m9at$ & ! taxpay] held su* asset4 7c7 ,special rules relat+ to own]%ip ( nontradable int]e/s 9 applicable entities 7#a7 ,9 g5]al ,= purposes ( subsection 7a71 if an applicable taxpay] elects "u subsection 7a77#c7 to treat a nontradable int]e/ 9 an applicable entity held directly z a tradable cov]$ asset = ! fir/ taxable ye> describ$ 9 subsection 7a77#a71 ! am\nt ( ! ga9 tak5 into acc\nt "u subsection 7a7 ) respect to su* int]e/ %all be equal to ! excess 7if any7 (-- 7,a7 ! value ( su* int]e/ specifi$ by ! taxpay] "u subsection 7a77#c77;,b71 ov] 7,b7 ! taxpay]'s adju/$ basis 9 su* int]e/ z ( ! close ( su* taxable ye>4 7#b7 ,adju/m5ts to bases ( entity's nontradable assets 7,a7 ,p>tn]%ips 7i7 ,9 g5]al ,if ! applicable entity is a p>tn]%ip1 ! p>tn]%ip %all increase ! adju/$ bases ( ! p>tn]%ip's assets by ! am\nt describ$ 9 p>agraph 7#a74 ,su* increase %all con/itute an adju/m5t to ! bases ( p>tn]%ip assets solely = det]m9+ ! applicable taxpay]'s %>e ( su* bases4 7ii7 ,allocation ,! ,secret>y %all prescribe rules = ! allocation ( ! increase 9 adju/$ bases among p>tn]%ip assets 9 a mann] :i* has ! effect ( r$uc+ ! diff]5ce betwe5 ! value & su* adju/$ bases4 ,su* rules %all also provide prop] adju/m5ts to adju/$ bases :]e own]%ip is held ?r\gh ti]$ entities4 7,b7 ,o!r applicable entities ,rules simil> to ! rules ( clause 7i7 %all apply to applicable entities o!r ?an p>tn]%ips4 7,c7 ,no d$uctions or cr$its = basis increases ,if !re is any increase 9 ! applicable entity's adju/$ basis ( any asset by reason ( subp>agraph 7,a71 no d$uction or cr$it %all be all[$ "u ?is title ) respect to ! portion ( su* adju/$ basis attributable to su* increase4 7#c7 ,def9itions ,any t]m us$ 9 ?is subsection :i* is also us$ 9 section #dic %all h ! same mean+ z :5 us$ 9 su* section4 7d7 ,special election = c]ta9 tradable assets ( applicable taxpay]s 7#a7 ,9 g5]al ,if a qualifi$ taxpay] makes an election "u ?is subsection1 !n any /ock held by su* qualifi$ taxpay] :i* w\ld 7b = su* election7 be a tradable cov]$ asset & :i* is specifi$ 9 su* election %all be treat$ z a nontradable capital asset ( ! taxpay] = purposes ( ?is "p4 7#b7 ,limitations 7,a7 ,only /ock ( a s+le entity tak5 into acc\nt ,an election made "u ?is subsection may n specify /ock 9 m ?an "o ,c corporation or specify m ?an "o class ( /ock 9 su* corporation4 7,b7 ,value 7i7 ,9 g5]al ,! aggregate value ( /ock specifi$ 9 an election made "u ?is subsection %all n exce$ #a1jjj1jjj1jjj4 7ii7 ,det]m9ation ,= purposes ( clause 7i71 ! value ( any /ock specifi$ 9 an election made "u ?is section %all be det]m9$ z ( ! la/ day ( ! fir/ taxable ye> = :i* ! taxpay] is an applicable taxpay]4 7#c7 ,qualifi$ taxpay] ,= purposes ( ?is subsection1 ! t]m qualifi$ taxpay] means any taxpay]-- 7,a7 :i* is n an e/ate or tru/1 & 7,b7 = :i* ! fir/ taxable ye> = :i* su* taxpay] is an applicable taxpay] is a taxable ye> t beg9s be=e ,janu>y #a1 #bjbg4 7#d7 ,election 7,a7 ,9 g5]al ,any election "u ?is subsection %all be made n lat] ?an ! due date = ! return ( tax = ! fir/ taxable ye> = :i* ! taxpay] is an applicable taxpay] & %all be made 9 su* mann] z ! ,secret>y %all provide4 7,b7 ,ext5sions ,! ,secret>y %all by regulation prescribe su* circum/ances & proc$ures "u :i* ext5sions ( "t w be grant$ to make any election "u ?is subsection4 ,9 det]m9+ :e!r to grant relief "u ?is subp>agraph1 ! ,secret>y %all take into acc\nt all relevant circum/ances & ! "t = mak+ ! election %all be treat$ z n expressly provid$ by /atute4 ,c ,o!r def9itions & rules ,sec4#dig4 ,t]ms & rules relat+ to cov]$ assets4,sec4#dih4 ,o!r def9itions2 coord9ation ) title4 #dig4 ,t]ms & rules relat+ to cov]$ assets 7a7 ,cov]$ asset ,= purposes ( ?is "p1 except z o!rwise provid$ 9 ?is "p1 ! t]m cov]$ asset means any asset o!r ?an-- 7#a7 any int]e/ ( ! taxpay] 9 an applicable sav+s plan or 9 a def9$ b5efit plan1 7#b7 any ca% or ca% equival5t1 or 7#c7 any private placem5t life insurance or annuity contract describ$ 9 section #gb7;e77#ab77;,d74 7b7 ,tradable cov]$ asset ,= purposes ( ?is "p1 except z provid$ 9 section #dif7;d71 ! t]m tradable cov]$ asset means-- 7#a7 any cov]$ asset if-- 7,a7 int]e/s 9 su* asset are trad$ on an e/abli%$ securities m>ket1 7,b7 int]e/s 9 su* assets are readily tradable on a second>y m>ket 7or ! sub/antial equival5t !re(71 7,c7 int]e/s 9 su* assets are available on an onl9e or electronic plat=m t regul>ly mat*es1 or facilitates ! mat*+ (1 buy]s & sell]s ( su* assets1 or 7,d7 su* asset is an asset = :i* ! ,secret>y det]m9es !re is a reasonable basis to det]m9e ! asset's fair m>ket value annually1 & 7#b7 any d]ivative ) respect to an und]ly+ inve/m5t :i*-- 7,a7 is an asset describ$ 9 p>agraph 7#a71 or 7,b7 is a nontradable cov]$ asset :i* is id5tifi$ 9 regulations or o!r guidance provid$ by ! ,secret>y4 7c7 ,nontradable cov]$ asset ,= purposes ( ?is "p-- 7#a7 ,9 g5]al ,! t]m nontradable cov]$ asset means any cov]$ asset :i* is n a tradable cov]$ asset4 7#b7 ,c]ta9 assets only c\nt$ = det]m9+ aggregate value ( assets 7,a7 ,9 g5]al ,any asset exclud$ f treatm5t z a cov]$ asset "u p>agraph 7#a71 7#b71 or 7#c7 ( subsection 7a7 %all be tak5 into acc\nt z a nontradable cov]$ asset 9 comput+ ! aggregate applicable value ( all tradable & nontradable cov]$ assets held by ! taxpay] z ( ! close ( any taxable ye> = purposes ( section #die7;a77#c74 7,b7 ,private placem5t life insurance & annuity contracts ,= purposes ( subp>agraph 7,a7-- 7i7 ,9 g5]al ,! applicable value ( a private placem5t life insurance or annuity contract 7z def9$ 9 section #gb7;e77#ab77;,d77 z ( any date %all be its ca% surr5d] value 7z det]m9$ "u section #ggjb7;f77#b77;,a77 on su* date4 7ii7 ,adju/m5ts ,! ,secret>y %all by regulation provide = adju/m5ts to ! ca% surr5d] value det]m9$ "u clause 7i7 ) respect to any contract to ! ext5t necess>y to prev5t ! avoidance ( ! purposes ( ?is "p1 includ+ regulations :i* ensure t su* value z ( any "t prop]ly reflects ! value ( any und]ly+ inve/m5ts ) respect to su* contract z ( su* "t4 7#c7 ,inve/m5ts 9 qualifi$ opportunity funds ,not)/&+ subsection 7b71 any inve/m5t 9 a qualifi$ opportunity fund 7z def9$ 9 section #adjj,z-#b7;d77 %all be treat$ z a nontradable cov]$ asset4 7d7 ,applicable value ,= purposes ( ?is "p-- 7#a7 ,tradable cov]$ assets ,! applicable value ( any tradable cov]$ asset z ( any date %all be its fair m>ket value on su* date4 7#b7 ,nontradable cov]$ assets ,! applicable value ( any nontradable cov]$ asset z ( any date %all be ! greate/ (-- 7,a7 ! orig9al co/ basis ( su* asset1 7,b7 ! adju/$ basis ( su* asset1 7,c7 ! value det]m9$ z ( ! date ( ! la/ ev5t ) respect to ! asset :i* e/abli%es su* value1 7,d7 9 ! case ( an asset ! value ( :i* is includ$ 9 an applicable f9ancial /atem5t1 ! value 9 ! late/ available /atem5t1 7,e7 ! value ( su* asset det]m9$ = purposes ( us+ su* asset to secure any indebt$ness1 & 7,f7 ! value ( su* asset det]m9$ "u su* o!r valuation me?od z ! ,secret>y may prescribe4 ,if a cov]$ asset w\ld1 b = subsection 7c77#c7 or any o!r provision ( ?is "p1 be treat$ z a tradable cov]$ asset1 ! asset's applicable value %all be det]m9$ "u p>agraph 7#a74 7#c7 ,adju/m5t = debt & o!r liabilities ( ! taxpay] ,except z provid$ by ! ,secret>y1 ! aggregate applicable value ( all cov]$ assets ( ! taxpay] z ( any date 7det]m9$ )\t reg>d to ?is p>agraph7 %all be r$uc$ by ! aggregate out/&+ am\nt (-- 7,a7 indebt$ness ( ! taxpay] z ( su* date1 & 7,b7 any o!r liabilities 7o!r ?an indebt$ness7 ( ! taxpay] z ( su* date :i* ! ,secret>y det]m9es are appropriate to be tak5 into acc\nt = su* purpose4 7#d7 ,reliance on valuation ,9 det]m9+ ! applicable value ( any tradable cov]$ asset = purposes ( ?is section1 ! taxpay] may rely on a valuation :i* is-- 7,a7 provid$ to ! taxpay] by a brok] "u section #fjde7;b71 7,b7 provid$ to ! taxpay] by a deal] 9 securities or a deal] 9 commodities1 )9 ! mean+ ( section #dge1 7,c7 det]m9$ "u an applicable f9ancial /atem5t1 or 7,d7 provid$ to ! taxpay] by su* o!r p]sons z may be designat$ by ! ,secret>y4 7#e7 ,applicable f9ancial /atem5t ,= purposes ( ?is subsection1 ! t]m applicable f9ancial /atem5t has ! mean+ giv5 su* t]m by section #dea7;b77#c74 7#f7 ,special rules = applicable entities ,9 ! case ( an applicable entity-- 7,a7 adju/m5ts to basis ( any cov]$ asset "u section #dic7;b77#b7 %all be tak5 into acc\nt 9 det]m9+ ! adju/$ basis ( su* asset = purposes ( p>agraph 7#b77;,b71 7,b7 ! value ( a p>tn]'s own]%ip int]e/ 9 su* p>tn]%ip "u p>agraph 7#b77;,c7 %all n be less ?an ! value ( ! p>tn]'s capital acc\nt "u section #gjd1 & 7,c7 ! ,secret>y %all provide rules = det]m9+ ! %>e ( a hold] ( an own]%ip int]e/ 9 su* an entity ( am\nts includ$ 9 an applicable f9ancial /atem5t ( su* entity = purposes ( apply+ p>agraph 7#b77;,d74 7#g7 ,secret>ial au?ority ,! ,secret>y %all prescribe su* regulations1 rules1 & guidance z may be necess>y to c>ry out ! purposes ( ?is subsection1 includ+ regulations1 rules1 & guidance :i*-- 7,a7 prev5t ! avoidance ( su* purposes1 7,b7 provide rules = ! application ( p>agraph 7#b77;,c71 includ+ 9 cases ( transactions 9 :i* ga9 or loss is n recogniz$ 9 connection ) contributions1 di/ributions1 & sales ( sub/antially simil> prop]ty f :i* value may be d]iv$1 & 7,c7 provide rules = det]m9+ ! applicable value ( assets 9 taxable ye>s beg9n+ be=e ! date ( ! enactm5t ( ?is "p4 #dih4 ,o!r def9itions2 coord9ation ) title 7a7 ,applicable transf] ,= purposes ( ?is "p-- 7#a7 ,9 g5]al ,! t]m applicable transf] means-- 7,a7 any sale1 ex*ange1 disposition1 or o!r transf] if-- 7i7 ga9 or loss 7if any7 is1 )\t reg>d to ?is "p1 recogniz$ "u ?is *apt] on su* sale1 ex*ange1 disposition1 or o!r transf]1 & 7ii7 su* sale1 ex*ange1 disposition1 or o!r transf] is n 9 ! ord9>y c\rse ( a trade or bus9ess1 & 7,b7 any disreg>d$ nonrecognition ev5t4 7#b7 ,disreg>d$ nonrecognition ev5t ,! t]m disreg>d$ nonrecognition ev5t means-- 7,a7 any ex*ange to :i* section #cea applies1 7,b7 any ex*ange to :i* section #ajca applies1 7,c7 any transf] ( an asset :i*-- 7i7 is id5tifi$ by ! ,secret>y1 7ii7 involves a ,c corporation1 & 7iii7 is 9 connection ) an asset ) respect to :i* no ga9 or loss has be5 recogniz$ by su* corporation1 or 7,d7 any o!r transaction 9 :i* ga9 or loss is n o!rwise recogniz$ & :i* ! ,secret>y det]m9es is necess>y to be treat$ z a disreg>d$ nonrecognition ev5t 9 ord] to prev5t ! avoidance ( ! purposes ( ?is "p4 7#c7 ,conv]sion ( assets 7,a7 ,nontradable to tradable ,if a taxpay] holds a nontradable cov]$ asset 7o!r ?an an inve/m5t 9 a qualifi$ opportunity fund 7z def9$ 9 section #adjj,z-#b7;d777 :i*1 z "p ( a transaction or s]ies ( transactions1 is conv]t$ to1 or ex*ang$ =1 a tradable cov]$ asset1 su* conv]sion or ex*ange %all be treat$ z a disreg>d$ nonrecognition ev5t if ga9 or loss 7if any7 on su* conv]sion or ex*ange is1 )\t reg>d to ?is "p1 n recogniz$ "u ?is *apt]4 7,b7 ,tradable to nontradable ,if a taxpay] holds a tradable cov]$ asset :i*1 z "p ( a transaction or s]ies ( transactions1 is conv]t$ to1 or ex*ang$ =1 a nontradable cov]$ asset1 su* conv]sion or ex*ange %all be treat$ z a taxable ev5t ) respect to ! asset be+ conv]t$ or ex*ang$ if ga9 or loss 7if any7 on su* conv]sion or ex*ange is1 )\t reg>d to ?is "p1 n recogniz$ "u ?is *apt]4 7b7 ,applicable sav+s plan ,! t]m applicable sav+s plan means-- 7#a7 a def9$ contribution plan to :i* section #dja7;a7 or #djc7;a7 applies1 7#b7 an annuity contract "u section #djc7;b71 7#c7 an eligible def]r$ comp5sation plan describ$ 9 section #deg7;b7 :i* is ma9ta9$ by an eligible employ] describ$ 9 section #deg7;e77#a77;,a71 7#d7 an individual retirem5t plan1 7#e7 an ,ar*] ,,msa 7)9 ! mean+ ( section #bbj7;d771 7#f7 a qualifi$ tuition program 7z def9$ 9 section #ebi7;b771 7#g7 an ,,able acc\nt 7z def9$ 9 section #ebi;,a7e77#f771 7#h7 a ,cov]dell education sav+s acc\nt 7z def9$ 9 section #ecj71 or 7#i7 a heal? sav+s acc\nt 7)9 ! mean+ ( section #bbc7;d774 7c7 ,d]ivative2 und]ly+ inve/m5t 7#a7 ,d]ivative ,! t]m d]ivative has ! mean+ giv5 su* t]m "u section #ei;,a7h77#d74 7#b7 ,und]ly+ inve/m5t ,! t]m und]ly+ inve/m5t means1 ) respect to any d]ivative1 any item-- 7,a7 :i* is describ$ 9 clauses 7i7 ?r\gh 7v7 ( section #ei;,a7h77#d77;,a7 7or any item sub/antially ! same z any su* item71 & 7,b7 by ref]5ce to :i* ! value ( ! d]ivative1 or any paym5t or o!r transf] ) respect to ! d]ivative1 is det]m9$ ei!r directly or indirectly4 7d7 ,regulatory au?ority ,to prev5t avoidance & ,to coord9ate ) o!r provisions ( ?is title ,! ,secret>y %all issue su* regulations or o!r guidance z are necess>y to-- 7#a7 prev5t taxpay]s f avoid+ ! application ( ?is "p1 & 7#b7 coord9ate ! provisions ( ?is "p ) o!r provisions ( ?is title :i* require taxpay]s to take income into acc\nt 9 ! abs5ce ( a paym5t or o!r di/ribution4 4 7b7 ,cl]ical am5dm5t ,! table ( p>ts = sub*apt] ,e ( *apt] #a is am5d$ by add+ at ! end ! foll[+ new item3 ,"p ,,iv4 ,elim9ation ( def]ral = applicable taxpay]s4 4 7c7 ,effective date ,! am5dm5ts made by ?is section %all apply to taxable ev5ts & applicable transf]s occurr+ 9 taxable ye>s beg9n+ aft] ,decemb] #ca1 #bjbe4 #ajb4 ,c>ryback ( capital losses attributable to m>k-to-m>ket rules 7a7 ,9 g5]al ,section #abab is am5d$ by add+ at ! end ! foll[+ new subsection3 7d7 ,c>ryback ( losses ( applicable taxpay]s f assets m>k$ to m>ket 7#a7 ,9 g5]al ,if an applicable taxpay] elects to h ?is subsection apply to any taxable ye> 9 :i* ! taxpay] has a net m>k$-to-m>ket loss 79 ?is subsection ref]r$ to z ! loss ye>71 ! am\nt ( su* net m>k$-to-m>ket loss-- 7,a7 %all be a c>ryback to ea* ( ! #c taxable ye>s prec$+ ! loss ye>1 & 7,b7 to ! ext5t t1 aft] ! application ( p>agraphs 7#b7 & 7#c71 su* loss is all[$ z a c>ryback to any su* prec$+ taxable ye>1 ! am\nt s all[$ %all be treat$ z a long-t]m capital loss4 7#b7 ,am\nt c>ri$ to ea* taxable ye> ,! entire am\nt ( ! net m>k$-to-m>ket loss = any loss ye> %all be c>ri$ to ! e>lie/ ( ! taxable ye>s to :i* su* loss may be c>ri$ back "u p>agraph 7#a74 ,! portion ( su* loss :i* %all be c>ri$ to ea* ( ! #b o!r taxable ye>s to :i* su* loss may be c>ri$ back %all be ! excess 7if any7 ( su* loss ov] ! portion ( su* loss :i*1 aft] ! application ( p>agraph 7#c71 0 all[$ z a c>ryback = any prior taxable ye>4 7#c7 ,am\nt :i* may be us$ 9 any prior taxable ye> ,an am\nt %all be all[$ z a c>ryback "u p>agraph 7#a7 f a loss ye> to any prior taxable ye> only to ! ext5t-- 7,a7 su* am\nt does n exce$ ! net m>k$-to-m>ket ga9 = su* prior ye>1 & 7,b7 ! all[ance ( su* c>ryback does n increase or produce a net op]at+ loss 7z def9$ 9 section #agb7;c77 = su* ye>4 7#d7 ,net m>k$-to-m>ket loss ,= purposes ( ?is subsection1 ! t]m net m>k$-to-m>ket loss means1 ) respect to any taxable ye>1 an am\nt equal to-- 7,a7 ! net capital loss = ! taxable ye> det]m9$ by tak+ into acc\nt only m>k$-to-m>ket ga9s & losses1 r$uc$ 7b n bel[ z]o7 by 7,b7 ! aggregate am\nt ( ga9s f ! sale or ex*ange ( capital assets :i* are n m>k$-to-m>ket ga9s4 7#e7 ,net m>k$-to-m>ket ga9 ,= purposes ( ?is subsection-- 7,a7 ,9 g5]al ,! t]m net m>k$-to-m>ket ga9 means1 ) respect to any taxable ye>1 an am\nt equal to-- 7i7 ! capital ga9 net income = ! taxable ye> det]m9$ by tak+ into acc\nt only m>k$-to-m>ket ga9s & losses1 r$uc$ 7b n bel[ z]o7 by 7ii7 ! aggregate am\nt ( losses f ! sale or ex*ange ( capital assets :i* are n m>k$-to-m>ket losses4 7,b7 ,special rule ,! net m>k$-to-m>ket ga9 = any taxable ye> be=e ! loss ye> %all be comput$ )\t reg>d to ! net m>k$-to-m>ket loss = ! loss ye> or = any taxable ye> !reaft]4 7#f7 ,coord9ation ) c>ry=w>d provisions ( subsection 7b77#a7 7,a7 ,c>ry=w>d am\nt r$uc$ by am\nt us$ z c>ryback ,= purposes ( apply+ subsection 7b77#a77;,b71 if any portion ( ! net m>k$-to-m>ket loss = any taxable ye> is all[$ z a c>ryback "u p>agraph 7#a7 to any prec$+ taxable ye>1 ! am\nt all[$ z a c>ryback %all be treat$ z a long-t]m capital ga9 = ! loss ye>4 7,b7 ,c>ryov] loss reta9s "* z attributable to m>k$-to-m>ket ,any am\nt c>ri$ =w>d z a long-t]m capital loss to any taxable ye> "u subsection 7b77#a77;,b7 7aft] ! application ( subp>agraph 7,a77 %all1 to ! ext5t attributable to m>k$-to-m>ket losses1 be treat$ z m>k$-to-m>ket loss4 7,c7 ,coord9ation ) r$uction 9 net capital loss = cr$it ,= purposes ( ?is p>agraph & p>agraph 7#d71 any r$uction 9 net capital loss "u section #dib7;c77#c7 7relat+ to r$uction = cr$it aga9/ tax attributable to def]ral recapture am\nt7 %all1 except z provid$ by ! ,secret>y1 be appli$ be=e ! application ( su* p>agraphs4 7#g7 ,o!r def9itions & rules ,= purposes ( ?is subsection-- 7,a7 ,m>k$-to-m>ket ga9s & losses 7i7 ,9 g5]al ,! t]ms m>k$-to-m>ket ga9s & m>k$-to-m>ket losses means1 ) respect to any applicable taxpay] = any taxable ye>1 ga9s or losses :i* are recogniz$ & tak5 into acc\nt by su* taxpay] = su* taxable ye> "u section #dia by reason ( taxable ev5ts describ$ 9 section #dia7;b77#a7 ) respect to tradable cov]$ assets :i* are capital assets4 ,su* t]ms %all n include ga9s & losses f nontradable cov]$ assets :i* are treat$ z tradable cov]$ assets 7& to :i* section #dia applies7 by reason ( an election "u section #dif7;a77#c74 7ii7 ,applicable entities ,9 ! case ( m>k$-to-m>ket ga9s or losses ( an applicable entity1 ?is subsection %all be appli$ at ! p>tn] or o!r own]%ip level4 7,b7 ,o!r t]ms ,any t]m us$ 9 ?is subsection :i* is also us$ 9 "p ,,iv ( sub*apt] ,e %all h ! same mean+ z :5 us$ 9 su* "p4 4 7b7 ,effective date ,! am5dm5t made by ?is section %all apply to loss ye>s beg9n+ aft] ,decemb] #ca1 #bjbe4 ,,ii ,application ( o!r provisions to applicable taxpay]s & entities ,a ,individuals #bja4 ,applicable taxpay]s n eligible = adju/$ gross income limitation on net inve/m5t tax 7a7 ,9 g5]al ,section #adaa7;a7 is am5d$ by add+ at ! end ! foll[+ new p>agraph3 7#c7 ,no adju/$ gross income limit = applicable taxpay]s ,9 ! case ( an applicable taxpay] 7z def9$ 9 section #die7 = any taxable ye>1 not)/&+ p>agraph 7#a7 or 7#b71 ! tax "u ?is subsection = su* taxable ye> %all be equal to ! product (-- 7,a7 9 ! case ( an individual1 ! rate ( tax 9 effect "u p>agraph 7#a7 multipli$ by ! am\nt det]m9$ "u p>agraph 7#a77;,a71 & 7,b7 9 ! case ( an e/ate or tru/1 ! rate ( tax 9 effect "u p>agraph 7#b7 multipli$ by ! am\nt det]m9$ "u p>agraph 7#b77;,a74 4 7b7 ,effective date ,! am5dm5t made by ?is section %all apply to taxable ye>s beg9n+ aft] ,decemb] #ca1 #bjbe4 #bjb4 ,treatm5t ( cov]$ expatriates 7a7 ,application ( expatriate rules to applicable taxpay]s ,section #hgg;,a is am5d$ by r$esignat+ subsection 7i7 z subsection 7j7 & by ins]t+ aft] subsection 7h7 ! foll[+ new subsection3 7i7 ,special rules = applicable taxpay]s 7#a7 ,9 g5]al ,9 ! case ( a cov]$ expatriate :o is an applicable taxpay] 7z def9$ 9 section #die7 = ! taxable ye> :i* includes ! expatriation date-- 7,a7 no election may be made "u subsection 7b7 ) respect to any prop]ty treat$ z sold by reason ( subsection 7a7 7aft] application ( subp>agraph 7,b771 & 7,b7 ! cov]$ expatriate %all1 = purposes ( subsection 7a77#a71 also be treat$ z hav+ sold on ! la/ day ( ! #aj-taxable-ye> p]iod describ$ 9 section #die7;d77#b77;,a7 all prop]ty held by ! cov]$ expatriate z ( ! close ( su* day :i* is n o!rwise treat$ z sold "u "p ,,iv ( sub*apt] ,e z ( su* "t4 7#b7 ,application ( section #hgg ,not)/&+ section #hgg7;h7-- 7,a7 a cov]$ expatriate describ$ 9 p>agraph 7#a7 %all be treat$ z an individual to :om section #hgg applies1 & 7,b7 su* individual %all be taxable z provid$ 9 su* section = ea* ( ! taxable ye>s 9 ! #aj-taxable-ye> p]iod describ$ 9 section #die7;d77#b77;,a74 4 7b7 ,effective date ,! am5dm5ts made by ?is section %all apply to taxable ye>s beg9n+ aft] ,decemb] #ca1 #bjbe4 ,b ,rules = applicable entities & tru/s #baa4 ,treatm5t ( l-k9d ex*anges by applicable entities 7a7 ,9 g5]al ,section #ajca is am5d$ by add+ at ! end ! foll[+ new subsection3 7i7 ,special rules = applicable entities ,subsection 7a7 %all n apply to an ex*ange by an applicable entity if a notice receiv$ by ! entity "u subsection 7b77#b77;,a7 or 7c77#b7 ( section #dic is 9 effect at ! "t ( su* ex*ange4 4 7b7 ,effective date ,! am5dm5t made by ?is section %all apply to ex*anges complet$ aft] ,decemb] #ca1 #bjbe4 #bab4 ,treatm5t ( transf]s by applicable entities 9 ex*ange = /ock 7a7 ,9 g5]al ,section #cea is am5d$ by r$esignat+ subsection 7h7 z subsection 7i7 & by ins]t+ aft] subsection 7g7 ! foll[+ new subsection3 7h7 ,special rules = applicable entities 7#a7 ,9 g5]al ,subsection 7a7 %all n apply to an ex*ange by an applicable entity if an applicable notice receiv$ by ! entity is 9 effect at ! "t ( su* ex*ange4 7#b7 ,applicable notice ,= purposes ( p>agraph 7#a7-- 7,a7 ,9 g5]al ,! t]m applicable notice means1 ) respect to any applicable entity1 a notice-- 7i7 :i* is receiv$ by ! entity "u subsection 7b77#b77;,a7 or 7c77#b7 ( section #dic1 & 7ii7 :i* relates to an applicable taxpay] :o is a #bj-p]c5t own] ) respect to su* entity4 7,b7 #bj-p]c5t own] ,= purposes ( subp>agraph 7,a71 a #bj-p]c5t own] %all be det]m9$ 9 ! same mann] z a #e-p]c5t own] "u section #dic7;b77#d77;,b71 except t #bj p]c5t %all be sub/itut$ = #e p]c5t 9 apply+ clauses 7i7 & 7ii77,i7 !re(4 7#c7 ,applicable entity ,= purposes ( ?is subsection1 ! t]m applicable entity has ! mean+ giv5 su* t]m by section #dic4 4 7b7 ,effective date ,! am5dm5ts made by ?is section %all apply to ex*anges complet$ aft] ,decemb] #ca1 #bjbe4 #bac4 ,special rules = applicable tru/s 7a7 ,9-,k9d di/ributions ,section #fdc7;e77#c7 is am5d$-- 7#a7 9 subp>agraph 7,a71 by /rik+ to :i* an election "u ?is p>agraph applies & ins]t+ to :i* ?is p>agraph applies1 & 7#b7 by /rik+ subp>agraph 7,b7 & ins]t+ ! foll[+3 7,b7 ,di/ributions to :i* ?is p>agraph applies ,?is p>agraph %all apply to-- 7i7 any di/ribution ( prop]ty by an e/ate :i* is describ$ 9 section #die7;a77#a77;,b77ii7 or by an applicable tru/ 7z def9$ 9 section #die7;c771 & 7ii7 any di/ribution dur+ ! taxable ye> ( any o!r e/ate or tru/ :i* makes an election "u ?is p>agraph4 ,any election made "u clause 7ii7 %all be made on ! return ( su* e/ate or tru/ = su* taxable ye>1 &1 once made1 may be revok$ only ) ! cons5t ( ! ,secret>y4 4 7b7 ,treatm5t ( loans ,section #fdc7;i7 is am5d$-- 7#a7 by ins]t+ or an applicable tru/ 7z def9$ 9 section #die7;c77 aft] =eign tru/ 9 p>agraph 7#a71 7#b7 by /rik+ :o is a ,unit$ ,/ates p]son 9 p>agraph 7#a77;,a7 & ins]t+ :o is n exempt f tax "u ?is *apt]1 7#c7 by /rik+ ,unit$ ,/ates p]son 9 p>agraph 7#a77;,b7 & ins]t+ p]son 7o!r ?an a p]son :o is exempt f tax "u ?is *apt]71 7#d7 by /rik+ p>agraph 7#b77;,c71 & 7#e7 by /rik+ =eign 9 ! head+ !re( & ins]t+ c]ta94 7c7 ,treatm5t ( multiple tru/s ,section #fdc7;f77#b7 is am5d$ by ins]t+ or ! rules ( "p ,,iv ( sub*apt] ,e aft] ?is *apt]4 7d7 ,=eign tru/s 7#a7 ,9 g5]al ,subp>t ,f ( "p ,i ( sub*apt] ,j is am5d$ by add+ at ! end ! foll[+ new section3 #fhf4 ,special rules = applicable =eign tru/s 7a7 ,9 g5]al ,= purposes ( ?is "p1 9 ! case ( any b5efici>y ( an applicable =eign tru/ :o is requir$ to include 9 income any am\nt attributable to ga9 on an applicable transf] ( any cov]$ asset1 ! am\nt ( tax impos$ "u ?is *apt] %all be increas$ by ! am\nt :i* be>s ! same ratio to ! am\nt ( ! def]ral recapture am\nt :i* w\ld be det]m9$ on su* applicable transf] "u section #dib7;a7 7det]m9$ z if su* tru/ 7 an applicable taxpay] & section #dib appli$ to any cov]$ asset ( ! tru/7 z-- 7#a7 ! am\nt requir$ to be includ$ 9 income attributable to ! ga9 on su* applicable transf]1 be>s to 7#b7 ! total am\nt ( ! ga9 on su* applicable transf]4 7b7 ,exception ,subsection 7a7 %all n apply to any am\nt to ! ext5t t ! applicable =eign tru/ pays 7at su* "t & 9 su* mann] z provid$ by ! ,secret>y7 ! tax :i* w\ld be impos$ "u section #dib7;a7 7det]m9$ z if su* tru/ 7 an applicable taxpay] & section #dib appli$ to any cov]$ asset ( ! tru/7 ) respect to ! applicable transf] describ$ 9 subsection 7a74 7c7 ,applicable =eign tru/ ,= purposes ( ?is section1 ! t]m applicable =eign tru/ means any =eign tru/ :i* w\ld be an applicable tru/ if su* tru/ 7 a dome/ic tru/4 7d7 ,o!r t]ms ,any t]m us$ 9 ?is section :i* is also us$ 9 "p ,,iv ( sub*apt] ,e %all h ! same mean+ z :5 us$ 9 su* "p4 4 7#b7 ,report+ ,section #fjdh7;c77#a7 is am5d$ by /rik+ &1 at ! end ( subp>agraph 7,b71 by r$esignat+ subp>agraph 7,c7 z subp>agraph 7,d71 & by ins]t+ aft] subp>agraph 7,b7 ! foll[+ new subp>agraph3 7,c7 su* in=mation z ! ,secret>y %all require = purposes ( det]m9+ ! increase 7if any7 9 tax "u section #fhf1 & 4 7#c7 ,cl]ical am5dm5t ,! table ( sections = subp>t ,f ( "p ,i ( sub*apt] ,j is am5d$ by add+ at ! end ! foll[+ new item3 ,sec4 #fhf4 ,special rules = applicable =eign tru/s4 4 7e7 ,coord9ation ) ?r[back rules ,! ,secret>y ( ! ,treasury 7or ! ,secret>y's delegate7 %all provide su* regulations or o!r guidance z necess>y to coord9ate ! am5dm5ts made by ?is section ) ! rules ( subp>t ,d ( "p ,i ( sub*apt] ,j4 7f7 ,effective dates 7#a7 ,9 g5]al ,except z provid$ 9 p>agraph 7#b71 ! am5dm5ts made by ?is section %all apply to taxable ye>s beg9n+ aft] ,decemb] #ca1 #bjbe4 7#b7 ,=eign tru/s ,! am5dm5ts made by subsection 7e7 %all apply to applicable transf]s occurr+ 9 taxable ye>s beg9n+ aft] ,decemb] #ca1 #bjbe4 ,c ,treatm5t ( def]r$ comp5sation & c]ta9 life insurance & annuity contracts #bba4 ,elim9ation ( def]ral ( tax on c]ta9 comp5sation 7a7 ,9 g5]al ,subp>t ,a ( "p ,i ( sub*apt] ,d ( *apt] #a is am5d$ by add+ at ! end ! foll[+ new section3 #dji;,b4 ,special rules = c]ta9 def]r$ comp5sation 7a7 ,9 g5]al ,9 ! case ( an individual :o is an applicable taxpay] = any taxable ye>1 ! taxpay]'s tax "u ?is *apt] = ! taxable ye> 7det]m9$ )\t reg>d to ?is section7 %all be increas$ by an am\nt equal to ! sum (-- 7#a7 ! def]ral recapture am\nt det]m9$ "u subsection 7b77#a7 = any applicable def]r$ comp5sation :i* is includible 9 ! gross income ( ! individual = ! taxable ye>1 & 7#b7 #aj p]c5t ( ! am\nt ( any sev]ance pay :i* is includible 9 ! gross income ( ! individual dur+ ! taxable ye>4 7b7 ,def]ral recapture am\nt ,= purposes ( ?is section-- 7#a7 ,9 g5]al ,! t]m def]ral recapture am\nt means1 ) respect to any applicable def]r$ comp5sation includible 9 gross income = ! taxable ye>1 ! aggregate am\nt ( int]e/ 7det]m9$ 9 ! mann] provid$ "u p>agraph 7#c77 on ! deem$ tax am\nt det]m9$ "u p>agraph 7#b7 = ea* prec$+ taxable ye> to :i* comp5sation is allocat$ "u p>agraph 7#b77;,a74 7#b7 ,deem$ tax am\nt 7,a7 ,9 g5]al ,! deem$ tax am\nt = any taxable ye> prec$+ ! taxable ye> 9 :i* applicable def]r$ comp5sation is includible 9 gross income %all be ! am\nt det]m9$-- 7i7 fir/1 except z provid$ 9 subp>agraph 7,b71 by allocat+ ! am\nt ( su* comp5sation ratably to ea* day 9 ! def]ral p]iod ) respect to ! applicable def]r$ comp5sation1 & 7ii7 !n by multiply+ ! am\nt1 if any1 allocat$ "u clause 7i7 to su* prec$+ taxable ye> by ! highe/ rate ( tax 9 effect "u section #a = ! taxable ye> 9 :i* ! comp5sation is includible 9 gross income ( ! individual4 7,b7 ,special rule = p]iods be=e becom+ applicable taxpay] ,not)/&+ subp>agraph 7,a77i71 any comp5sation :i* w\ld be o!rwise allocat$ "u su* subp>agraph to any taxable ye> prec$+ ! fir/ taxable ye> = :i* ! taxpay] is treat$ z an applicable taxpay] %all be allocat$ to su* fir/ taxable ye>4 7#c7 ,computation ( int]e/ 7,a7 ,9 g5]al ,! am\nt ( int]e/ ref]r$ to 9 p>agraph 7#a7 on any deem$ tax am\nt det]m9$ "u p>agraph 7#b7 = any prec$+ taxable ye> ) respect to applicable def]r$ comp5sation %all be det]m9$ = ! p]iod beg9n+ on ! due date = su* prec$+ taxable ye> & end+ on ! la/ day ( ! def]ral p]iod ) respect to ! applicable def]r$ comp5sation1 by us+ ! rates det]m9$ "u section #ffba7;b7 7plus #a p]c5tage po9t71 & ! me?od applicable "u section #ffba1 = und]paym5ts ( tax = su* p]iod4 7,b7 ,due date ,= purposes ( ?is p>agraph1 ! t]m due date means1 ) respect to any prec$+ taxable ye>1 ! date prescrib$ by law 7det]m9$ )\t reg>d to ext5sions7 = fil+ ! return ( ! tax impos$ by ?is *apt] = su* taxable ye>4 7#d7 ,limitation ,9 no case %all ! def]ral recapture am\nt det]m9$ ) respect to any applicable def]r$ comp5sation :i* is includible 9 gross income = a taxable ye> exce$ an am\nt equal to #aj p]c5t ( ! am\nt ( su* comp5sation4 7c7 ,def9itions ,= purposes ( ?is section-- 7#a7 ,applicable taxpay] ,! t]m applicable taxpay] has ! mean+ giv5 su* t]m by section #die4 7#b7 ,applicable def]r$ comp5sation 7,a7 ,9 g5]al ,except z provid$ 9 subp>agraph 7,b71 ! t]m applicable def]r$ comp5sation means-- 7i7 any comp5sation provid$ "u a nonqualifi$ def]r$ comp5sation plan1 z def9$ 9 section #dji;,a7d77#a71 except t-- 7,i7 su* t]m %all include /ock appreciation rights1 & 7,,ii7 comp5sation %all n fail to be treat$ z def]r$ solely because su* comp5sation is n treat$ z def]r$ = purposes ( section #dji;,a by reason ( su* comp5sation be+ includible 9 gross income = ! fir/ taxable ye> aft] a taxable ye> 9 :i* su* comp5sation is no long] subject to a sub/antial risk ( =feiture1 & 7ii7 any o!r prop]ty transf]r$ 9 connection ) ! p]=mance ( s]vices :i* is subject to section #hc4 7,b7 ,exceptions ,su* t]m does n include-- 7i7 sev]ance pay1 or 7ii7 any transf] ( a pr(its int]e/ 9 a p>tn]%ip4 7,c7 ,e>n+s & int]e/ ,any e>n+s1 int]e/1 or simil> adju/m5t includ$ 9 an am\nt ( applicable def]r$ comp5sation %all n be treat$ z sep>ately def]r$ f su* am\nt4 7#c7 ,sev]ance pay ,! t]m sev]ance pay means any comp5sation ! paym5t or ve/+ ( :i* is cont+5t1 9 :ole or 9 "p1 ^u ! t]m9ation ( employm5t or o!r s]vices1 includ+ ca%1 prop]ty1 reimbursem5t or direct provision ( liv+1 travel1 & bus9ess exp5ses1 & life1 heal?1 or o!r insurance1 to ! ext5t o!rwise includible 9 gross income4 7#d7 ,def]ral p]iod 7,a7 ,9 g5]al ,except z provid$ 9 subp>agraphs 7,b7 & 7,c71 ! t]m def]ral p]iod1 ) respect to any applicable def]r$ comp5sation1 means ! p]iod-- 7i7 beg9n+ on ! date ! comp5sation 0 fir/ def]r$1 )\t reg>d to ve/+1 transf]ability1 or risk ( =feiture1 & 7ii7 end+ on ! date su* comp5sation is includible 9 gross income or1 if applicable1 ! date describ$ 9 section #hc7;a77#a7 ) respect to su* comp5sation4 ,= purposes ( ! prec$+ s5t5ce1 comp5sation %all be treat$ z fir/ def]r$ z ( ! date ! applicable taxpay] fir/ has a legally b9d+ "r to ! comp5sation or1 9 ! case ( prop]ty subject to section #hc1 ! date ( transf] ( ! prop]ty4 7,b7 ,computation ( int]e/ ,solely = purposes ( subsection 7b77#c71 ! def]ral p]iod %all end on ! la/ day ( ! taxable ye> :i* includes ! date describ$ 9 subp>agraph 7,a77ii74 7,c7 ,prop]ty transf]r$ pursuant to ! ex]cise ( an option ,9 ! case ( prop]ty acquir$ pursuant to an option describ$ 9 section #hc7;e77#c71 ! def]ral p]iod %all beg9 on ! date ( grant ( ! option pursuant to :i* ! prop]ty 0 acquir$4 7d7 ,regulations ,! ,secret>y %all prescribe su* regulations z may be necess>y or appropriate to c>ry out ! purposes ( ?is section4 4 7b7 ,in=mation report+ ) respect to applicable def]r$ comp5sation ,subp>t ,b ( "p ,,iii ( sub*apt] ,a ( *apt] #fa1 z 9 effect aft] ! am5dm5ts made by section #ccd7;d7 ( ! ,,secure #b4j ,act ( #bjbb & ! am5dm5ts made by section #gjbjc7;c7 ( ,public ,law #aai-ba1 is am5d$ by add+ at ! end ! foll[+ new section3 #fjej;,,bb4 ,in=mation ) respect to applicable def]r$ comp5sation 7a7 ,9 g5]al ,e p]son mak+ a paym5t to an individual 9 excess ( #e1jjj1jjj (-- 7#a7 any applicable def]r$ comp5sation describ$ 9 section #dji;,b7c77#b77;,a71 or 7#b7 any sev]ance pay 7z def9$ 9 section #dji;,b7d77#c771 %all make a return1 n lat] ?an ,janu>y #ca ( ! fir/ cal5d> ye> beg9n+ aft] ! close ( ! taxable ye> dur+ :i* su* paym5t is includible 9 gross income ( ! individual4 7b7 ,in=mation requir$ ,! return requir$ by subsection 7a7 %all include-- 7#a7 ! "n1 taxpay] id5tification numb]1 & address ( ! individual to :om ! paym5t ( applicable def]r$ comp5sation or sev]ance pay is made1 7#b7 ! date any applicable def]r$ comp5sation 0 fir/ def]r$ 7! date ( ! transf]1 9 ! case ( prop]ty subject to section #hc1 or ! date ( grant ( ! option1 9 ! case ( prop]ty acquir$ pursuant to an option describ$ 9 section #hc7;e77#c771 )\t reg>d to ve/+1 transf]ability1 or risk ( =feiture1 7#c7 ! am\nt ( su* comp5sation includible 9 gross income ( ! individual = ! taxable ye>1 7#d7 ! am\nt ( su* sev]ance pay includible 9 gross income ( ! individual = ! taxable ye>1 & 7#e7 su* o!r in=mation z ! ,secret>y may require4 7c7 ,special rules 7#a7 ,section #hc comp5sation ,) respect to transf]s ( prop]ty to :i* section #hc applies1 ! in=mation requir$ "u p>agraphs 7#b7 & 7#c7 ( subsection 7b7 %all be report$ sep>ately = ea* item ( prop]ty transf]r$1 except t prop]ty = :i* ! in=mation requir$ by su* p>agraphs is id5tical may be aggregat$4 7#b7 ,o!r comp5sation ,) respect to any applicable def]r$ comp5sation n describ$ 9 p>agraph 7#a71 if su* comp5sation is paid pursuant to m ?an #a plan or arrangem5t or involves am\nts :i* 7 fir/ def]r$ on m ?an #a date1 ! in=mation requir$ "u p>agraphs 7#b7 & 7#c7 ( subsection 7b7 %all be report$ sep>ately ) respect to ea* su* plan or arrangem5t & ea* su* date4 7d7 ,/atem5ts ,to be furni%$ to individuals ) respect to :om in=mation is report$ ,e p]son requir$ to make a return "u subsection 7a7 %all furni% to ea* individual ) respect to :om su* a return is requir$ a writt5 /atem5t %[+-- 7#a7 ! "n1 address1 & phone numb] ( ! in=mation contact ( ! p]son mak+ su* return1 & 7#b7 ! in=mation requir$ by p>agraphs 7#b7 ?r\gh 7#e7 ( subsection 7b74 ,! writt5 /atem5t requir$ "u ! prec$+ s5t5ce %all be furni%$ to ! individual on or be=e ,janu>y #ca ( ! fir/ cal5d> ye> beg9n+ aft] ! close ( ! taxable ye> = :i* ! return "u subsection 7a7 0 made4 7e7 ,adju/m5ts = inflation 7#a7 ,9 g5]al ,9 ! case ( any taxable ye> beg9n+ aft] #bjbf1 ! #e1jjj1jjj am\nt "u subsection 7a7 %all be increas$ by an am\nt equal to ! product (-- 7,a7 su* doll> am\nt1 & 7,b7 ! co/-(-liv+ adju/m5t "u section #a7;f77#c7 = ! cal5d> ye> 9 :i* su* taxable ye> beg9s1 det]m9$ by sub/itut+ cal5d> ye> #bjbe = cal5d> ye> #aiib 9 subp>agraph 7,b7 !re(4 7#b7 ,r\nd+ ,if any am\nt z adju/$ "u p>agraph 7#a7 is n a multiple ( #bej1jjj1 su* am\nt %all be r\nd$ to ! next l[e/ multiple ( #bej1jjj4 7f7 ,regulations ,! ,secret>y %all prescribe su* regulations z may be necess>y or appropriate to c>ry out ! purposes ( ?is section1 includ+ regulations specify+ :at con/itutes a paym5t to an individual ( applicable def]r$ comp5sation = purposes ( subsection 7a74 4 7c7 ,p5alties 7#a7 ,returns ,section #fgbd7;d77#a77;,b71 z 9 effect aft] ! am5dm5ts made by section #ccd7;d7 ( ! ,,secure #b4j ,act ( #bjbb & section #gjbjc7;c7 ( ,public ,law #aai-ba1 is am5d$ by /rik+ or at ! end ( clause 7xxviii71 by ins]t+ or at ! end ( clause 7xxix71 & by ins]t+ aft] clause 7xxix7 ! foll[+ new clause3 7xxx7 section #fjej;,,bb7a7 7relat+ to returns ( in=mation ) respect to applicable def]r$ comp5sation71 & 4 7#b7 ,/atem5ts ,section #fgbd7;d77#b71 z 9 effect aft] ! am5dm5ts made by section #ccd7;d7 ( ! ,,secure #b4j ,act ( #bjbb & sections #gjbjc7;c7 & #gjdba7;d77#b77;,b7 ( ,public ,law #aai-ba1 is am5d$-- 7,a7 by /rik+ or at ! end ( subp>agraph 7,,nn71 7,b7 by /rik+ ! p]iod at ! end ( subp>agraph 7,,oo7 & ins]t+ 1 or1 & 7,c7 by ins]t+ aft] subp>agraph 7,,oo7 ! foll[+ new subp>agraph3 7,,pp7 section #fjej;,,bb7d7 7relat+ to /atem5ts ( in=mation ) respect to applicable def]r$ comp5sation74 4 7d7 ,cl]ical am5dm5ts 7#a7 ,9 g5]al ,! table ( sections = subp>t ,a ( "p ,i ( sub*apt] ,d ( *apt] #a is am5d$ by ins]t+ aft] ! item relat+ to section #dji;,a ! foll[+ new item3 ,sec4 #dji;,b4 ,special rules = c]ta9 def]r$ comp5sation4 4 7#b7 ,in=mation report+ ,! table ( sections = subp>t ,b ( "p ,,iii ( sub*apt] ,a ( *apt] #fa1 z 9 effect aft] ! am5dm5ts made by section #ccd7;d7 ( ! ,,secure #b4j ,act ( #bjbb & section #gjbjc7;d77#b7 ( ,public ,law #aai-ba1 is am5d$ by ins]t+ aft] ! item relat+ to section #fjej;,,aa ! foll[+ new item3 ,sec4 #fjej;,,bb4 ,in=mation ) respect to applicable def]r$ comp5sation4 4 7e7 ,effective date ,! am5dm5ts made by ?is section %all apply to taxable ye>s beg9n+ aft] ,decemb] #ca1 #bjbe4 #bbb4 ,rules relat+ to c]ta9 life insurance & annuity contracts ( applicable taxpay]s 7a7 ,treatm5t ( am\nts receiv$ 7#a7 ,9 g5]al ,section #gb7;e7 is am5d$ by r$esignat+ p>agraph 7#ab7 z p>agraph 7#ac7 & by ins]t+ aft] p>agraph 7#aa7 ! foll[+3 7#ab7 ,treatm5t ( c]ta9 am\nts receiv$ "u c]ta9 life insurance & annuity contracts ( applicable taxpay]s 7,a7 ,9 g5]al ,9 ! case ( any applicable am\nt :i* is receiv$ dur+ any taxable ye>1 not)/&+ p>agraph 7#e77;,a7 or 7#e77;,e7-- 7i7 if su* am\nt is receiv$ on or aft] ! annuity />t+ date1 p>agraph 7#b77;,a7 %all apply1 & 7ii7 if su* am\nt is receiv$ be=e ! annuity />t+ date or is receiv$ ) respect to a life insurance contract to :i* ?is section applies1 ! rules ( clauses 7i7 & 7ii7 ( p>agraph 7#b77;,b7 %all apply4 7,b7 ,applicable am\nt 7i7 ,9 g5]al ,= purposes ( ?is p>agraph1 ! t]m applicable am\nt means-- 7,i7 any am\nt to :i* ?is subsection applies :i* is receiv$ "u an applicable private placem5t life insurance or annuity contract1 & 7,,ii7 9 ! case ( an applicable taxpay]1 not)/&+ p>agraph 7#e77;,a71 7#e77;,e71 or 7#aj77;,a71 any am\nt or portion describ$ 9 p>agraph 7#d77;,a7 ) respect to a life insurance or annuity contract1 except t any applicable taxpay] or any relat$ p]son 7z def9$ 9 section #add7;a77#c77 to an applicable taxpay] %all be sub/itut$ = an individual 9 apply+ su* p>agraph4 7ii7 ,treatm5t ( refunds1 surr5d]s1 r$emptions & maturities ,not)/&+ p>agraph 7#e77;,a7 or 7#e77;,e71 am\nts describ$ 9 clause 7i77,i7 %all include am\nts describ$ 9 clause 7i7 or 7ii7 ( p>agraph 7#e77;,e7 receiv$ "u an applicable private placem5t life insurance or annuity contract4 7iii7 ,am\nts "u pre-#aihb & qualifi$ plan contracts1 etc4 exclud$ ,su* t]m %all n include am\nts receiv$-- 7,i7 "u a contract :i* is describ$ 9 p>agraph 7#e77;,b7 or 7#e77;,d71 or 7,,ii7 "u a qualifi$ tuition program 7z def9$ 9 section #ebi7;b77 or "u a ,cov]dell education sav+s acc\nt 7z def9$ 9 section #ecj7;b774 7,c7 ,applicable private placem5t life insurance or annuity contract ,= purposes ( ?is p>agraph-- 7i7 ,9 g5]al ,! t]m applicable private placem5t life insurance or annuity contract means a private placem5t life insurance or annuity contract ! hold] ( :i* 7:e!r directly or indirectly7 is an applicable taxpay]4 7ii7 ,secret>ial au?ority ,! ,secret>y %all prescribe regulations or o!r guidance :i* treat a private placem5t life insurance or annuity contract z an applicable private placem5t life insurance or annuity contract 9 cases :]e an applicable taxpay] 7or a relat$ p]son7 has an int]e/ 9 su* contract n describ$ 9 clause 7i7 if su* treatm5t is necess>y to prev5t ! avoidance ( ! purposes ( ?is p>agraph4 7,d7 ,private placem5t life insurance or annuity contract ,= purposes ( ?is p>agraph1 ! t]m private placem5t life insurance or annuity contract means any contract-- 7i7 :i* is an annuity contract or a life insurance contract1 & 7ii7 ) respect to :i* ! hold] ( ! contract is requir$1 = purposes ( obta9+ a regi/ration exemption "u securities laws z 9 effect on ! date ( enactm5t ( ?is section 7includ+ ! ,securities ,ex*ange ,act ( #aicd & ! ,inve/m5t ,advisors ,act ( #aidj71 to make a repres5tation t su* own]-- 7,i7 has a specifi$ m9imum am\nt ( income or assets1 7,,ii7 has complet$ a specifi$ m9imum level ( education1 or 7,,iii7 holds a specific lic5se or cr$5tial4 7,e7 ,applicable taxpay] ,= purposes ( ?is p>agraph1 ! t]m applicable taxpay] has ! mean+ giv5 su* t]m "u section #die4 4 7#b7 ,con=m+ am5dm5t ,section #gb7;e77#e77;,c7 is am5d$ by ins]t+ or 7#ab7 aft] 7#aj74 7#c7 ,effective date ,! am5dm5ts made by ?is subsection %all apply to am\nts receiv$ 9 taxable ye>s beg9n+ aft] ,decemb] #ca1 #bjbe4 7b7 #aj-,p]c5t additional tax = di/ributions f applicable private placem5t life insurance or annuity contracts 7#a7 ,9 g5]al ,section #gb7v7 is am5d$-- 7,a7 by ins]t+ or an applicable private placem5t life insurance or annuity contract 7z def9$ 9 subsection 7e77#ab77 aft] a modifi$ end[m5t contract 7z def9$ 9 section #ggjb;,a7 9 p>agraph 7#a71 & 7,b7 by ins]t+ & applicable private placem5t life insurance or annuity contracts aft] modifi$ end[m5t contracts 9 ! head+ !re(4 7#b7 ,effective date ,! am5dm5ts made by ?is subsection %all apply to am\nts receiv$ 9 taxable ye>s beg9n+ aft] ,decemb] #ca1 #bjbe4 7c7 ,repeal ( exclusion = dea? b5efits 7#a7 ,9 g5]al ,section #aja is am5d$ by add+ at ! end ! foll[+ new subsection3 7k7 ,exclusion n ,to apply 7#a7 ,9 g5]al ,subsection 7a77#a7 %all n apply to am\nts receiv$ by reason ( ! dea? ( ! insur$ "u an applicable private placem5t life or annuity contract 7)9 ! mean+ ( section #gb7;e77#ab774 7#b7 ,am\nts previ\sly includ$ ,! ,secret>y %all prescribe rules to ensure t p>agraph 7#a7 %all n apply to any portion ( any am\nt receiv$ :i* 0 previ\sly includ$ 9 gross income4 4 7#b7 ,con=m+ am5dm5t ,section #aja7;a77#a7 is am5d$ by /rik+ & subsection 7j71 & ins]t+ subsection 7j71 & subsection 7k714 7#c7 ,effective date ,! am5dm5ts made by ?is subsection %all apply to am\nts receiv$ 9 taxable ye>s beg9n+ aft] ,decemb] #ca1 #bjbe4 7d7 ,report+ requirem5ts 7#a7 ,9 g5]al ,subp>t ,b ( "p ,,iii ( sub*apt] ,a ( *apt] #fa1 z am5d$ by ?is ,act1 is am5d$ by add+ at ! end ! foll[+ new section3 #fjej;,,cc4 ,returns relat+ to am\nts receiv$ "u c]ta9 life insurance & annuity contracts 7a7 ,9 g5]al ,e p]son :o issues a life insurance or annuity contract or :o re9sures su* a contract %all make an annual return 7at su* "t & 9 su* mann] z ! ,secret>y %all prescribe7 sett+ =?-- 7#a7 ! "n1 address1 & ,,t9 ( su* p]son1 7#b7 ! "n1 address1 & ,,t9 ( ea* p]son :o receives an applicable am\nt 7z def9$ 9 section #gb7;e77#ab77 dur+ ! ye> ) respect to any life insurance or annuity contract issu$ or re9sur$ by su* p]son1 7#c7 ! aggregate applicable am\nts receiv$ by ea* p]son id5tifi$ 9 p>agraph 7#b71 & 7#d7 su* o!r in=mation z ! ,secret>y may require4 7b7 ,/atem5t ,to be furni%$ to taxpay]s ) respect to :om in=mation is requir$ 7#a7 ,9 g5]al ,e p]son t is requir$ to make a return "u subsection 7a7 %all furni% to ea* p]son ^: id5tity is requir$ to be set =? "u subsection 7a77#b7 a writt5 /atem5t %[+-- 7,a7 ! "n1 address1 & phone numb] ( ! in=mation contact ( ! p]son requir$ to make su* return1 & 7,b7 ! in=mation requir$ to be %[n on su* return ) respect to ! p]son describ$ 9 subsection 7a77#b7 & ) respect to applicable am\nts receiv$ by su* p]son4 7#b7 ,furni%+ ( in=mation ,! writt5 /atem5t requir$ "u p>agraph 7#a7 %all be furni%$ to ! p]son on or be=e ,janu>y #ca ( ! ye> foll[+ ! cal5d> ye> = :i* ! return "u subsection 7a7 is requir$ to be made4 7c7 ,regulatory au?ority ,! ,secret>y may prescribe su* regulations & o!r guidance z necess>y = purposes ( c>ry+ out ?is section1 includ+ regulations or o!r guidance to require report+ "u ?is section by su* o!r p]sons z necess>y to c>ry out ! purposes ( section #gb7;e77#ab74 4 7#b7 ,p5alties 7,a7 ,returns ,section #fgbd7;d77#a77;,b71 z am5d$ by ?is ,act1 is am5d$ by /rik+ or at ! end ( clause 7xxix71 by /rik+ & at ! end ( clause 7xxx7 & ins]t+ or1 & by ins]t+ aft] clause 7xxx7 ! foll[+ new clause3 7xxxi7 section #fjej;,,cc7a7 7relat+ to returns ( in=mation ) respect to private placem5t life insurance & annuity contracts71 4 7,b7 ,/atem5ts ,section #fgbd7;d77#b71 z s am5d$1 is am5d$-- 7i7 by /rik+ or at ! end ( subp>agraph 7,,oo71 7ii7 by /rik+ ! p]iod at ! end ( subp>agraph 7,,pp7 & ins]t+ 1 or1 & 7iii7 by ins]t+ aft] subp>agraph 7,,pp7 ! foll[+ new subp>agraph3 7,,qq7 section #fjej;,,cc7b7 7relat+ to /atem5ts ( in=mation ) respect to private placem5t life insurance & annuity contracts74 4 7#c7 ,cl]ical am5dm5t ,! table ( sections = subp>t ,b ( "p ,,iii ( sub*apt] ,a ( *apt] #fa1 z am5d$ by ?is ,act1 is am5d$ by ins]t+ aft] ! item relat+ to section #fjej;,,bb ! foll[+ new item3 ,sec4 #fjej;,,cc4 ,returns relat+ to am\nts receiv$ "u c]ta9 life insurance & annuity contracts4 4 7#d7 ,effective date ,! am5dm5ts made by ?is subsection %all apply to taxable ye>s beg9n+ aft] ,decemb] #ca1 #bjbe4 ,d ,repeal ( special treatm5t = c]ta9 inve/m5ts #bca4 ,treatm5t ( exclusion = c]ta9 small bus9ess /ock 7a7 ,9 g5]al ,section #abjb7;a71 z am5d$ by section #gjdcb7;a7 ( ,public ,law #aai-ba1 is am5d$ by add+ at ! end ! foll[+ new p>agraph3 7#g7 ,special rules = applicable taxpay]s 7,a7 ,9 g5]al ,?is subsection %all n apply to any ga9 f ! sale or ex*ange ( qualifi$ small bus9ess /ock by an applicable taxpay] 7z def9$ 9 section #die74 7,b7 ,exception ,subp>agraph 7,a7 %all n apply to any qualifi$ small bus9ess /ock acquir$ be=e ,septemb] #ag1 #bjbe4 4 7b7 ,effective date ,! am5dm5t made by ?is subsection %all apply to sales or ex*anges on or aft] ,septemb] #ag1 #bjbe4 #bcb4 ,modifications = inve/m5ts 9 qualifi$ opportunity funds 7a7 ,t]m9ation ( election 7#a7 ,9 g5]al ,section #adjj,z-#b7;a77#b71 z am5d$ by section #gjdba7;c77#a7 ( ,public ,law #aai-ba1 is am5d$ to read z foll[s3 7#b7 ,election ,except z provid$ 9 p>agraph 7#c71 no election may be made "u p>agraph 7#a7 ) respect to a sale or ex*ange if an election previ\sly made ) respect to su* sale or ex*ange is 9 effect4 4 7#b7 ,special rules ,section #adjj,z-#b7;a7 is am5d$ by add+ at ! end ! foll[+ new p>agraph3 7#c7 ,special rules = applicable taxpay]s & entities ,= purposes ( p>agraph 7#b7-- 7,a7 ,9 g5]al ,no election may be made "u p>agraph 7#a7 ) respect to a sale or ex*ange if-- 7i7 except z provid$ 9 subp>agraph 7,b71 9 ! case ( a taxpay] :i* is 7or ev] 07 an applicable taxpay]1 su* sale or ex*ange is on or aft] ! fir/ day ( ! fir/ taxable ye> = :i* ! taxpay] 0 an applicable taxpay]1 & 7ii7 9 ! case ( an applicable entity1 a notice receiv$ by ! entity "u subsection 7b77#b77;,a7 or 7c77#b7 ( section #dic is 9 effect at ! "t ( su* sale or ex*ange4 7,b7 ,special rule = #bjbe ,9 ! case ( a taxpay] :i* w\ld be an applicable taxpay] = its fir/ taxable ye> beg9n+ 9 #bjbe 7det]m9$ z if "p ,,iv ( sub*apt] ,e appli$ to taxable ye>s beg9n+ 9 #bjbe71 subp>agraph 7,a77i7 %all be appli$ by sub/itut+ ,septemb] #ag1 #bjbe = ! date o!rwise specifi$ 9 su* subp>agraph4 7,c7 ,def9itions ,= purposes ( ?is p>agraph & subsection 7c71 any t]m us$ 9 ?is p>agraph :i* is also us$ 9 "p ,,iv ( sub*apt] ,e %all h ! same mean+ z :5 us$ 9 su* "p4 4 7b7 ,modification ( special rule = inve/m5ts held #aj ye>s ,section #adjj,z-#b7;c71 z am5d$ by section #gjdba7;c77#c7 ( ,public ,law #aai-ba1 is am5d$-- 7#a7 by /rik+ ,9 ! case ( & all t foll[s & ins]t+3 7#a7 ,9 g5]al ,except z provid$ 9 p>agraph 7#b71 9 ! case ( 1 & 7#b7 by add+ at ! end ! foll[+ new p>agraph3 7#b7 ,special rule = applicable taxpay]s & entities ,9 ! case ( any taxpay] :o is an applicable taxpay] = any taxable ye> dur+ :i* su* inve/m5t 0 held by ! taxpay] or any taxpay] :i* is an applicable entity1 ! basis det]m9$ "u p>agraph 7#a7 ( any inve/m5t held = at lea/ #aj ye>s %all be ! less] (-- 7,a7 ! fair m>ket value ( su* inve/m5t z ( ! la/ day ( ! taxable ye> :i* includes ! lat] (-- 7i7 ! date t su* inve/m5t has be5 held = #aj ye>s1 or 7ii7 9 ! case (-- 7,i7 an applicable taxpay]1 ! date t su* taxpay] fir/ became an applicable taxpay]1 or 7,,ii7 an applicable entity1 ! fir/ date a notice 0 receiv$ by ! entity "u subsection 7b77#b77;,a7 or 7c77#b7 ( section #dic1 or 7,b7 ! fair m>ket value ( su* inve/m5t on ! date t inve/m5t is sold or ex*ang$ 7or1 if e>li]1 ! date describ$ 9 p>agraph 7#a77;,b774 4 7c7 ,effective date ,! am5dm5ts made by ?is section %all apply to sales or ex*anges aft] ,septemb] #ag1 #bjbe1 9 taxable ye>s end+ aft] su* date4