§ 545. Undistributed personal holding company income
(a)
Definition
For purposes of this part, the term “undistributed personal holding company income” means the taxable income of a personal holding company adjusted in the manner provided in subsections (b), (c), and (d), minus the dividends paid deduction as defined in section
561. In the case of a personal holding company which is a foreign corporation, not more than 10 percent in value of the outstanding stock of which is owned (within the meaning of section
958
(a)) during the last half of the taxable year by United States persons, the term “undistributed personal holding company income” means the amount determined by multiplying the undistributed personal holding company income (determined without regard to this sentence) by the percentage in value of its outstanding stock which is the greatest percentage in value of its outstanding stock so owned by United States persons on any one day during such period.
(b)
Adjustments to taxable income
For the purposes of subsection (a), the taxable income shall be adjusted as follows:
(1)
Taxes
There shall be allowed as a deduction Federal income and excess profits taxes and income, war profits and excess profits taxes of foreign countries and possessions of the United States (to the extent not allowable as a deduction under section
275
(a)(4)), accrued during the taxable year or deemed to be paid by a domestic corporation under section
902
(a) or
960
(a)(1) for the taxable year, but not including the accumulated earnings tax imposed by section
531, the personal holding company tax imposed by section
541, or the taxes imposed by corresponding sections of a prior income tax law.
(2)
Charitable contributions
The deduction for charitable contributions provided under section
170 shall be allowed, but in computing such deduction the limitations in section
170
(b)(1)(A), (B), (D), and (E) shall apply, and section
170
(b)(2) and (d)(1) shall not apply. For purposes of this paragraph, the term “contribution base” when used in section
170
(b)(1) means the taxable income computed with the adjustments (other than the 10-percent limitation) provided in section
170
(b)(2) and (d)(1) and without deduction of the amount disallowed under paragraph (6) of this subsection.
(4)
Net operating loss
The net operating loss deduction provided in section
172 shall not be allowed, but there shall be allowed as a deduction the amount of the net operating loss (as defined in section
172
(c)) for the preceding taxable year computed without the deductions provided in part VIII (except section
248) of subchapter B.
(5)
Net capital gains
There shall be allowed as a deduction the net capital gain for the taxable year, minus the taxes imposed by this subtitle attributable to such net capital gain. The taxes attributable to such net capital gain shall be an amount equal to the difference between—
(6)
Expenses and depreciation applicable to property of the taxpayer
The aggregate of the deductions allowed under section
162 (relating to trade or business expenses) and section
167 (relating to depreciation), which are allocable to the operation and maintenance of property owned or operated by the corporation, shall be allowed only in an amount equal to the rent or other compensation received for the use of, or the right to use, the property, unless it is established (under regulations prescribed by the Secretary) to the satisfaction of the Secretary—
(7)
Special rule for capital gains and losses of foreign corporations
In the case of a foreign corporation, paragraph (5) shall be applied by taking into account only gains and losses which are effectively connected with the conduct of a trade or business within the United States and are not exempt from tax under treaty.
(c)
Certain foreign corporations
In the case of a foreign corporation all of the outstanding stock of which during the last half of the taxable year is owned by nonresident alien individuals (whether directly or indirectly through foreign estates, foreign trusts, foreign partnerships, or other foreign corporations), the taxable income for purposes of subsection (a) shall be the income which constitutes personal holding company income under section
543
(a)(7), reduced by the deductions attributable to such income, and adjusted, with respect to such income, in the manner provided in subsection (b).