more than 6 months or in the case of a taxpayer other than a corporation, be considered gain from the sale or exchange of a capital asset held for more than 6 months but not more than 2 years or held for more than 2 years, as the case may be." (10) (A) Subsection (b) of section 1233 (relating to gains and losses from short sales) is amended to read as follows: "(b) SHORT-TERM AND CLASS B GAINS AND HOLD 10 ING PERIODS.-If gain or loss from a short sale is considered 11 as gain or loss from the sale or exchange of a capital asset 12 under subsection (a) and if on the date of such short sale 13 substantially identical property has been held by the 14 taxpayer "(1) for not more than 6 months (determined without regard to the effect, under the second sentence of this subsection, of such short sale on the holding period), or if substantially identical property is acquired by the taxpayer after such short sale and on or before the date of the closing thereof, any gain on the closing of such short sale shall be considered as a gain on the sale or exchange of a capital asset held for not more than 6 months (notwithstanding the period of time any property used to close such short sale has been held); or 1 2 3 4 5 6 7 8 9 10 "(2) in the case of a taxpayer other than a corporation, for more than 6 months but not more than 2 years (determined without regard to the effect, under the second sentence of this subsection, of such short sale on the holding period), any gain on the closing of such short sale shall be considered as a gain on the sale or exchange of a capital asset held for more than 6 months but not more than 2 years (notwithstanding the period of time any property used to close such short sale has been held). 11 The holding period of such substantially identical property 12 shall be considered to begin (notwithstanding section 1223, 13 relating to the holding period of property) on the date of the 14 closing of the short sale, or on the date of a sale, gift, or 15 other disposition of such property, whichever date occurs 16 first. The preceding sentence shall apply to such substantially 17 identical property in the order of the dates of the acquisition 18 of such property, but only to so much of such property as 19 does not exceed the quantity sold short. For purposes of this 20 subsection, the acquisition of an option to sell property at a 21 fixed price shall be considered as a short sale, and the exer22 cise or failure to exercise such option shall be considered as a closing of such short sale." 23 1 2 3 (B) Subsection (d) of section 1233 is amended to read as follows: "(d) LONG-TERM, CLASS A, AND CLASS B LOSSES.— 4 If on the date of such short sale substantially identical prop 5 erty has been held by the taxpayer "(1) In the case of a corporation, for more than 6 months, any loss on the closing of such short sale shall be considered as a loss on the sale or exchange of a capital asset held for more than 6 months (notwithstanding the period of time any property used to close such short sale has been held, and notwithstanding section 1234). "(2) In the case of a taxpayer other than a corpo ration "(A) for more than 2 years, any loss on the closing of such short sale shall be considered as a loss on the sale or exchange of a capital asset held for more than 2 years (notwithstanding the period of time any property used to close such short sale has been held, and notwithstanding section 1234), or "(B) for more than 6 months but not more than 2 years, any loss on the closing of such short sale shall be considered as a loss on the sale or ex change of a capital asset held for more than 6 months but not more than 2 years (notwithstanding the period of time any property used to close such short sale has been held, and notwithstanding section 1234)." (C) Paragraph (1) of section 1233 (e) is amended. to read as follows: "(1) Subsection (b) or (d) shall not apply to the gain or loss, respectively, on any quantity of property used to close such short sale which is in excess of the quantity of the substantially identical property referred to in the applicable subsection. In the case of a tax payer other than a corporation— "(A) subsection (b) (1) or (d) (2) (A) shall not apply to the gain or loss, respectively, on any quantity of property used to close such short sale which is in excess of the quantity of the substantially identical property to which either subsection (b) (1) or (d) (2) (A) applies (determined without regard to this subparagraph), and "(B) subsection (b) (2) or (d) (2) (B) shall apply only to the gain or loss, respectively, on the excess described in subparagraph (A), but only to the extent of the quantity of the substantially 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 identical property to which either subsection (b) (2) or (d) (2) (B) applies (determined without regard to this subparagraph)." (D) Section 1233 (e) (4) (A) is amended by strik ing out "for not more than 6 months," in clause (i) and inserting in lieu thereof "in the case of a corporation, for not more than 6 months, or in the case of a taxpayer other than a corporation, for not more than 2 years,", and by striking out "subsection (b) (2)" in the lan guage following clause (ii) and inserting in lieu thereof "the second and third sentences of subsection (b)". (E) Section 1233 (f) is amended by striking out "subsection (b) (2)" each place it appears and inserting in lieu thereof "the second and third sentences of sub section (b)". (11) (A) Section 1247 (relating to election by foreign investment companies to distribute income cur 18 rently) is amended by striking out subparagraph (B) of subsection (a) (1) and inserting in lieu thereof the following: "(B) designate in a written notice mailed to its shareholders at any time before the expiration of 45 days after the close of its taxable year the pro rata amount for the taxable year of the adjusted class A and adjusted class B capital gain (deter |