1 2 3 4 5 6 7 8 9 9 10 11 12 13 14 15 16 17 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 "(2) in the ease of a taxpayer other than a cor poration, 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 elose such short sale has been held). The holding period of such substantially identical property shall be considered to begin (notwithstanding section 1223, relating to the holding period of property) on the date of the elosing of the short sale, or on the date of a sale, gift, or other disposition of such property, whichever date occurs 22 first. The preceding sentence shall apply to such substan 23 24 25 tially identical property in the order of the dates of the aequisition of such property, but only to so much of such property as does not exceed the quantity sold short. For 1 purposes of this subsection, the acquisition of an option to sell 2 property at a fixed price shall be considered as a short sale, 3 and the exercise or failure to exercise such option shall be 4 considered as a closing of such short sale." 5 6 7 (B) Subsection (d) of section 1233 is amended to read as follows: "(d) LONG-TERM, CLASS A, AND CLASS B LOSSES. 8 If on the date of such short sale substantially identical prop erty has been held by the taxpayer "(1) In the ease 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 (notwithstand ing the period of time any property used to close such short sale has been held, and notwithstanding section 1234). "(2) In the ease of a taxpayer other than a corpo ration "(A) for more than 2 years, any loss on the elesing of such short sale shall be considered as a less 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), "(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 ease of a taxpayer 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) or (d)(2)(A) applies (deter mined 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 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 excess described in subparagraph (A), but only to the extent of the quantity of the substantially 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 striking out "for not more than 6 months," in clause (i) and inserting in lieu thereof "in the ease of a corporation, for not more than 6 months, or in the ease 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 eur 20 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 pre rata amount for the taxable year of the adjusted elass A and adjusted class B capital gain (deter mined as though such corporation were a taxpayer other than a corporation except that section 1212 (a) shall apply in lieu of section 1212(b)); and the portions thereof which are being distributed; and" (B) Clause (i) of section 1247(a)(2)(A) is amended to read as follows: "(i) the adjusted class A and adjusted elass B capital gain referred to in paragraph (1) (B)," (C) Subparagraph (C) of section 1247(a) (2) is amended to read as follows: "(C) CARRYOVER OF CAPITAL LOSSES FROM NONELECTION YEARS DENIED. In computing the adjusted class A and adjusted class B capital gains referred to in paragraph (1)(B), section 1212 shall not apply to losses incurred in or with respect to taxable years before the first taxable year to which the election applies." (D) Section 1247(e) (2) is amended by striking out "his long term capital gains" and inserting in lieu thereof "in the ease of a shareholder which is a corpora tion, its long-term capital gains, and in the ease of a |