321
‘‘(c) SPECIAL RULE IN COMPUTING LIFE INSURANCE
RESERVES.—For 
purposes 
of 
applying 
section
816(b)(1)(A) to any modified guaranteed contract, an as-
sumed rate of interest shall include a rate of interest de-
termined, from time to time, with reference to a market
rate of interest.
‘‘(d) MODIFIED
GUARANTEED
CONTRACT
DE-
FINED.—For purposes of this section, the term ‘modified
guaranteed contract’ means a contract not described in
section 817—
‘‘(1) all or part of the amounts received under
which are allocated to an account which, pursuant to
State law or regulation, is segregated from the gen-
eral asset accounts of the company and is valued
from time to time with reference to market values,
‘‘(2) which—
‘‘(A) provides for the payment of annuities,
‘‘(B) is a life insurance contract, or
‘‘(C) is a pension plan contract which is
not a life, accident, or health, property, cas-
ualty, or liability contract,
‘‘(3) for which reserves are valued at market for
annual statement purposes, and
322
‘‘(4) which provides for a net surrender value or
a policyholder’s fund (as defined in section
807(e)(1)).
‘‘(e) REGULATIONS.—The Secretary may prescribe
regulations—
‘‘(1) to provide for the treatment of market
value adjustments under sections 72, 7702, 7702A,
and 807(e)(1)(B),
‘‘(2) to determine the interest rates applicable
under sections 807(c)(3), 807(d)(2)(B), and 812
with respect to a modified guaranteed contract an-
nually, in a manner appropriate for modified guar-
anteed contracts and, to the extent appropriate for
such a contract, to modify or waive the applicability
of section 811(d),
‘‘(3) to provide rules to limit ordinary gain or
loss treatment to assets constituting reserves for
modified guaranteed contracts (and not other assets)
of the company,
‘‘(4) to provide appropriate treatment of trans-
fers of assets to and from the segregated account,
and
‘‘(5) as may be necessary or appropriate to
carry out the purposes of this section.’’
323
(b) CLERICAL AMENDMENT.—The table of sections
for subpart E of part I of subchapter L of chapter 1 is
amended by inserting after the item relating to section
817 the following new item:
‘‘Sec. 817A. Special rules for modified guaranteed contracts.’’
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to taxable years beginning
after December 31, 1992.
(2) TREATMENT
OF
NET
ADJUSTMENTS.—In
the case of any taxpayer required by the amend-
ments made by this section to change its calculation
of reserves to take into account market value adjust-
ments and to mark segregated assets to market for
any taxable year—
(A) such changes shall be treated as a
change in method of accounting initiated by the
taxpayer,
(B) such changes shall be treated as made
with the consent of the Secretary, and
(C) the adjustments required by reason of
section 481 of the Internal Revenue Code of
1986 shall be taken into account as ordinary in-
come or loss by the taxpayer for the taxpayer’s
first taxable year beginning after December 31,
1992.
324
Subtitle F—Other Provisions
SEC. 651. CLOSING OF PARTNERSHIP TAXABLE YEAR WITH
RESPECT TO DECEASED PARTNER, ETC.
(a) GENERAL RULE.—Subparagraph (A) of section
706(c)(2) (relating to disposition of entire interest) is
amended to read as follows:
‘‘(A) DISPOSITION
OF
ENTIRE
INTER-
EST.—The taxable year of a partnership shall
close with respect to a partner whose entire in-
terest in the partnership terminates (whether
by reason of death, liquidation, or otherwise).’’
(b) CLERICAL AMENDMENT.—The paragraph head-
ing for paragraph (2) of section 706(c) is amended to read
as follows:
‘‘(2) TREATMENT OF DISPOSITIONS.—’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to partnership taxable years begin-
ning after December 31, 1993.
SEC. 652. REPEAL OF SPECIAL TREATMENT OF OWNER-
SHIP CHANGES IN DETERMINING ADJUSTED
CURRENT EARNINGS.
(a) GENERAL RULE.—Paragraph (4) of section 56(g)
(relating to adjustments) is amended by striking subpara-
graph (G) and by redesignating the following subpara-
graph as paragraph (G).
325
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to ownership changes after the
date of the enactment of this Act.
SEC. 653. SIMPLIFICATION OF CORPORATE MINIMUM TAX
DEPRECIATION PREFERENCE.
(a) IN GENERAL.—
(1) Clause (ii) of section 56(a)(1)(A) is amend-
ed—
(A) by striking ‘‘150 percent’’ in subclause
(I) and inserting ‘‘150 percent (120 percent in
the case of a corporation to which subsection
(g) applies)’’, and
(B) by striking ‘‘150-PERCENT
DECLIN-
ING’’ in the clause heading and inserting ‘‘DE-
CLINING’’.
(2) Clause (i) of section 56(g)(4)(A) is amended
to read as follows:
‘‘(i) PROPERTY
PLACED
IN
SERVICE
AFTER 1989.—The depreciation deduction
with respect to any property placed in
service in a taxable year beginning—
‘‘(I) during 1990, 1991, or 1992
shall be determined under the alter-
native system of section 168(g), or
326
‘‘(II) after 1992 shall be deter-
mined under the rules of subpara-
graph (A) of subsection (a)(1).’’
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (2) of section 168(b) is amended
to read as follows:
‘‘(2) SPECIAL RULE FOR DECLINING BALANCE
METHOD IN CERTAIN CASES.—
‘‘(A) 150 PERCENT METHOD FOR CERTAIN
PROPERTY.—Paragraph (1) shall be applied by
substituting ‘150 percent’ for ‘200 percent’ in
the case of—
‘‘(i) any 15-year or 20-year property,
or
‘‘(ii) any property used in a farming
business (within the meaning of section
263A(e)(4)).
‘‘(B) ELECTION
TO
USE
MINIMUM
TAX
METHOD.—In the case of any property (other
than property described in paragraph (3)) with
respect to which the taxpayer elects under para-
graph (5) to have the provisions of this sub-
paragraph apply, paragraph (1) shall be applied
by substituting ‘150 percent (120 percent in the
case of a corporation to which section 56(g) ap-
327
plies)’ for ‘200 percent’ (and subparagraph (A)
of this paragraph shall not apply).’’
(2) Paragraph (5) of section 168(b) is amended
by striking ‘‘paragraph (2)(C)’’ and inserting ‘‘para-
graph (2)(B)’’.
(3) Paragraph (2) of section 168(c) is amend-
ed—
(A) by striking ‘‘subsection (b)(2)(C)’’ and
inserting ‘‘subsection (b)(2)(B)’’, and
(B) by striking ‘‘150 PERCENT METHOD’’
in the paragraph heading and inserting ‘‘MINI-
MUM TAX METHOD’’.
(c) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to property placed in service in taxable
years beginning after December 31, 1992.
(2) 
COORDINATION
WITH
TRANSITIONAL
RULES.—The amendments made by this section
shall not apply to any property to which paragraph
(1) of section 56(a) of the Internal Revenue Code of
1986 does not apply by reason of subparagraph
(C)(i) of such paragraph (1).
328
SEC. 654. MODIFICATION OF CREDIT FOR PRODUCING
FUEL FROM A NONCONVENTIONAL SOURCE.
(a) IN GENERAL.—Subparagraph (A) of section
29(c)(2) (relating to gas from geopressured brine, etc.) is
amended by adding at the end the following new sentence:
‘‘If the Federal Energy Regulatory Commission ceases to
make the determinations described in the preceding sen-
tence, the Secretary shall make such determinations in ac-
cordance with section 503 of such Act.’’
(b) 
CONFORMING
AMENDMENT.—Section
29(c)(2)(A) is amended by inserting ‘‘(as in effect before
its repeal by the Natural Gas Wellhead Decontrol Act of
1989)’’± after ‘‘Natural Gas Policy Act of 1978’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on January 1, 1993.
TITLE VII—ESTATE AND GIFT
TAX PROVISIONS
SEC. 701. CLARIFICATION OF WAIVER OF CERTAIN RIGHTS
OF RECOVERY.
(a) AMENDMENT TO SECTION 2207A.—Paragraph
(2) of section 2207A(a) (relating to right of recovery in
the case of certain marital deduction property) is amended
to read as follows:
‘‘(2) DECEDENT
MAY
OTHERWISE
DIRECT.—
Paragraph (1) shall not apply with respect to any
property to the extent that the decedent in his will
329
(or a revocable trust) specifically indicates an intent
to waive any right of recovery under this subchapter
with respect to such property.’’
(b) AMENDMENT TO SECTION 2207B.—Paragraph
(2) of section 2207B(a) (relating to right of recovery
where decedent retained interest) is amended to read as
follows:
‘‘(2) DECEDENT
MAY
OTHERWISE
DIRECT.—
Paragraph (1) shall not apply with respect to any
property to the extent that the decedent in his will
(or a revocable trust) specifically indicates an intent
to waive any right of recovery under this subchapter
with respect to such property.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to the estates of dece-
dents dying after the date of the enactment of this Act.
SEC. 702. ADJUSTMENTS FOR GIFTS WITHIN 3 YEARS OF
DECEDENT’S DEATH.
(a) GENERAL RULE.—Section 2035 is amended to
read as follows:
‘‘SEC. 2035. ADJUSTMENTS FOR CERTAIN GIFTS MADE
WITHIN 3 YEARS OF DECEDENT’S DEATH.
‘‘(a) INCLUSION OF CERTAIN PROPERTY IN GROSS
ESTATE.—If—
330
‘‘(1) the decedent made a transfer (by trust or
otherwise) of an interest in any property, or relin-
quished a power with respect to any property, during
the 3-year period ending on the date of the dece-
dent’s death, and
‘‘(2) the value of such property (or an interest
therein) would have been included in the decedent’s
gross estate under section 2036, 2037, 2038, or
2042 if such transferred interest or relinquished
power had been retained by the decedent on the date
of his death,
the value of the gross estate shall include the value of any
property (or interest therein) which would have been so
included.
‘‘(b) INCLUSION OF GIFT TAX ON GIFTS MADE DUR-
ING
3 YEARS
BEFORE
DECEDENT’S
DEATH.—The
amount of the gross estate (determined without regard to
this subsection) shall be increased by the amount of any
tax paid under chapter 12 by the decedent or his estate
on any gift made by the decedent or his spouse during
the 3-year period ending on the date of the decedent’s
death.
‘‘(c) OTHER
RULES
RELATING
TO
TRANSFERS
WITHIN 3 YEARS OF DEATH.—
‘‘(1) IN GENERAL.—For purposes of—
376
‘‘(f) REMOVAL
FOR USE
AS DISTILLING MATE-
RIAL.—Subject to such regulations as the Secretary may
prescribe, beer may be removed from a brewery without
payment of tax to any distilled spirits plant for use as
distilling material.’’
(c) CLARIFICATION
OF REFUND
AND CREDIT
OF
TAX.—Section 5056 (relating to refund and credit of tax,
or relief from liability) is amended—
(1) by redesignating subsection (c) as sub-
section (d) and by inserting after subsection (b) the
following new subsection:
‘‘(c) BEER RECEIVED
AT
A DISTILLED SPIRITS
PLANT.—Any tax paid by any brewer on beer produced
in the United States may be refunded or credited to the
brewer, without interest, or if the tax has not been paid,
the brewer may be relieved of liability therefor, under reg-
ulations as the Secretary may prescribe, if such beer is
received on the bonded premises of a distilled spirits plant
pursuant to the provisions of section 5222(b)(2), for use
in the production of distilled spirits.’’, and
(2) by striking ‘‘or rendering unmerchantable’’
in subsection (d) (as so redesignated) and inserting
‘‘rendering unmerchantable, or receipt on the bond-
ed premises of a distilled spirits plant’’.