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or capital contributions) of cash or other property
from a related person (as so defined) to a controlled
foreign corporation.’’.
(4) Paragraph (1) of section 965(c) is amended
to read as follows:
‘‘(1) APPLICABLE FINANCIAL STATEMENT.—The
term ‘applicable financial statement’ means—
‘‘(A) with respect to a United States share-
holder which is required to file a financial state-
ment with the Securities and Exchange Commis-
sion (or which is included in such a statement
so filed by another person), the most recent au-
dited annual financial statement (including the
notes which form an integral part of such state-
ment) of such shareholder (or which includes
such shareholder)—
‘‘(i) which was so filed on or before
June 30, 2003, and
‘‘(ii) which was certified on or before
June 30, 2003, as being prepared in accord-
ance with generally accepted accounting
principles, and
‘‘(B) with respect to any other United
States shareholder, the most recent audited fi-
nancial statement (including the notes which
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form an integral part of such statement) of such
shareholder (or which includes such share-
holder)—
‘‘(i) which was certified on or before
June 30, 2003, as being prepared in accord-
ance with generally accepted accounting
principles, and
‘‘(ii) which is used for the purposes of
a statement or report—
‘‘(I) to creditors,
‘‘(II) to shareholders, or
‘‘(III) for any other substantial
nontax purpose.’’.
(5) Paragraph (2) of section 965(d) is amended
by striking ‘‘properly allocated and apportioned’’ and
inserting ‘‘directly allocable’’.
(6) Subsection (d) of section 965 is amended by
adding at the end the following new paragraph:
‘‘(4) COORDINATION WITH SECTION 78.—Section
78 shall not apply to any tax which is not allowable
as a credit under section 901 by reason of this sub-
section.’’.
(7) The last sentence of section 965(e)(1) is
amended by inserting ‘‘which are imposed by foreign
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countries and possessions of the United States and
are’’ after ‘‘taxes’’.
(8) Subsection (f) of section 965 is amended by
inserting ‘‘on or’’ before ‘‘before the due date’’.
(r) AMENDMENTS RELATED TO SECTION 501 OF THE
ACT.—
(1) Subparagraph (A) of section 164(b)(5) is
amended to read as follows:
‘‘(A) ELECTION
TO
DEDUCT
STATE
AND
LOCAL
SALES
TAXES
IN
LIEU
OF
STATE
AND
LOCAL INCOME TAXES.—At the election of the
taxpayer for the taxable year, subsection (a)
shall be applied—
‘‘(i) without regard to the reference to
State and local income taxes, and
‘‘(ii) as if State and local general sales
taxes were referred to in a paragraph there-
of.’’.
(2) Clause (ii) of section 56(b)(1)(A) is amended
by inserting ‘‘or clause (ii) of section 164(b)(5)(A)’’
before the period at the end.
(s) AMENDMENTS RELATED TO SECTION 708 OF THE
ACT.—Section 708 of the American Jobs Creation Act of
2004 is amended—
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(1) in subsection (a), by striking ‘‘contract com-
mencement date’’ and inserting ‘‘construction com-
mencement date’’, and
(2) by redesignating subsection (d) as subsection
(e) and inserting after subsection (c) the following
new subsection:
‘‘(d) CERTAIN ADJUSTMENTS NOT TO APPLY.—Section
481 of the Internal Revenue Code of 1986 shall not apply
with respect to any change in the method of accounting
which is required by this section.’’.
(t) AMENDMENT RELATED TO SECTION 710 OF THE
ACT.—Clause (i) of section 45(c)(7)(A) is amended by strik-
ing ‘‘synthetic’’.
(u) AMENDMENT RELATED TO SECTION 801 OF THE
ACT.—Paragraph (3) of section 7874(a) is amended to read
as follows:
‘‘(3) COORDINATION WITH SUBSECTION (b).—A
corporation which is treated as a domestic corpora-
tion under subsection (b) shall not be treated as a
surrogate foreign corporation for purposes of para-
graph (2)(A).’’.
(v) AMENDMENTS RELATED TO SECTION 804 OF THE
ACT.—
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(1) Subparagraph (C) of section 877(g)(2) is
amended by striking ‘‘section 7701(b)(3)(D)(ii)’’ and
inserting ‘‘section 7701(b)(3)(D)’’.
(2) Subsection (n) of section 7701 is amended to
read as follows:
‘‘(n) SPECIAL RULES FOR DETERMINING WHEN AN IN-
DIVIDUAL IS NO LONGER A UNITED STATES CITIZEN OR
LONG-TERM RESIDENT.—For purposes of this chapter—
‘‘(1) UNITED STATES CITIZENS.—An individual
who would (but for this paragraph) cease to be treated
as a citizen of the United States shall continue to be
treated as a citizen of the United States until such
individual—
‘‘(A) gives notice of an expatriating act
(with the requisite intent to relinquish citizen-
ship) to the Secretary of State, and
‘‘(B) provides a statement in accordance
with section 6039G (if such a statement is other-
wise required).
‘‘(2) LONG-TERM RESIDENTS.—A long-term resi-
dent (as defined in section 877(e)(2)) who would (but
for this paragraph) be described in section 877(e)(1)
shall be treated as a lawful permanent resident of the
United States and as not described in section
877(e)(1) until such individual—
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‘‘(A) gives notice of termination of residency
(with the requisite intent to terminate residency)
to the Secretary of Homeland Security, and
‘‘(B) provides a statement in accordance
with section 6039G (if such a statement is other-
wise required).’’.
(w) AMENDMENT RELATED TO SECTION 811 OF THE
ACT.—Subsection (c) of section 811 of the American Jobs
Creation Act of 2004 is amended by inserting ‘‘and which
were not filed before such date’’ before the period at the end.
(x) AMENDMENTS RELATED TO SECTION 812 OF THE
ACT.—
(1) Subsection (b) of section 6662 is amended by
adding at the end the following new sentence: ‘‘Except
as provided in paragraph (1) or (2)(B) of section
6662A(e), this section shall not apply to the portion
of any underpayment which is attributable to a re-
portable transaction understatement on which a pen-
alty is imposed under section 6662A.’’
(2) Paragraph (2) of section 6662A(e) is amend-
ed to read as follows:
‘‘(2) COORDINATION WITH OTHER PENALTIES.—
‘‘(A) COORDINATION
WITH
FRAUD
PEN-
ALTY.—This section shall not apply to any por-
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tion of an understatement on which a penalty is
imposed under section 6663.
‘‘(B) COORDINATION
WITH
GROSS
VALU-
ATION
MISSTATEMENT
PENALTY.—This section
shall not apply to any portion of an understate-
ment on which a penalty is imposed under sec-
tion 6662 if the rate of the penalty is determined
under section 6662(h).’’.
(3) Subsection (f) of section 812 of the American
Jobs Creation Act of 2004 is amended to read as fol-
lows:
‘‘(f) EFFECTIVE DATES.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall
apply to taxable years ending after the date of the en-
actment of this Act.
‘‘(2) 
DISQUALIFIED
OPINIONS.—Section
6664(d)(3)(B) of the Internal Revenue Code of 1986
(as added by subsection (c)) shall not apply to the
opinion of a tax advisor if—
‘‘(A) the opinion was provided to the tax-
payer before the date of the enactment of this
Act,
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‘‘(B) the opinion relates to one or more
transactions all of which were entered into before
such date, and
‘‘(C) the tax treatment of items relating to
each such transaction was included on a return
or statement filed by the taxpayer before such
date.’’.
(y) AMENDMENT RELATED TO SECTION 814 OF THE
ACT.—Subparagraph (B) of section 6501(c)(10) is amended
by striking ‘‘(as defined in section 6111)’’.
(z) AMENDMENT RELATED TO SECTION 815 OF THE
ACT.—Paragraph (1) of section 6112(b) is amended by in-
serting ‘‘(or was required to maintain a list under sub-
section (a) as in effect before the enactment of the American
Jobs Creation Act of 2004)’’ after ‘‘a list under subsection
(a)’’.
(aa) AMENDMENTS RELATED TO SECTION 832 OF THE
ACT.—
(1) Subsection (e) of section 853 is amended to
read as follows:
‘‘(e) TREATMENT OF CERTAIN TAXES NOT ALLOWED
AS A CREDIT UNDER SECTION 901.—This section shall not
apply to any tax with respect to which the regulated invest-
ment company is not allowed a credit under section 901
by reason of subsection (k) or (l) of such section.’’.
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(2) Clause (i) of section 901(l)(2)(C) is amended
by striking ‘‘if such security were stock’’.
(bb) AMENDMENTS RELATED TO SECTION 833 OF THE
ACT.—
(1) Subsection (a) of section 734 is amended by
inserting ‘‘with respect to such distribution’’ before
the period at the end.
(2) So much of subsection (b) of section 734 as
precedes paragraph (1) is amended to read as follows:
‘‘(b) METHOD OF ADJUSTMENT.—In the case of a dis-
tribution of property to a partner by a partnership with
respect to which the election provided in section 754 is in
effect or with respect to which there is a substantial basis
reduction, the partnership shall—’’.
(cc) AMENDMENT RELATED TO SECTION 835 OF THE
ACT.—Paragraph (3) of section 860G(a) is amended—
(1) in subparagraph (A)(iii)(I), by striking ‘‘the
obligation’’ and inserting ‘‘a reverse mortgage loan or
other obligation’’, and
(2) by striking all that follows subparagraph (C)
and inserting the following:
‘‘For purposes of subparagraph (A), any obligation
secured by stock held by a person as a tenant-stock-
holder (as defined in section 216) in a cooperative
housing corporation (as so defined) shall be treated as
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secured by an interest in real property. For purposes
of subparagraph (A), any obligation originated by the
United States or any State (or any political subdivi-
sion, agency, or instrumentality of the United States
or any State) shall be treated as principally secured
by an interest in real property if more than 50 per-
cent of such obligations which are transferred to, or
purchased by, the REMIC are principally secured by
an interest in real property (determined without re-
gard to this sentence).’’.
(dd) AMENDMENTS RELATED TO SECTION 836 OF THE
ACT.—
(1) Paragraph (1) of section 334(b) is amended
by striking ‘‘except that’’ and all that follows and in-
serting 
‘‘except 
that, 
in 
the 
hands 
of 
such
distributee—
‘‘(A) the basis of such property shall be the
fair market value of the property at the time of
the distribution in any case in which gain or
loss is recognized by the liquidating corporation
with respect to such property, and
‘‘(B) the basis of any property described in
section 362(e)(1)(B) shall be the fair market
value of the property at the time of the distribu-
tion in any case in which such distributee’s ag-
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gregate adjusted basis of such property would
(but for this subparagraph) exceed the fair mar-
ket value of such property immediately after
such liquidation.’’.
(2) Clause (ii) of section 362(e)(2)(C) is amend-
ed to read as follows:
‘‘(ii) ELECTION.—Any election under
clause (i) shall be made at such time and
in such form and manner as the Secretary
may prescribe, and, once made, shall be ir-
revocable.’’.
(ee) AMENDMENT RELATED TO SECTION 840 OF THE
ACT.—Subsection (d) of section 121 is amended—
(1) by redesignating the paragraph (10) relating
to property acquired from a decedent as paragraph
(11) and by moving such paragraph to the end of
such subsection, and
(2) by amending the paragraph (10) relating to
property acquired in like-kind exchange to read as
follows:
‘‘(10) PROPERTY ACQUIRED IN LIKE-KIND EX-
CHANGE.—If a taxpayer acquires property in an ex-
change with respect to which gain is not recognized
(in whole or in part) to the taxpayer under subsection
(a) or (b) of section 1031, subsection (a) shall not
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apply to the sale or exchange of such property by such
taxpayer (or by any person whose basis in such prop-
erty is determined, in whole or in part, by reference
to the basis in the hands of such taxpayer) during the
5-year period beginning with the date of such acquisi-
tion.’’.
(ff) AMENDMENT RELATED TO SECTION 849 OF THE
ACT.—Subsection (a) of section 849 of the American Jobs
Creation Act of 2004 is amended by inserting ‘‘, and in
the case of property treated as tax-exempt use property
other than by reason of a lease, to property acquired after
March 12, 2004’’ before the period at the end.
(gg) AMENDMENT RELATED TO SECTION 884 OF THE
ACT.—Subparagraph (B) of section 170(f)(12) is amended
by adding at the end the following new clauses:
‘‘(v) Whether the donee organization
provided any goods or services in consider-
ation, in whole or in part, for the qualified
vehicle.
‘‘(vi) A description and good faith esti-
mate of the value of any goods or services
referred to in clause (v) or, if such goods or
services consist solely of intangible religious
benefits (as defined in paragraph (8)(B)), a
statement to that effect.’’.
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(hh) AMENDMENTS RELATED TO SECTION 885 OF THE
ACT.—
(1) Paragraph (2) of section 26(b) is amended by
striking ‘‘and’’ at the end of subparagraph (R), by
striking the period at the end of subparagraph (S)
and inserting ‘‘, and’’, and by adding at the end the
following new subparagraph:
‘‘(T) subsections (a)(1)(B)(i) and (b)(4)(A)
of section 409A (relating to interest and addi-
tional tax with respect to certain deferred com-
pensation).’’.
(2) Clause (ii) of section 409A(a)(4)(C) is
amended by striking ‘‘first’’.
(3)(A) Notwithstanding section 885(d)(1) of the
American Jobs Creation Act of 2004, subsection (b) of
section 409A of the Internal Revenue Code of 1986
shall take effect on January 1, 2005.
(B) Not later than 90 days after the date of the
enactment of this Act, the Secretary of the Treasury
shall issue guidance under which a nonqualified de-
ferred compensation plan which is in violation of the
requirements of section 409A(b) of such Code shall be
treated as not having violated such requirements if
such plan comes into conformance with such require-
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ments during such limited period as the Secretary
may specify in such guidance.
(4) Subsection (f) of section 885 of the American
Jobs Creation Act of 2004 is amended by striking
‘‘December 31, 2004’’ the first place it appears and
inserting ‘‘January 1, 2005’’.
(ii) AMENDMENT RELATED TO SECTION 888 OF THE
ACT.—Paragraph (2) of section 1092(a) is amended by
striking the last sentence and adding at the end the fol-
lowing new subparagraph:
‘‘(C) REGULATIONS.—The Secretary shall
prescribe such regulations or other guidance as
may be necessary or appropriate to carry out the
purposes of this paragraph. Such regulations or
other guidance may specify the proper methods
for clearly identifying a straddle as an identified
straddle (and for identifying the positions com-
prising such straddle), the rules for the applica-
tion of this section to a taxpayer which fails to
comply with those identification requirements,
and the ordering rules in cases where a taxpayer
disposes (or otherwise ceases to be the holder) of
any part of any position which is part of an
identified straddle.’’.
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(jj) AMENDMENTS RELATED TO SECTION 898 OF THE
ACT.—
(1) Paragraph (3) of section 361(b) is amended
by inserting ‘‘(reduced by the amount of the liabilities
assumed (within the meaning of section 357(c)))’’ be-
fore the period at the end.
(2) Paragraph (1) of section 357(d) is amended
by inserting ‘‘section 361(b)(3),’’ after ‘‘section
358(h),’’.
(kk) AMENDMENT RELATED TO SECTION 899 OF THE
ACT.—Subparagraph (A) of section 351(g)(3) is amended
by adding at the end the following: ‘‘If there is not a real
and meaningful likelihood that dividends beyond any limi-
tation or preference will actually be paid, the possibility
of such payments will be disregarded in determining wheth-
er stock is limited and preferred as to dividends.’’.
(ll) AMENDMENT RELATED TO SECTION 902 OF THE
ACT.—Paragraph (1) of section 709(b) is amended by strik-
ing ‘‘taxpayer’’ both places it appears and inserting ‘‘part-
nership’’.
(mm) AMENDMENTS RELATED TO SECTION 907 OF
THE
ACT.—Clause 
(ii) 
of 
section 
274(e)(2)(B) 
is
amended—
(1) in subclause (I), by inserting ‘‘or a related
party to the taxpayer’’ after ‘‘the taxpayer’’,
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(2) in subclause (II), by inserting ‘‘(or such re-
lated party)’’ after ‘‘the taxpayer’’, and
(3) by adding at the end the following new flush
sentence:
‘‘For purposes of this clause, a person is a
related party with respect to another person
if such person bears a relationship to such
other person described in section 267(b) or
707(b).’’.
(nn) EFFECTIVE DATE.—The amendments made by
this section shall take effect as if included in the provisions
of the American Jobs Creation Act of 2004 to which they
relate.
SEC. 404. AMENDMENTS RELATED TO THE WORKING FAMI-
LIES TAX RELIEF ACT OF 2004.
(a) AMENDMENT RELATED TO SECTION 201 OF THE
ACT.—Subsection (e) of section 152 is amended to read as
follows:
‘‘(e) SPECIAL RULE FOR DIVORCED PARENTS, ETC.—
‘‘(1) IN GENERAL.—Notwithstanding subsection
(c)(1)(B), (c)(4), or (d)(1)(C), if—
‘‘(A) a child receives over one-half of the
child’s support during the calendar year from
the child’s parents—
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‘‘(i) who are divorced or legally sepa-
rated under a decree of divorce or separate
maintenance,
‘‘(ii) who are separated under a writ-
ten separation agreement, or
‘‘(iii) who live apart at all times dur-
ing the last 6 months of the calendar year,
and—
‘‘(B) such child is in the custody of 1 or
both of the child’s parents for more than one-half
of the calendar year, such child shall be treated
as being the qualifying child or qualifying rel-
ative of the noncustodial parent for a calendar
year if the requirements described in paragraph
(2) or (3) are met.
‘‘(2) EXCEPTION WHERE CUSTODIAL PARENT RE-
LEASES CLAIM TO EXEMPTION FOR THE YEAR.—For
purposes of paragraph (1), the requirements described
in this paragraph are met with respect to any cal-
endar year if—
‘‘(A) the custodial parent signs a written
declaration (in such manner and form as the
Secretary may by regulations prescribe) that
such custodial parent will not claim such child
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as a dependent for any taxable year beginning
in such calendar year, and
‘‘(B) the noncustodial parent attaches such
written declaration to the noncustodial parent’s
return for the taxable year beginning during
such calendar year.
‘‘(3) EXCEPTION FOR CERTAIN PRE-1985 INSTRU-
MENTS.—
‘‘(A) IN GENERAL .—For purposes of para-
graph (1), the requirements described in this
paragraph are met with respect to any calendar
year if—
‘‘(i) a qualified pre-1985 instrument
between the parents applicable to the tax-
able year beginning in such calendar year
provides that the noncustodial parent shall
be entitled to any deduction allowable under
section 151 for such child, and
‘‘(ii) the noncustodial parent provides
at least $600 for the support of such child
during such calendar year.
For purposes of this subparagraph, amounts ex-
pended for the support of a child or children
shall be treated as received from the noncustodial