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‘‘(iii) any capital loss carryback to the
taxable year under section 1212(a)(1).
‘‘(B) EFFECT OF NET OPERATING LOSS.—
Subparagraph (A) shall not apply for any tax-
able year for which there is a net operating loss
(as determined under section 172).
‘‘(c) SPECIAL RULES.—The provisions of
subparagraph (A) shall be applied—
‘‘(i) first separately with respect to
dividends from 20-percent owned corpora-
tions and the percentage determined under
this subparagraph shall be 80 percent, and
‘‘(ii) then separately with respect to
dividends not from 20-percent owned cor-
porations and the percentage determined
under this subparagraph shall be 70 per-
cent and the taxable income shall be re-
duced by the aggregate amount of divi-
dends from 20-percent owned corporations.
‘‘(2) EXCLUSION OF CERTAIN DIVIDENDS.—
‘‘(A) IN GENERAL.—No deduction shall be
allowed under subsection (a) or (b) in respect of
any dividend on any share of stock—
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‘‘(i) which is sold or otherwise dis-
posed of in any case in which the taxpayer
has held such share for 45 days or less, or
‘‘(ii) to the extent that the taxpayer is
under an obligation (whether pursuant to a
short sale or otherwise) to make cor-
responding payments with respect to posi-
tions in substantially similar or related
property.
‘‘(B) 90-DAY RULE IN THE CASE OF CER-
TAIN PREFERENCE DIVIDENDS.—In the case of
any stock having preference in dividends, the
holding period specified in subparagraph (A)(i)
shall be 90 days in lieu of 45 days if the tax-
payer receives dividends with respect to such
stock which are attributable to a period or peri-
ods aggregating in excess of 366 days.
‘‘(C) DETERMINATION OF HOLDING PERI-
ODS.—For purposes of this subsection, in deter-
mining the period for which the taxpayer has
held any share of stock—
‘‘(i) the day of disposition, but not the
day of acquisition, shall be taken into ac-
count,
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‘‘(ii) there shall not be taken into ac-
count any day which is more than 45 days
(or 90 days in the case of stock to which
subparagraph (B) applies) after the date
on which such share becomes ex-dividend,
and
‘‘(iii) paragraph (4) of section 1223
shall not apply.
‘‘(D) HOLDING PERIOD REDUCED FOR PE-
RIODS
WHERE
RISK
OF
LOSS
DIMINISHED.—
The holding periods determined under the pre-
ceding provisions of this subparagraph shall be
appropriately reduced (in the manner provided
in regulations prescribed by the Secretary) for
any period (during such periods) in which—
‘‘(i) the taxpayer has an option to sell,
is under a contractual obligation to sell, or
has made (and not closed) a short sale of,
substantially identical stock or securities,
‘‘(ii) the taxpayer is the grantor of an
option to buy substantially identical stock
or securities, or
‘‘(iii) under regulations prescribed by
the Secretary, a taxpayer has diminished
his risk of loss by holding 1 or more other
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positions with respect to substantially simi-
lar or related property.
The preceding sentence shall not apply in the case of any
qualified covered call (as defined in section 1092(c)(4) but
without regard to the requirement that gain or loss with
respect to the option not be ordinary income or loss).
‘‘(f) CROSS REFERENCE.—
‘‘For special rule relating to mutual savings banks,
etc., to which section 593 applies, see section 596.’’
(2) NET OPERATING LOSS DEDUCTION.—Para-
graph (5) of section 172(d) of such Code is amended
to read as follows:
‘‘(5) COMPUTATION OF DEDUCTION FOR DIVI-
DENDS
RECEIVED
FROM
CERTAIN
FOREIGN
COR-
PORATIONS.—The deduction allowed by section 245
(relating to dividends received from certain foreign
corporations) shall be computed without regard to
section 245(e)(1).’’
(3) DIVIDENDS
RECEIVED
DEDUCTION
RE-
DUCED
WHERE
PORTFOLIO
STOCK
IS
DEBT
FI-
NANCED.—
(A) Subsections (a) and (e) of section
246A of such Code (relating to dividends re-
ceived deduction reduced where portfolio stock
is debt financed) are each amended by striking
‘‘243, 244, or’’.
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(B) Subsection (b) of section 246A of such
Code is amended to read as follows:
‘‘(b) SECTION NOT TO APPLY TO DIVIDENDS FOR
WHICH 100 PERCENT DIVIDENDS RECEIVED DEDUCTION
ALLOWABLE.—Subsection (a) shall not apply to dividends
received by a small business investment company operat-
ing under the Small Business Investment Act of 1958.’’
(4) LIMITATION ON DIVIDENDS RECEIVED DE-
DUCTION FOR MUTUAL SAVINGS BANKS, ETC.—Sec-
tion 596 of such Code (relating to limitation on divi-
dends received deduction) is amended by striking
‘‘sections 243, 244, and 245’’ and inserting in lieu
thereof ‘‘section 245’’.
(d) CLERICAL AMENDMENTS.—The table of sections
for part VIII of subchapter B of chapter 1 is amended
by striking the items relating to sections 243, 244, 246,
and 247 and inserting after the item relating to section
241 the following:
‘‘Sec. 243. Dividends paid by domestic corporations.’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to distributions made after June
30, 1993 under the following schedule:
(1) for the period beginning July 1, 1993,
through December 31, 1994, the amount of the de-
duction for the taxable year shall be no more than