(A) the corporation may revoke such elec-
tion, effective as of the date of the enactment 
of this Act, and 
(B) if the corporation does revoke such 
election— 
(i) such corporation shall be treated 
as a domestic corporation transferring (as 
of the date of the enactment of this Act) 
all of its property to a foreign corporation 
in connection with an exchange described 
in section 354 of the Internal Revenue 
Code of 1986, and 
(ii) no gain or loss shall be recognized 
on such transfer. 
(2) 
EXCEPTION.—Subparagraph 
(B)(ii) 
of 
paragraph (1) shall not apply to gain on any asset 
held by the revoking corporation if— 
(A) the basis of such asset is determined 
in whole or in part by reference to the basis of 
such asset in the hands of the person from 
whom the revoking corporation acquired such 
asset, 
(B) the asset was acquired by transfer (not 
as a result of the election under section 943(e) 
of such Code) occurring on or after the 1st day
on which its election under section 943(e) of 
such Code was effective, and 
(C) a principal purpose of the acquisition 
was the reduction or avoidance of tax (other 
than a reduction in tax under section 114 of 
such Code, as in effect on the day before the 
date of the enactment of this Act). 
(e) GENERAL TRANSITION.— 
(1) IN GENERAL.—In the case of a taxable year 
ending after the date of the enactment of this Act 
and beginning before January 1, 2007, for purposes 
of chapter 1 of such Code, each current FSC/ETI 
beneficiary shall be allowed a deduction equal to the 
transition amount determined under this subsection 
with respect to such beneficiary for such year. 
(2) CURRENT
FSC/ETI
BENEFICIARY.—The 
term ‘‘current FSC/ETI beneficiary’’ means any cor-
poration which entered into one or more transactions 
during its taxable year beginning in calendar year 
2001 with respect to which FSC/ETI benefits were 
allowable. 
(3) TRANSITION
AMOUNT.—For purposes of 
this subsection— 
(A) IN GENERAL.—The transition amount 
applicable to any current FSC/ETI beneficiary
for any taxable year is the phaseout percentage 
of the base period amount. 
(B) PHASEOUT PERCENTAGE.— 
(i) IN
GENERAL.—In the case of a 
taxpayer using the calendar year as its 
taxable year, the phaseout percentage shall 
be determined under the following table: 
The phaseout 
‘‘Years: 
percentage is: 
2004 and 2005 ...................................................................................
2006 ...................................................................................................
2007 and thereafter ...........................................................................
0. 
(ii) SPECIAL
RULE
FOR
2004.—The 
phaseout percentage for 2004 shall be the 
amount that bears the same ratio to 80 
percent as the number of days after the 
date of the enactment of this Act bears to 
365. 
(iii) SPECIAL RULE FOR FISCAL YEAR 
TAXPAYERS.—In the case of a taxpayer 
not using the calendar year as its taxable 
year, the phaseout percentage is the 
weighted average of the phaseout percent-
ages determined under the preceding provi-
sions of this paragraph with respect to cal-
endar years any portion of which is in-
cluded in the taxpayer’s taxable year. The 
weighted average shall be determined on
the basis of the respective portions of the 
taxable year in each calendar year. 
(4) BASE PERIOD AMOUNT.—For purposes of 
this subsection, the base period amount is the aggre-
gate FSC/ETI benefits for the taxpayer’s taxable 
year beginning in calendar year 2001. 
(5) FSC/ETI BENEFIT.—For purposes of this 
subsection, the term ‘FSC/ETI benefit’ means— 
(A) amounts excludable from gross income 
under section 114 of such Code, and 
(B) the exempt foreign trade income of re-
lated foreign sales corporations from property 
acquired from the taxpayer (determined without 
regard to section 923(a)(5) of such Code (relat-
ing to special rule for military property), as in 
effect on the day before the date of the enact-
ment of the FSC Repeal and Extraterritorial 
Income Exclusion Act of 2000). 
In determining the FSC/ETI benefit there shall be 
excluded any amount attributable to a transaction 
with respect to which the taxpayer is the lessor un-
less the leased property was manufactured or pro-
duced in whole or in significant part by the tax-
payer.