177 
striking clause (ii), and by redesignating clause (iii) 
as clause (ii). 
(10) Paragraph (1) of section 543(b) is amend-
ed by inserting ‘‘and’’ at the end of subparagraph 
(A), by striking ‘‘, and’’ at the end of subparagraph 
(B) and inserting a period, and by striking subpara-
graph (C). 
(11) Paragraph (1) of section 562(b) is amend-
ed by striking ‘‘or a foreign personal holding com-
pany described in section 552’’. 
(12) Section 563 is amended— 
(A) by striking subsection (c), 
(B) by redesignating subsection (d) as sub-
section (c), and 
(C) by striking ‘‘subsection (a), (b), or (c)’’ 
in subsection (c) (as so redesignated) and in-
serting ‘‘subsection (a) or (b)’’. 
(13) Subsection (d) of section 751 is amended 
by adding ‘‘and’’ at the end of paragraph (2), by 
striking paragraph (3), by redesignating paragraph 
(4) as paragraph (3), and by striking ‘‘paragraph 
(1), (2), or (3)’’ in paragraph (3) (as so redesig-
nated) and inserting ‘‘paragraph (1) or (2)’’. 
(14) Paragraph (2) of section 864(d) is amend-
ed by striking subparagraph (A) and by redesig-
178 
nating subparagraphs (B) and (C) as subparagraphs 
(A) and (B), respectively. 
(15)(A) Subparagraph (A) of section 898(b)(1) 
is amended to read as follows: 
‘‘(A) which is treated as a controlled for-
eign corporation for any purpose under subpart 
F of part III of this subchapter, and’’. 
(B) Subparagraph (B) of section 898(b)(2) is 
amended by striking ‘‘and sections 551(f) and 554, 
whichever are applicable,’’. 
(C) Paragraph (3) of section 898(b) is amended 
to read as follows: 
‘‘(3) UNITED
STATES
SHAREHOLDER.—The 
term ‘United States shareholder’ has the meaning 
given to such term by section 951(b), except that, in 
the case of a foreign corporation having related per-
son insurance income (as defined in section 
953(c)(2)), the Secretary may treat any person as a 
United States shareholder for purposes of this sec-
tion if such person is treated as a United States 
shareholder under section 953(c)(1).’’. 
(D) Subsection (c) of section 898 is amended to 
read as follows: 
‘‘(c) DETERMINATION OF REQUIRED YEAR.— 
‘‘(1) IN GENERAL.—The required year is—
179 
‘‘(A) the majority U.S. shareholder year, 
or 
‘‘(B) if there is no majority U.S. share-
holder year, the taxable year prescribed under 
regulations. 
‘‘(2) 1-MONTH DEFERRAL ALLOWED.—A speci-
fied foreign corporation may elect, in lieu of the tax-
able year under paragraph (1)(A), a taxable year be-
ginning 1 month earlier than the majority U.S. 
shareholder year. 
‘‘(3) MAJORITY U.S. SHAREHOLDER YEAR.— 
‘‘(A) IN GENERAL.—For purposes of this 
subsection, the term ‘majority U.S. shareholder 
year’ means the taxable year (if any) which, on 
each testing day, constituted the taxable year 
of— 
‘‘(i) each United States shareholder 
described in subsection (b)(2)(A), and 
‘‘(ii) each United States shareholder 
not described in clause (i) whose stock was 
treated 
as 
owned 
under 
subsection 
(b)(2)(B) by any shareholder described in 
such clause. 
‘‘(B) TESTING
DAY.—The testing days 
shall be—
180 
‘‘(i) the first day of the corporation’s 
taxable year (determined without regard to 
this section), or 
‘‘(ii) the days during such representa-
tive period as the Secretary may pre-
scribe.’’. 
(16) Clause (ii) of section 904(d)(2)(A) is 
amended to read as follows: 
‘‘(ii) CERTAIN AMOUNTS INCLUDED.— 
Except as provided in clause (iii), the term 
‘passive income’ includes, except as pro-
vided in subparagraph (E)(iii) or para-
graph (3)(I), any amount includible in 
gross income under section 1293 (relating 
to certain passive foreign investment com-
panies).’’. 
(17)(A) Subparagraph (A) of section 904(h)(1), 
as redesignated by section 302, is amended by add-
ing ‘‘or’’ at the end of clause (i), by striking clause 
(ii), and by redesignating clause (iii) as clause (ii). 
(B) The paragraph heading of paragraph (2) of 
section 904(h), as so redesignated, is amended by 
striking ‘‘FOREIGN PERSONAL HOLDING OR’’.
181 
(18) Section 951 is amended by striking sub-
sections (c) and (d) and by redesignating subsections 
(e) and (f) as subsections (c) and (d), respectively. 
(19) Paragraph (3) of section 989(b) is amend-
ed by striking ‘‘, 551(a),’’. 
(20) Paragraph (5) of section 1014(b) is 
amended by inserting ‘‘and before January 1, 
2005,’’ after ‘‘August 26, 1937,’’. 
(21) Subsection (a) of section 1016 is amended 
by striking paragraph (13). 
(22)(A) Paragraph (3) of section 1212(a) is 
amended to read as follows: 
‘‘(3) SPECIAL RULES ON CARRYBACKS.—A net 
capital loss of a corporation shall not be carried 
back under paragraph (1)(A) to a taxable year— 
‘‘(A) for which it is a regulated investment 
company (as defined in section 851), or 
‘‘(B) for which it is a real estate invest-
ment trust (as defined in section 856).’’. 
(B) The amendment made by subparagraph (A) 
shall apply to taxable years beginning after Decem-
ber 31, 2004. 
(23) Section 1223 is amended by striking para-
graph (10) and by redesignating the following para-
graphs accordingly.
182 
(24) Subsection (d) of section 1248 is amended 
by striking paragraph (5) and by redesignating 
paragraphs (6) and (7) as paragraphs (5) and (6), 
respectively. 
(25) Paragraph (2) of section 1260(c) is 
amended by striking subparagraphs (H) and (I) and 
by redesignating subparagraph (J) as subparagraph 
(H). 
(26)(A) 
Subparagraph 
(F) 
of 
section 
1291(b)(3) is amended by striking ‘‘551(d), 959(a),’’ 
and inserting ‘‘959(a)’’. 
(B) Subsection (e) of section 1291 is amended 
by inserting ‘‘(as in effect on the day before the date 
of the enactment of the American Jobs Creation Act 
of 2004)’’ after ‘‘section 1246’’. 
(27) Paragraph (2) of section 1294(a) is 
amended to read as follows: 
‘‘(2) 
ELECTION
NOT
PERMITTED
WHERE 
AMOUNTS OTHERWISE INCLUDIBLE UNDER SECTION 
951.—The taxpayer may not make an election under 
paragraph (1) with respect to the undistributed 
PFIC earnings tax liability attributable to a quali-
fied electing fund for the taxable year if any amount 
is includible in the gross income of the taxpayer