An Act to amend section 165(g) of the Internal Revenue Code of 1954 which provides for treatment of losses on worthless securities
PL 91-687 (H.R.19369), enacted 01/12/1971

84 STAT.] 
PUBLIC LAW 91-687-JAN. 12, 1971 
2071 
shall, for purposes of such paragraphs, be treated as a single 
corporation. 
(b) (1) Gain from any sale or exchange described in subsection (a) 
shall be deemed, for j)urposes of such Code, to be gain from the sale of 
property held primarily for sale to customers in the ordinary course of 
trade or business to the extent of 5 percent of the selling price. 
(2) For the purpose of computing gain under paragraph (1), 
expenditures incurred in connection with the sale or exchange of any 
lot or parcel shall neither be allowed as a deduction in computing 
taxable income, nor treated as reducing the amount realized on such 
sale or exchange; but so much of such expenditures as does not exceed 
the portion of gain deemed under paragraph (1) to be gain from the 
sale of property held primarily for sale to customers in the ordinary 
course of trade or business shall be so allowed as a deduction, and the 
remainder, if any, shall be treated as reducing the amount realized 
on such sale or exchange. 
(c) The provisions of subsections (a) and (b) shall apply to tax-
able years beginning after December 31, 1957, and before January 1, 
1984. 
SEC. 2. (a) Section 1237 of the Internal Revenue Code of 1954 is 
amended by: 
(1) in subsection (a), striking out the parenthetical expres-
sion: "(including corporations only if no shareholder directly or 
indirectly holds real property for sale to customers in the ordinary 
course of trade or busmess and only in the case of property 
described in the last sentence of subsection (b) (3))" and inserting 
in lieu thereof the words "other than a corporation"; 
(2) in subsection (b), striking out the last sentence. 
(b) The amendments made by subsection (a) shall be effective for 
taxable years beginning after the date of enactment of this Act. 
Approved January 12, 1971. 
Effective date. 
68A Stat. 330; 
70 Stat. 118. 
26 u s e 1237, 
Effective date. 
Public Law 91-687 
A N A C T 
January 12, 197 1 
To amend section 165(g) of the Internal Revenue Code of 1954 which provides 
[H. R. I9369] 
for treatment of losses on worthless securities. 
Be it enacted hy the Senate and House of Representatives 
of the 
United States of Ameiica in Congress assembled, That section 165 of 
the Internal Revenue Code of 1954 (relating to losses) is amended— 
(a) by striking out in subsection (g) (3) (A) "at least 95 per-
cent of each class of its stock" and inserting in lieu thereof "stock 
possessing at least 80 percent of the voting power of all classes of 
its stock and at least 80 percent of each class of its nonvoting 
stock", and 
(b) by adding at the end of subsection (g) (3) the following: 
"As used in subparagraph (A), the term 'stock' does not include 
nonvoting stock which is limited and preferred as to dividends." 
SEC. 2. The amendments made by this Act shall apply with respect to 
taxable years beginning on or after January 1,1970. 
Approved January 12, 1971. 
Taxes. 
Worthless 
securities, l o s s e s . 
68A Stat. 49. 
26 u s e 165.