An Act to amend section 112 (n) (8) of the Internal Revenue Code of 1939, relating to the suspension of certain periods of limitation while the taxpayer is on extended active duty with the Armed Forces, and to amend the Internal Revenue Code of 1954 with respect to tax treatment where the taxpayer recovers amounts held by another under claim of right
PL 84-384 (H.R.257), enacted 08/12/1955

716 
PUBLIC LAW 384-AUG. 12, 1955 
[69 S T A T 
65 Stat. 686. 
45 u s e 228e (g) 
(2). 
65 Stat. 689. 
45 u s e 228e (/) 
(9). 
50 Stat. 316. 
45 u s e 228i. 
52 Stat. 1097; 53 
Stat. 845. 
45 u s e 352 (e). 
50 Stat. 315. 
45USe228j (b). 
52 Stat. 1110. 
45 u s e 362 (1). 
amended, is amended by striking out "than $40" and inserting in lieu 
thereof the following: ", with respect to any month, than an amount 
equal to the maximum amount which could be paid to anyone, with 
respect to such month, as a wife's insurance benefit under section 202 
(b) of the Social Security Act as amended from time to time". 
SEC. 2. Effective with respect to annuities accruing in months follow-
ing the month of enactment hereof, section 5 (g) (2) of the Railroad 
Retirement Act of 1937, as amended, is amended by striking out the 
second sentence thereof. 
SEC. 3. Effective as of January 1,1955, section 5 (1) (9) of the Rail-
road Retirement Act of 1937, as amended, is amended by striking out 
the language between "(ii)" and " ( B ) " and inserting in lieu thereof 
the following: "if such compensation for any calendar year before 
1955 is less than $3,600 or for any calendar year after 1954 is less than 
$4,200 and the average monthly remuneration computed on compensa-
tion alone is less than $350 and the employee has earned in such calen-
dar year 'wages' as defined in paragraph (6) hereof, such wages, in 
an amount not to exceed the difference between the compensation for 
such year and $3,600 for years before 1955 and $4,200 for years after 
1954, by". 
SEC. 4. Effective as of the dates of their original enactment, section 
12 of the Railroad Retirement Act of 1937, as amended, and section 2 
(e) of the Railroad Unemployment Insurance Act, are each amended 
by striking out "No" and inserting in lieu thereof "Notwithstanding 
any other law of the United States, or of any State, Territory, or the 
District of Columbia, no". 
SEC. 5. Section 10 (b) 4 of the Railroad Retirement Act of 1937, as 
amended, is amended by inserting immediately after the first sentence 
thereof the following sentence: "All positions to which such individuals 
are appointed, except one administrative assistant to each member of 
the Board, shall ] ^ m and under the competitive civil service and shall 
not be removed or excepted therefrom." 
SEC. 6. The second paragraph of section 12 (1) of the Railroad Un-
employment Insurance Act is amended by inserting immediately before 
the first colon therein the following: ": Provided, That all positions 
to which such persons are appointed, except one administrative 
assistant to each member of the Board, shall be in and under the com-
petitive civil service and shall not be removed or excepted therefrom". 
Approved August 12, 1955. 
August 12, 1955 
[H. R. 257] 
Public Law 384 
CHAPTER 870 
AN ACT 
To amend section 112 (n) (8) of the Internal Revenue Code of 1939, relating 
to the suspension of certain periods of limitation while the taxpayer is on 
extended active duty with the Armed Forces, and to amend the Internal 
Revenue Code of 1954 with respect to tax treatment where the taxpayer 
recovers amounts held by another under claim of right. 
66 Stat. 735. 
26 u s e , 1952 ed., 
112. 
68A Stat. 35. 
26 u s e 112. 
Effective date. 
Be it enacted hy the Senate and House of Representatives 
of the 
United States of America in Congress assembled, That section 112 
(n) (8) of the Internal Revenue Code of 1939 (relating to the sus-
pension of certain periods of limitation while the taxpayer is on 
extended active duty with the Armed Forces) is hereby amended 
by striking out "and before January 1, 1954, except that any such 
period" and inserting in lieu thereof the following: "and during an 
induction period (as defined in section 112 (c) (5) of the Internal 
Revenue Code of 1954), except that any such period of time". 
SEC. 2. The amendment made by the first section of this Act shall 
take effect as of December 31,1953. 
69 
S T A T . ] 
PUBLIC LAW 385-AUG. 12, 1955 
717 
SEC. 3. The Internal Revenue Code of 1954 is amended by adding 
a new section to chapter 1 of subtitle A immediately following section 
1341 to read as follows: 
"SEC. 1342. COMPUTATION OF TAX WHERE TAXPAYER RECOVERS SUB-
STANTIAL AMOUNT HELD BY ANOTHER UNDER CLAIM 
OF RIGHT. 
"(a) GENERAL EuLE.—If— 
"(1) an item was deducted from gross income for a prior tax-
able year (or years) because it appeared that another person held 
an unrestricted right to such item as a result of a court decision 
in a patent infringement suit (whether or not the taxpayer is 
a party to such suit); and 
"(2) gross income is increased for the taxable year because it 
was established after the close of such prior taxable year (or 
years) that such other person did not have an unrestricted right 
to such item or to a portion of such item because of the subsequent 
reversal of such court decision on the ground that such decision 
was induced by fraud or undue influence; and 
"(3) the amount of such increase in gross income exceeds 
$3,000, then the tax imposed by this chapter for the taxable year 
shall be the lesser of the following: 
"(4) the tax for the taxable year computed with the gross 
income so increased; or 
"(5) an amount equal to— 
"(A) the tax for the taxable year computed without such 
increase in gross income, plus 
"(B) the increase in tax (including interest) under this 
chapter (or the corresponding provisions of prior revenue 
laws) for the prior taxable year (or years) which would 
result solely from the elimination of such item (or portion 
thereof) as a deduction from gross income for such prior 
taxable year (or years). 
"(b) SPECIAL KULE.—For purposes of subsection (a) (5) 
(B) 
' interest shall be computed from the due date of the return for such 
prior taxable year to the due date of the return for the taxable year.*' 
SEC. 4. The amendment made by section 3 of this Act shall apply 
with respect to taxable years beginning after December 31, 1954. 
Approved August 12, 1955. 
Applicability. 
Public Law 385 
CHAPTER 871 
AN ACT 
August 12, 195!i 
To amend section 1233 and section 542 (a) (2) of the Internal Revenue Code 
[
H
« R
« 6263] 
of 1954. 
Be it enacted hy the Senate and House of Representatives 
of the 
United States of America in Congress assembled^ That section 1233 
of the Internal Kevenue Code of 1954 is amended by adding at the 
end thereof a new subsection as follows: 
"(f) ARBITRAGE OPERATIONS IN SECURITIES.—In the case of a short 
sale which had been entered into as an arbitrage operation, to which 
sale the rule of subsection (b) (2) would apply except as otherwise 
provided in this subsection— 
"(1) subsection (b) 
(2) shall apply first to substantially 
identical assets acquired for arbitrage operations held at the close 
Income taxes. 
68A Stat. 327. 
26 u s e 1233. 
Capital gains and 
losses. 
Short sales.