An Act to amend the Internal Revenue Code of 1939 and 1954, and for other purposes
PL 84-629 (H.R.6143), enacted 06/29/1956

404 
PUBLIC LAW 629-JUNE 29, 1966 
[70 ST A T . 
Public Law 629 
CHAPTER 
464 
June 29. 1956 
[H. R. 6143] 
Taxes. 
Patent rlght«. 
65 StaU 504. 
AN ACT 
53 Stat. 36. 
To amend the Internal Revenue Codes of 1939 and 1954, and for other purposes. 
Be it enacted hy the Senate and House of Representatives 
of the 
United States of America in Congress assembled^ That section llT of 
tlie Internal Revenue Code of 1939 (relating to capital gains and 
losses) is hereby amended by adding at the end thereof a new sub-
section as follows: 
''(<j) 
TRANSFER OF P A T E N T R I G H T S . — 
"(1) GENERAL RULE.—A transfer (other than by gift, inherit-
, 
ance, or devise) of property consisting of all substantial rights 
to a patent, or an undivided interest therein which includes a 
part of all such rights, by any holder shall be considered the sale 
or exchange of a capital asset held for more than 6 months, re-
gardless of whether or not payments in consideration of such 
transfer are— 
"(A) payable periodically over a period generally coter-
minous with the transferee's use of the patent, or 
"(B) contingent on the productivity, use, or disposition of 
the property transferred. 
"(2) 'HOLDER' DEFINED.—For purposes of this subsection, the 
term 'holder' means— 
"(A) any individual whose efforts created such property, 
or 
"(B) any other individual who has acquired his interest 
in such property in exchange for consideration in money or 
money's worth paid to such creator prior to actual reduction 
to practice of the invention covered by the patent, if such 
individual is neither— 
" (i) the employer of such creator, nor 
"(ii) related to such creator (within the meaning of 
paragraph (3)). 
"(3] EXCEPTIONS.—This subsection shall not apply to any 
transfer described in paragraph (1) — 
"(A) by a nonresident alien individual, or 
"(B) between an individual and any related person. 
For purposes of this paragraph, the term 'related person' means 
a person, other than a brother or sister (whether of the whole 
or half blood), with respect to whom a loss resulting from the 
transfer would be disallowed under section 24 (b). 
"(4) APPLICABILITY.—This subsection shall apply with respect 
to any amount received, or payment made, pursuant to a transfer 
described in paragraph (1) in any taxable year beginning after 
May 31,1950, regardless of the taxable year in which such transfer 
occurred." 
SEC. 2. CERTAIN CLAIMS AGAINST UNITED STATES. 
(a) Section 106 of the Internal Revenue Code of 1939 (relating to 
claims against the United States involving acquisition of property) 
is hereby amended to read as follows: 
-SEC. 106. CERTAIN CLAIMS AGAINST UNITED STATES. 
"In the case of any amount (other than interest) received by a 
taxpayer from the United States with respect to a claim against the 
United States— 
"(a) involving the acquisition of property and remaining 
unpaid for more than 15 years, or 
'*(b) arising under a contract for the construction of installa-
tions or facilities for any branch of the armed services of the 
70 S T A T . ] 
PUBLIC LAW 629-JUNE 29, 1966 
405 
United States and remaining unpaid for more than 5 years 
from the date such claim first accrued and paid prior to January 1, 
1950, 
the portion of the tax imposed by section 12 attributable to such 
amount (other than interest) shall not exceed 30 percent thereof. In 
applying section 291 (a) (relating to additions to the tax for failure 
to file a return) in any case to which paragraph (b) of this section 
applies, the term 'reasonable cause' shall include the filing of a timely 
incomplete return under circumstances which led the taxpayer to 
believe that no tax was due on amounts received under a settlement 
with the United States." 
(b) The amendment made by this section shall apply with respect 
to taxable years ending after December 31, 1948, notwithstanding the 
operation of any law or rule of law (other than section 3760 of the 
Internal Revenue Code of 1939 or section 7121 of the Internal Reve-
nue Code of 1954, relating to closing agreements, and other than 
section 3761 of the Internal Revenue Code of 1939 or section 7122 of 
the Internal Revenue Code of 1964, relating to compromises). 
Not-
withstanding the preceding sentence, no claim for credit or refund 
of any overpayment resulting from the amendment made by this 
section shall be allowed or made after the period of limitation ap-
plicable to such overpayment, except that such period shall not expire 
before the expiration of one year after the date of the enactment of 
this Act. 
SEC. 3. CERTAIN DISTRIBUTIONS IN KIND. 
(a) Section 115 of the Internal Revenue Code of 1939 (relating to 
distributions by corporations) is hereby amended by adding at the 
end thereof the following new subsection: 
"(n) 
CERTAIN DISTRIBUTIONS IN KIND.— 
"(1) Notwithstanding ^ny other provision of this section, a 
distribtition of property by a corporation to its stockholders, with 
respect to its stock, shall be (except as provided in para^aph 
(2)) considered to be a distribution which is not a dividend 
(whether or not otherwise a dividend) to the extent that the fair 
market value of such property exceeds the earnings and profits of 
such corporation accumulated after February 28, 1913, and the 
earnings and profits of the taxable year (computed as of the close 
of the taxable year without diminution by reason of any distribu-
tions, except those described in subparagraphs (A), (B),and (C) 
of paragraph (3), made during the taxable year) without regard 
to the amount of the earnings and profits at the time the dis-
tribution was made. The preceding sentence shall not prevent 
the application of subsection (d) to any such distribution. 
"(2) If any portion of a distribution of property by a corpora-
tion to its shareholders, with respect to its stock, is a dividend 
solely by reason of the last sentence of subsection (a), then— 
"(A) paragraph (1) shall not apply to such distribution, 
but 
"(B) such distribution shall be considered to be a distribu-
tion which is not a dividend (whether or not otherwise a 
dividend) to the extent that the fair market value of such 
property exceeds the Subchapter A net income referred to in 
the last sentence of subsection (a), adjusted as provided in 
such sentence. 
In applying this paragraph, distributions described in subpara-
graphs (A), (B), and (C) of paragraph (3) shall be taken into 
account before other distributions. 
Effective date. 
Restriction. 
53 Stat. 46. 
406 
PUBLIC LAW 629-JUNE 29, 1956 
[70 S T A T . 
"(3) This subsection sliall apply to any distribution of prop-
erty other than— 
"(A) money, 
"(B) inventory assets, as defined in section 312 (b) (2) 
of the Internal Revenue Code of 1954, or 
"(C) distributions described in section 312 (j) of the 
Internal Revenue Code of 1954." 
Effective date. 
^j^^ 'pj^g amendment made by this section to section 115 of the 
Internal Revenue Code of 1939 shall be effective as if it were a part 
of such section on the date of enactment of the Internal Revenue Code 
of 1939, except that it shall not apply to any taxable year of a share-
holder which was a corporation and which tiled a return for such year 
reporting dividends in accordance with publicly announced litigation 
policies of the Secretary or his delegate which had not been revoked 
at the time such return was filed. No interest shall be allowed or paid 
in respect of any overpayment of tax resulting from the amendment 
made by this section. 
SEC. 4. TRADEMARK AND TRADE NAME EXPENDITURES. 
(a) Part VI of subchapter B of chapter 1 of the Internal Revenue 
26 vie i^t^' 
Code of 1954 is hereby amended by inserting after section 176 thereof 
the following new section: 
"SEC. 
1
7
7
. 
TRADEMARK 
AND 
TRADE 
NAME 
EXPENDITURES. 
"(a) ELECTION To AMORTIZE.—Any trademark or trade name ex-
penditure paid or incurred during a taxable year beginning after 
December 31, 1955, may, at the election of the taxpayer (made in 
accordance with regulations prescribed by the Secretary or his dele-
gate), be treated as a deferred expense. In computing taxable in-
come, all expenditures paid or incurred during the taxable year which 
are so treated shall be allowed as a deduction ratably over such period 
of not less than 60 months (beginning with the first month in such 
taxable year) as may be selected by the taxpayer in making such 
election. The expenditures so treated are expenditures properly 
chargeable to capital account for purposes of section 1016 (a) (1) 
(relating to adjustments to basis of property). 
"(b) TRADEMARK AND TRADE NAME EXPENDITURES DEFINED.—For 
purposes of subsection (a), the term 'trademark or trade name ex-
penditure' means any expenditure which— 
"(1) is directly connected with the acquisition, protection, 
expansion, registration (Federal, State, or foreign), or defense 
of a trademark or trade name; 
"(2) is chargeable to capital account; and 
"(3) is not part of the consideration paid for a trademark, 
trade name, or ousiness. 
"(c) TIME FOR AND SCO^E OF ELECTION.—The election provided by 
subsection (a) shall be made within the time prescribed by law 
(including extensions thereof) for filing the return for the taxable 
year during which the expenditure is paid or incurred. The period 
selected by the taxpayer under subsection (a) with respect to the 
expenditures paid or incurred during the taxable year which are 
treated as deferred expenses shall be adhered to in computing his 
taxable income for the taxable year for which the election is made 
and all subsequent years. 
"(d) CROSS REFERENCE.— 
"For adjustments to basis of property for amounts allowed as 
deductions for expenditures treated as deferred expenses under 
this section, see section 1016 (a) (16)." 
(b) The table of sections of part VI of subchapter B of chapter 1 
70 
S T A T . ] 
PUBLIC LAW 631~JUNE 29, 1956 
40T 
of the Internal Revenue Code of 1954 is hereby amended by inserting 
at the end thereof 
"Sec. 177. Trademark and trade name expenditures." 
(c) Subsection (a) of section 1016 of the Internal Revenue Code 
of 1954 (relating to adjustments to basis) is hereby amended by 
striking out the period at the end of paragraph (15) and inserting in 
lieu thereof a semicolon, and by adding at the end of such subsection 
the following new paragraph: 
"(16) for amounts allowed as deductions for expenditures 
treated as deferred expenses under section 177 (relating to trade-
mark and trade name expenditures) and resulting in a reduction 
of the taxpayer's taxes under this subtitle, but not less than the 
amounts allowable under such section for the taxable year and 
prior years." 
SEC. 5. LIVESTOCK SOLD ON ACCOUNT OF DROUGHT. 
(a) Section 1033 of the Internal Revenue Code of 1954 (relating 
to involuntary conversions) is hereby amended by redesignating sub-
section (f) thereof as subsection (g) and by inserting after subsection 
(e) of such section the following new subsection: 
"(f) LIVESTOCK SOLD ON ACCOUNT OF DROUGHT.—For purposes of 
this subtitle, the sale or exchange of livestock (other than poultry) 
held by a taxpayer for draft, breeding, or dairy purposes in excess 
of the number the taxpayer would sell if he followed his usual business 
practices shall be treated as an involuntary conversion to which this 
section applies if such livestock are sold or exchanged by the tax-
payer solely on account of drought." 
(b) The amendment made by this section shall apply with respect 
to taxable years ending after December 31, 1955, but only in the case 
of sales and exchanges of livestock after December 31, 1955. 
Approved June 29, 1956. 
68A Stat. 45. 
68A Stat, 300. 
26 u s e 1016. 
68A Stat. 306. 
2 6 u s e 1033. 
Effective date. 
Public Law 630 
CHAPTER 465 
AN ACT 
Adopting and anthorizinj? the imin-ovement of Rockland Harbor, Maine. 
June 29, 1956 
[S. 1749] 
Be it enacted hy the Senate and Ilou^se of Representatives 
of the 
United States of America in (•ongtess a-ssenibled^ That the modifica-
tion of the project for im])rovement of Rockland Harbor, Maine, is 
hereby adopted and authorized substantially in accordance with the 
recommendations of the Chief of Engineers contained in Senate Docu-
ment 3s'uinbered 82, Eighty-fourth Congress, first session, at an esti-
mated cost of $710,000, and subject to the conditions set forth therein, 
the work to be prosecuted under the direction of the Secretary of the 
Army and the supervision of the Chief of Engineers. 
SEC. 2. There are authorized to be appropriated such sums as may 
be necessary to carry out the provisions of this Act. 
Approved June 29, 1956. 
Rockland 
bor, Maine. 
Appropriation. 
Public Law 631 
CHAPTER 473 
AN ACT 
To amend tlie Export Control Act of 1949 to continue for an additional period 
of two years the authority provided thereunder for the regulation of exports. 
June 29, 1956 
[H. R. 9052] 
Be it enacted hy the Senate and House of Representatives 
of the 
United States of America in Congress assernhled, That section 12 of