ELECTION WITH RESPECT TO CERTAIN INADMISSIBLE ASSETS.

SEC. 508. ELECTION WITH RESPECT TO CERTAIN INADMISSIBLE ASSETS. (a) Amendment of Section 440.—Section 440 (relating to admissible and inadmissible assets) is hereby amended by adding at the end thereof the following new subsection: “(c) Treatment of Government Obligations as Admissible Assets.—If the taxpayer elects for any taxable year, in accordance with regulations prescribed by the Secretary, to increase its excess profits net income by an amount equal to the amount by which the interest received or accrued during the taxable year on Government obligations exceeds the sum of— “(1) the amount of interest paid or accrued during such year which is not allowed as a deduction under section 23 (b), and “(2) the amount of the adjustments required for the taxable year under section 22 (o) (relating to adjustment for certain bond premiums), but not in excess of the amount of interest received or accrued during the taxable year on Government obligations to which such section is applicable, then for the taxable year for which the election is made the term ‘admissible assets’ shall include Government obligations, and the term ‘inadmissible assets’ shall not include Government obligations. For the purpose of applying section 435 to the taxable year for which the election is made, Government obligations shall not he considered ‘inadmissible assets’ in determining original inadmissible assets or yearly base period capital. As used in this subsection the term ‘Government obligations’ means obligations described in section 22 (b) (4) any part of the interest from which is excludible from gross income or allowable as a credit against net income; but such term shall include only such obligations as in the hands of the taxpayer are property described in section 117 (a) (1) (A). For the purpose of determining the excess profits credit for a taxable year for which the election is made, the excess profits net income under section 433 (b) for any taxable year shall include the amount by which the interest received or accrued during such taxable year on Government obligations exceeds the amount of interest paid or accrued during such year which is not allowed as a deduction under section 23 (b) and, if the taxable year ends after June 30, 1950, the amount with respect to such year described in paragraph (2).” (b) Amendment of Section 433 (a) (1).—Section 433 (a) (relating to adjustments in excess profits net income for the taxable year) is hereby amended by adding the following new subparagraph at the end thereof: “(S) Interest on Certain Government Obligations.—For adjustment in the case of a taxpayer making an election provided in section 440 (c), relating to dealers in certain government obligations, see section 440 (c).” (c) Amendment of Section 433 (b).—Section 433 (b) (relating to adjustments in excess profits net income for taxable years in base period) is hereby amended by adding at the end thereof the following new paragraph: “(17) Interest on certain government obligations.—For adjustment in the case of a taxpayer making an election provided in section 440 (c), relating to dealers in certain Government obligations, see section 440 (c).”