EXCLUSION OF CERTAIN RENTS FROM PERSONAL HOLDING COMPANY INCOME.

SEC. 206. EXCLUSION OF CERTAIN RENTS FROM PERSONAL HOLDING COMPANY INCOME. (a) Rents From Leases of Certain Tangible Personal Property.— Section 543(b)(3) (relating to adjusted income from rents) is amended by striking out “but does not include amounts constituting personal holding company income under subsection (a)(6), nor copyright royalties (as defined in subsection (a)(4) nor produced film rents (as defined in subsection (a)(5)(B)).” and inserting in lieu thereof the following: “but such term does not include— “(A) amounts constituting personal holding company income under subsection (a)(6), “(B) copyright royalties (as defined in subsection (a)(4)), “(C) produced film rents (as defined in subsection (a)(5)(B)), or “(D) compensation, however designated, for the use of, or the right to use, any tangible personal property manu-80 Stat. 1579factured or produced by the taxpayer, if during the taxable year the taxpayer is engaged in substantial manufacturing or production of tangible personal property of the same type.” (b) Technical Amendments.— (1) Section 543(a)(2) (relating to adjusted income from rents included in personal holding company income) is amended by striking out the last sentence thereof. (2) Section 543(b)(2) (relating to definition of adjusted ordinary gross income) is amended by adding at the end thereof the following new subparagraph: “(D) Certain excluded rents.— From the gross income consisting of compensation described in subparagraph (D) of paragraph (3) subtract the amount allowable as deductions for the items described in clauses (i), (ii), (iii), and (iv) of subparagraph (A) to the extent allocable, under regulations prescribed by the Secretary or his delegate, to such gross income. The amount subtracted under this subparagraph shall not exceed such gross income.” (c) Effective Date.— The amendments made by subsections (a) and (b) shall apply to taxable years beginning after the date of the enactment of this Act. Such amendments shall also apply, at the election of the taxpayer (made at such time and in such manner as the Secretary or his delegate may prescribe), to taxable years beginning on or before such date and ending after December 31, 1965.