INCOME FROM CERTAIN AIRCRAFT AND VESSELS.

SEC. 314. INCOME FROM CERTAIN AIRCRAFT AND VESSELS. (a) Election—Section 861 (relating to income from sources within the United States) is amended by adding at the end thereof the following new subsection: “(e) Election To Treat Income From Certain Aircraft and Vessels as Income From Sources Within the United States— “(1) In general.—For purposes of subsection (a) and section 862(a), if a taxpayer owning an aircraft or vessel which is section 38 property (or would be section 38 property but for section 48(a) (5)) leases such aircraft or vessel to a United States person, other than a member of the same controlled group of corporations (as defined in section 1563) as the taxpayer, and if such aircraft or vessel is manufactured or constructed in the United States, the taxpayer may elect, for any taxable year ending after the commencement of such lease, to treat all amounts includible in gross income with respect to such aircraft or vessel (whether during or after the period of any such lease), including gain from sale or other disposition of such aircraft or vessel, as income from sources within the United States. “(2) Effect of election—An election under paragraph (1) made with respect to any aircraft or vessel shall apply to the tax-able year for which made and to all subsequent taxable years. Such election may not be revoked except with the consent of the Secretary or his delegate. “(3) Manner and time of election and revocation—An election under paragraph (1), and any revocation of such election, shall be made in such manner and at such time as the Secretary or his delegate prescribes by regulations. “(4) Certain transfers involving carryover basis.—If the taxpayer transfers or distributes an aircraft or vessel which is subject to an election under paragraph (1) and the basis of such aircraft or vessel in the hands of the transferee or distributes is determined by reference to its basis in the hands of the transferor or distributor, the transferee or distributes shall, for purposes of paragraph (1), be treated as having made an election with respect to such aircraft or vessel.” (b) Clerical Amendment—Section 862 (relating to income from sources without the United States) is amended by adding at the end thereof the following new subsection: “(c) Cross Reference— “For source of amounts attributable to certain aircraft and vessels, see section 861(e).” (c) Effective Date—The amendments made by this section shall apply to taxable years ending after August 15, 1971, but only with respect to leases entered into after such date.