GAIN ON CERTAIN STOCK SALES BY CONTROLLED FOREIGN CORPORATIONS TREATED AS DIVIDENDS.

SEC. 1111. GAIN ON CERTAIN STOCK SALES BY CONTROLLED FOREIGN CORPORATIONS TREATED AS DIVIDENDS. (a) General Rule.—Section 964 (relating to miscellaneous provisions) is amended by adding at the end thereof the following new subsection: “(e) Gain on Certain Stock Sales by Controlled Foreign Corporations Treated as Dividends.— “(1) In general.—If a controlled foreign corporation sells or exchanges stock in any other foreign corporation, gain recognized on such sale or exchange shall be included in the gross income of such controlled foreign corporation as a dividend to the same extent that it would have been so included under section 1248(a) if such controlled foreign corporation were a United States person. For purposes of determining the amount which would have been so includible, the determination of whether such other foreign corporation was a controlled foreign corporation shall be made without regard to the preceding sentence. “(2) Same country exception not applicable.—Clause (i) of section 954(c)(3)(A) shall not apply to any amount treated as a dividend by reason of paragraph (1).111 STAT. 969 “(3) Clarification of deemed sales.—For purposes of this subsection, a controlled foreign corporation shall be treated as having sold or exchanged any stock if, under any provision of this subtitle, such controlled foreign corporation is treated as having gain from the sale or exchange of such stock.”. (b) Amendment of Section 904(d).—Clause (i) of section 904(d)(2)(E) is amended by striking “and except as provided in regulations, the taxpayer was a United States shareholder in such corporation”. (c) Effective Dates.— (1) The amendment made by subsection (a) shall apply to gain recognized on transactions occurring after the date of the enactment of this Act. (2) The amendment made by subsection (b) shall apply to distributions after the date of the enactment of this Act.