
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document affected by Public Law 106-554 Section 1(a)(7)]
[Document affected by Public Law 106-554 Section 1(a)(7)]
[CITE: 26USC165]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
               Subchapter B--Computation of Taxable Income
 
      PART VI--ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS
 
Sec. 165. Losses


(a) General rule

    There shall be allowed as a deduction any loss sustained during the 
taxable year and not compensated for by insurance or otherwise.

(b) Amount of deduction

    For purposes of subsection (a), the basis for determining the amount 
of the deduction for any loss shall be the adjusted basis provided in 
section 1011 for determining the loss from the sale or other disposition 
of property.

(c) Limitation on losses of individuals

    In the case of an individual, the deduction under subsection (a) 
shall be limited to--
        (1) losses incurred in a trade or business;
        (2) losses incurred in any transaction entered into for profit, 
    though not connected with a trade or business; and
        (3) except as provided in subsection (h), losses of property not 
    connected with a trade or business or a transaction entered into for 
    profit, if such losses arise from fire, storm, shipwreck, or other 
    casualty, or from theft.

(d) Wagering losses

    Losses from wagering transactions shall be allowed only to the 
extent of the gains from such transactions.

(e) Theft losses

    For purposes of subsection (a), any loss arising from theft shall be 
treated as sustained during the taxable year in which the taxpayer 
discovers such loss.

(f) Capital losses

    Losses from sales or exchanges of capital assets shall be allowed 
only to the extent allowed in sections 1211 and 1212.

(g) Worthless securities

                          (1) General rule

        If any security which is a capital asset becomes worthless 
    during the taxable year, the loss resulting therefrom shall, for 
    purposes of this subtitle, be treated as a loss from the sale or 
    exchange, on the last day of the taxable year, of a capital asset.

                        (2) Security defined

        For purposes of this subsection, the term ``security'' means--
            (A) a share of stock in a corporation;
            (B) a right to subscribe for, or to receive, a share of 
        stock in a corporation; or
            (C) a bond, debenture, note, or certificate, or other 
        evidence of indebtedness, issued by a corporation or by a 
        government or political subdivision thereof, with interest 
        coupons or in registered form.

              (3) Securities in affiliated corporation

        For purposes of paragraph (1), any security in a corporation 
    affiliated with a taxpayer which is a domestic corporation shall not 
    be treated as a capital asset. For purposes of the preceding 
    sentence, a corporation shall be treated as affiliated with the 
    taxpayer only if--
            (A) the taxpayer owns directly stock in such corporation 
        meeting the requirements of section 1504(a)(2), and
            (B) more than 90 percent of the aggregate of its gross 
        receipts for all taxable years has been from sources other than 
        royalties, rents (except rents derived from rental of properties 
        to employees of the corporation in the ordinary course of its 
        operating business), dividends, interest (except interest 
        received on deferred purchase price of operating assets sold), 
        annuities, and gains from sales or exchanges of stocks and 
        securities.

    In computing gross receipts for purposes of the preceding sentence, 
    gross receipts from sales or exchanges of stocks and securities 
    shall be taken into account only to the extent of gains therefrom.

(h) Treatment of casualty gains and losses

                  (1) $100 limitation per casualty

        Any loss of an individual described in subsection (c)(3) shall 
    be allowed only to the extent that the amount of the loss to such 
    individual arising from each casualty, or from each theft, exceeds 
    $100.

    (2) Net casualty loss allowed only to the extent it exceeds 
                     10 percent of adjusted gross income

        (A) In general

            If the personal casualty losses for any taxable year exceed 
        the personal casualty gains for such taxable year, such losses 
        shall be allowed for the taxable year only to the extent of the 
        sum of--
                (i) the amount of the personal casualty gains for the 
            taxable year, plus
                (ii) so much of such excess as exceeds 10 percent of the 
            adjusted gross income of the individual.

        (B) Special rule where personal casualty gains exceed personal 
                casualty losses

            If the personal casualty gains for any taxable year exceed 
        the personal casualty losses for such taxable year--
                (i) all such gains shall be treated as gains from sales 
            or exchanges of capital assets, and
                (ii) all such losses shall be treated as losses from 
            sales or exchanges of capital assets.

       (3) Definitions of personal casualty gain and personal 
                                casualty loss

        For purposes of this subsection--

        (A) Personal casualty gain

            The term ``personal casualty gain'' means the recognized 
        gain from any involuntary conversion of property which is 
        described in subsection (c)(3) arising from fire, storm, 
        shipwreck, or other casualty, or from theft.

        (B) Personal casualty loss

            The term ``personal casualty loss'' means any loss described 
        in subsection (c)(3). For purposes of paragraph (2), the amount 
        of any personal casualty loss shall be determined after the 
        application of paragraph (1).

                          (4) Special rules

        (A) Personal casualty losses allowable in computing adjusted 
                gross income to the extent of personal casualty gains

            In any case to which paragraph (2)(A) applies, the deduction 
        for personal casualty losses for any taxable year shall be 
        treated as a deduction allowable in computing adjusted gross 
        income to the extent such losses do not exceed the personal 
        casualty gains for the taxable year.

        (B) Joint returns

            For purposes of this subsection, a husband and wife making a 
        joint return for the taxable year shall be treated as 1 
        individual.

        (C) Determination of adjusted gross income in case of estates 
                and trusts

            For purposes of paragraph (2), the adjusted gross income of 
        an estate or trust shall be computed in the same manner as in 
        the case of an individual, except that the deductions for costs 
        paid or incurred in connection with the administration of the 
        estate or trust shall be treated as allowable in arriving at 
        adjusted gross income.

        (D) Coordination with estate tax

            No loss described in subsection (c)(3) shall be allowed if, 
        at the time of filing the return, such loss has been claimed for 
        estate tax purposes in the estate tax return.

        (E) Claim required to be filed in certain cases

            Any loss of an individual described in subsection (c)(3) to 
        the extent covered by insurance shall be taken into account 
        under this section only if the individual files a timely 
        insurance claim with respect to such loss.

(i) Disaster losses

          (1) Election to take deduction for preceding year

        Notwithstanding the provisions of subsection (a), any loss 
    attributable to a disaster occurring in an area subsequently 
    determined by the President of the United States to warrant 
    assistance by the Federal Government under the Disaster Relief and 
    Emergency Assistance Act may, at the election of the taxpayer, be 
    taken into account for the taxable year immediately preceding the 
    taxable year in which the disaster occurred.

                          (2) Year of loss

        If an election is made under this subsection, the casualty 
    resulting in the loss shall be treated for purposes of this title as 
    having occurred in the taxable year for which the deduction is 
    claimed.

                         (3) Amount of loss

        The amount of the loss taken into account in the preceding 
    taxable year by reason of paragraph (1) shall not exceed the 
    uncompensated amount determined on the basis of the facts existing 
    at the date the taxpayer claims the loss.

     (4) Use of disaster loan appraisals to establish amount of 
                                    loss

        Nothing in this title shall be construed to prohibit the 
    Secretary from prescribing regulations or other guidance under which 
    an appraisal for the purpose of obtaining a loan of Federal funds or 
    a loan guarantee from the Federal Government as a result of a 
    Presidentially declared disaster (as defined by section 1033(h)(3)) 
    may be used to establish the amount of any loss described in 
    paragraph (1) or (2).

(j) Denial of deduction for losses on certain obligations not in 
        registered form

                           (1) In general

        Nothing in subsection (a) or in any other provision of law shall 
    be construed to provide a deduction for any loss sustained on any 
    registration-required obligation unless such obligation is in 
    registered form (or the issuance of such obligation was subject to 
    tax under section 4701).

                           (2) Definitions

        For purposes of this subsection--

        (A) Registration-required obligation

            The term ``registration-required obligation'' has the 
        meaning given to such term by section 163(f)(2) except that 
        clause (iv) of subparagraph (A), and subparagraph (B), of such 
        section shall not apply.

        (B) Registered form

            The term ``registered form'' has the same meaning as when 
        used in section 163(f).

                           (3) Exceptions

        The Secretary may, by regulations, provide that this subsection 
    and section 1287 shall not apply with respect to obligations held by 
    any person if--
            (A) such person holds such obligations in connection with a 
        trade or business outside the United States,
            (B) such person holds such obligations as a broker dealer 
        (registered under Federal or State law) for sale to customers in 
        the ordinary course of his trade or business,
            (C) such person complies with reporting requirements with 
        respect to ownership, transfers, and payments as the Secretary 
        may require, or
            (D) such person promptly surrenders the obligation to the 
        issuer for the issuance of a new obligation in registered form,

    but only if such obligations are held under arrangements provided in 
    regulations or otherwise which are designed to assure that such 
    obligations are not delivered to any United States person other than 
    a person described in subparagraph (A), (B), or (C).

(k) Treatment as disaster loss where taxpayer ordered to demolish or 
        relocate residence in disaster area because of disaster

    In the case of a taxpayer whose residence is located in an area 
which has been determined by the President of the United States to 
warrant assistance by the Federal Government under the Disaster Relief 
and Emergency Assistance Act, if--
        (1) not later than the 120th day after the date of such 
    determination, the taxpayer is ordered, by the government of the 
    State or any political subdivision thereof in which such residence 
    is located, to demolish or relocate such residence, and
        (2) the residence has been rendered unsafe for use as a 
    residence by reason of the disaster,

any loss attributable to such disaster shall be treated as a loss which 
arises from a casualty and which is described in subsection (i).

(l) Treatment of certain losses in insolvent financial institutions

                           (1) In general

        If--
            (A) as of the close of the taxable year, it can reasonably 
        be estimated that there is a loss on a qualified individual's 
        deposit in a qualified financial institution, and
            (B) such loss is on account of the bankruptcy or insolvency 
        of such institution,

    then the taxpayer may elect to treat the amount so estimated as a 
    loss described in subsection (c)(3) incurred during the taxable 
    year.

                  (2) Qualified individual defined

        For purposes of this subsection, the term ``qualified 
    individual'' means any individual, except an individual--
            (A) who owns at least 1 percent in value of the outstanding 
        stock of the qualified financial institution,
            (B) who is an officer of the qualified financial 
        institution,
            (C) who is a sibling (whether by the whole or half blood), 
        spouse, aunt, uncle, nephew, niece, ancestor, or lineal 
        descendant of an individual described in subparagraph (A) or 
        (B), or
            (D) who otherwise is a related person (as defined in section 
        267(b)) with respect to an individual described in subparagraph 
        (A) or (B).

                 (3) Qualified financial institution

        For purposes of this subsection, the term ``qualified financial 
    institution'' means--
            (A) any bank (as defined in section 581),
            (B) any institution described in section 591,
            (C) any credit union the deposits or accounts in which are 
        insured under Federal or State law or are protected or 
        guaranteed under State law, or
            (D) any similar institution chartered and supervised under 
        Federal or State law.

                             (4) Deposit

        For purposes of this subsection, the term ``deposit'' means any 
    deposit, withdrawable account, or withdrawable or repurchasable 
    share.

               (5) Election to treat as ordinary loss

        (A) In general

            In lieu of any election under paragraph (1), the taxpayer 
        may elect to treat the amount referred to in paragraph (1) for 
        the taxable year as an ordinary loss described in subsection 
        (c)(2) incurred during the taxable year.

        (B) Limitations

            (i) Deposit may not be federally insured

                No election may be made under subparagraph (A) with 
            respect to any loss on a deposit in a qualified financial 
            institution if part or all of such deposit is insured under 
            Federal law.
            (ii) Dollar limitation

                With respect to each financial institution, the 
            aggregate amount of losses attributable to deposits in such 
            financial institution to which an election under 
            subparagraph (A) may be made by the taxpayer for any taxable 
            year shall not exceed $20,000 ($10,000 in the case of a 
            separate return by a married individual). The limitation of 
            the preceding sentence shall be reduced by the amount of any 
            insurance proceeds under any State law which can reasonably 
            be expected to be received with respect to losses on 
            deposits in such institution.

                            (6) Election

        Any election by the taxpayer under this subsection for any 
    taxable year--
            (A) shall apply to all losses for such taxable year of the 
        taxpayer on deposits in the institution with respect to which 
        such election was made, and
            (B) may be revoked only with the consent of the Secretary.

                  (7) Coordination with section 166

        Section 166 shall not apply to any loss to which an election 
    under this subsection applies.

(m) Cross references

            (1) For special rule for banks with respect to worthless 
        securities, see section 582.
            (2) For disallowance of deduction for worthlessness of 
        securities to which subsection (g)(2)(C) applies, if issued by a 
        political party or similar organization, see section 271.
            (3) For special rule for losses on stock in a small business 
        investment company, see section 1242.
            (4) For special rule for losses of a small business 
        investment company, see section 1243.
            (5) For special rule for losses on small business stock, see 
        section 1244.

(Aug. 16, 1954, ch. 736, 68A Stat. 49; Pub. L. 85-866, title I, Secs. 7, 
57(c)(1), title II, Sec. 202(a), Sept. 2, 1958, 72 Stat. 1608, 1646, 
1676; Pub. L. 87-426, Sec. 2(a), Mar. 31, 1962, 76 Stat. 51; Pub. L. 88-
272, title II, Secs. 208(a), 238, Feb. 26, 1964, 78 Stat. 43, 128; Pub. 
L. 88-348, Sec. 3(a), June 30, 1964, 78 Stat. 237; Pub. L. 91-606, title 
III, Sec. 301(h), Dec. 31, 1970, 84 Stat. 1759; Pub. L. 91-677, 
Sec. 1(a), Jan. 12, 1971, 84 Stat. 2061; Pub. L. 91-687, Sec. 1, Jan. 
12, 1971, 84 Stat. 2071; Pub. L. 92-336, Sec. 2(a), July 1, 1972, 86 
Stat. 406; Pub. L. 92-418, Sec. 2(a), Aug. 29, 1972, 86 Stat. 656, 657; 
Pub. L. 93-288, title VII, Sec. 702(h), formerly title VI, Sec. 602(h), 
May 22, 1974, 88 Stat. 164, renumbered title VII, Sec. 702(h), Pub. L. 
103-337, div. C, title XXXIV, Sec. 3411(a)(1), (2), Oct. 5, 1994, 108 
Stat. 3100; Pub. L. 94-455, title XIX, Sec. 1901(a)(26), Oct. 4, 1976, 
90 Stat. 1767; Pub. L. 97-248, title II, Sec. 203(a), (b), title III, 
Sec. 310(b)(5), Sept. 3, 1982, 96 Stat. 422, 598; Pub. L. 98-369, div. 
A, title I, Sec. 42(a)(4), title VII, Sec. 711(c)(1), (2)(A)(i), (ii), 
title X, Sec. 1051(a), July 18, 1984, 98 Stat. 556, 943, 1044; Pub. L. 
99-514, title IX, Sec. 905(a), title X, Sec. 1004(a), Oct. 22, 1986, 100 
Stat. 2385, 2388; Pub. L. 100-647, title I, Sec. 1009(d)(1), Nov. 10, 
1988, 102 Stat. 3449; Pub. L. 100-707, title I, Sec. 109(l), Nov. 23, 
1988, 102 Stat. 4709; Pub. L. 105-34, title IX, Sec. 912(a), Aug. 5, 
1997, 111 Stat. 878; Pub. L. 106-554, Sec. 1(a)(7) [title III, 
Sec. 318(b)(1), (2)], Dec. 21, 2000, 114 Stat. 2763, 2763A-645.)

                       References in Text

    The Disaster Relief and Emergency Assistance Act, referred to in 
subsecs. (i)(1) and (k), is Pub. L. 93-288, May 22, 1974, 88 Stat. 143, 
as amended, known as the Robert T. Stafford Disaster Relief and 
Emergency Assistance Act, which is classified principally to chapter 68 
(Sec. 5121 et seq.) of Title 42, The Public Health and Welfare. For 
complete classification of this Act to the Code, see Short Title note 
set out under section 5121 of Title 42 and Tables.


                               Amendments

    2000--Subsec. (g)(3). Pub. L. 106-554, Sec. 1(a)(7) [title III, 
Sec. 318(b)(2)], struck out last sentence of concluding provisions which 
read as follows: ``As used in subparagraph (A), the term `stock' does 
not include nonvoting stock which is limited and preferred as to 
dividends.''
    Subsec. (g)(3)(A). Pub. L. 106-554, Sec. 1(a)(7) [title III, 
Sec. 318(b)(1)], amended subpar. (A) generally. Prior to amendment, 
subpar. (A) read as follows: ``stock possessing at least 80 percent of 
the voting power of all classes of its stock and at least 80 percent of 
each class of its nonvoting stock is owned directly by the taxpayer, 
and''.
    1997--Subsec. (i)(4). Pub. L. 105-34 added par. (4).
    1988--Subsecs. (i)(1), (k). Pub. L. 100-707 substituted ``and 
Emergency Assistance Act'' for ``Act of 1974''.
    Subsec. (l)(5) to (7). Pub. L. 100-647 added pars. (5) and (6), 
redesignated former par. (6) as (7), and struck out former par. (5) 
which read as follows: ``Election.--Any election by the taxpayer under 
this subsection may be revoked only with the consent of the Secretary 
and shall apply to all losses of the taxpayer on deposits in the 
institution with respect to which such election was made.''
    1986--Subsec. (h)(4)(E). Pub. L. 99-514, Sec. 1004(a), added subpar. 
(E).
    Subsecs. (l), (m). Pub. L. 99-514, Sec. 905(a), added subsec. (l) 
and redesignated former subsec. (l) as (m).
    1984--Subsec. (c)(3). Pub. L. 98-369, Sec. 711(c)(2)(A)(i), extended 
limitation to losses of property not connected with a transaction 
entered into for profit.
    Subsec. (h). Pub. L. 98-369, Sec. 711(c)(2)(A)(ii), substituted 
heading ``Treatment of casualty gains and losses'' for ``Casualty and 
theft losses''; substituted par. (1) ``$100 limitation per casualty'' 
provision for former par. (1) ``General rule'' provision stating that: 
``Any loss of an individual described in subsection (c)(3) shall be 
allowed for any taxable year only to the extent that--
        ``(A) the amount of loss to such individual arising from each 
    casualty, or from each theft, exceeds $100, and
        ``(B) the aggregate amount of all such losses sustained by such 
    individual during the taxable year (determined after application of 
    subparagraph (A) exceeds 10 percent of the adjusted gross income of 
    the individual.'';
added par. (2) ``Net casualty loss allowed only to the extent it exceeds 
10 percent of adjusted gross income'' provision and par. (3) 
``Definitions of personal casualty gain and personal casualty loss'' 
provisions; redesignated as par. (4) former par. (2) catchline; added 
par. (4)(A) ``Personal casualty losses allowable in computing adjusted 
gross income to the extent of personal casualty gains'' provision; 
redesignated as par. (4)(B) former par. (2)(A) joint returns provision, 
substituting ``For purposes of this section'' for ``For purposes of the 
$100 and 10 percent limitations described in paragraph (1)'' and 
``individual'' for ``one individual''; redesignated as par. (4)(C) 
former par. (2)(B), substituting therein paragraph ``(2)'' for ``(1)''; 
and redesignated as par. (4)(D) former par. (2)(C).
    Pub. L. 98-369, Sec. 711(c)(1), amended par. (2) by redesignating 
subpar. (B) as (C) and by adding a new subpar. (B) relating to the 
determination of adjusted gross income in case of estates and trusts.
    Subsec. (j)(3). Pub. L. 98-369, Sec. 42(a)(4), substituted ``section 
1287'' for ``subsection (d) of section 1232''.
    Subsecs. (k), (l). Pub. L. 98-369, Sec. 1051(a), added subsec. (k) 
and redesignated former subsec. (k) as (l).
    1982--Subsec. (c)(3). Pub. L. 97-248, Sec. 203(b), inserted ``except 
as provided in subsection (h),'' before ``losses of property'' and 
struck out provisions that a loss described in this paragraph would be 
allowed only to the extent that the amount of loss to such individual 
arising from each casualty, or from each theft, exceeded $100, that, for 
purposes of the $100 limitation, a husband and wife making a joint 
return under section 6013 for the taxable year in which the loss was 
allowed as a deduction would be treated as one individual, and that no 
loss described in this paragraph would be allowed if, at the time of 
filing the return, such loss had been claimed for estate tax purposes in 
the estate tax return.
    Subsec. (h). Pub. L. 97-248, Sec. 203(a), added subsec. (h) relating 
to casualty and theft losses. Former subsec. (h), relating to disaster 
losses, redesignated (i).
    Subsec. (i). Pub. L. 97-248, Sec. 203(a), redesignated former 
subsec. (h), relating to disaster losses, as (i), in subsec. (i), as so 
redesignated, further redesignated existing unnumbered provisions as 
pars. (1) and (2), in par. (1), as so redesignated, substituted ``be 
taken into account for the taxable year'' for ``be deducted for the 
taxable year'', in par. (2), as so redesignated, substituted ``shall be 
treated for purposes of this title as having occurred'' for ``will be 
deemed to have occurred'', added par. (3), and struck out provision that 
a deduction under this subsection could not be in excess of so much of 
the loss as would have been deductible in the taxable year in which the 
casualty occurred, based on facts existing at the date the taxpayer 
claimed the loss. Former subsec. (i), setting forth cross references, 
redesignated (j).
    Subsec. (j). Pub. L. 97-248, Sec. 310(b)(5), added subsec. (j) 
relating to denial of deduction for losses on certain obligations not in 
registered form. Former subsec. (j), setting forth cross references, 
redesignated (k).
    Pub. L. 97-248, Sec. 203(a), redesignated former subsec. (i), 
setting forth cross references, as (j).
    Subsec. (k). Pub. L. 97-248, Sec. 310(b)(5), redesignated former 
subsec. (j), setting forth cross references, as (k).
    1976--Subsecs. (i), (j). Pub. L. 94-455 redesignated subsec. (j) as 
subsec. (i). Former subsec. (i), which related to property confiscated 
by Cuba, was struck out.
    1974--Subsec. (h). Pub. L. 93-288 substituted ``Disaster Relief Act 
of 1974'' for ``Disaster Relief Act of 1970''.
    1972--Subsec. (h). Pub. L. 92-418 struck out par. (1) provisions 
relating to losses attributable to a disaster occurring during period 
following close of taxable year and on or before time prescribed by law 
for filing the income tax return for the taxable year without regard to 
any extension of time, struck out par. (2) designation, and inserted 
``attributable to a disaster'' before ``occurring in an area'', and at 
end of second sentence, inserted ``based on facts existing at the date 
the taxpayer claims the loss''.
    Subsec. (h)(1). Pub. L. 92-336 substituted provisions relating to 
losses attributable to a disaster which occurs during the period after 
the close of the taxable year and on or before the last day of the 6th 
calendar month beginning after the close of the taxable year, for 
provisions relating to losses attributable to a disaster which occurs 
during the period following the close of the taxable year and on or 
before the time prescribed by law for filing the income tax return for 
the taxable year, determined without regard to any extension of time.
    1971--Subsec. (g)(3). Pub. L. 91-687 substituted ``stock possessing 
at least 80 percent of the voting power of all classes of its stock and 
at least 80 percent of each class of its nonvoting stock'' for ``at 
least 95 percent of each class of its stock'' in subpar. (A), and 
inserted at the end of the subsection the sentence providing that the 
term ``stock'', as used in subpar. (A), does not include nonvoting stock 
which is limited and preferred as to dividends.
    Subsec. (i)(1). Pub. L. 91-677, Sec. 1(a)(1), (2), struck out ``or 
(2)'' after ``paragraph (1)'' in cl. (B), and substituted ``one or more 
days in the period beginning on December 31, 1958, and ending on May 16, 
1959'' for ``December 31, 1958''.
    Subsec. (i)(2)(B). Pub. L. 91-677, Sec. 1(a)(3), substituted ``one 
or more days during the period beginning on December 31, 1958, and 
ending on May 16, 1959'' for ``December 31, 1958'' and ``the first day 
in such period on which the property was held by the taxpayer'' for 
``December 31, 1958''.
    Subsec. (i)(3). Pub. L. 91-677, Sec. 1(a)(4), struck out subsec. 
(i)(3) which authorized a refund or credit to be given for any 
overpayment attributable to the application of par. (1), provided that a 
claim was filed for such refund or credit before Jan. 1, 1965.
    1970--Subsec. (h)(2). Pub. L. 91-606 substituted ``the Disaster 
Relief Act of 1970'' for ``sections 1855-1855g of title 42''.
    1964--Subsec. (c)(3). Pub. L. 88-272, Sec. 208(a), inserted 
requirement that losses must exceed $100 to be deductible.
    Subsec. (i). Pub. L. 88-348 designated existing provisions as par. 
(1), substituted provisions permitting individuals who were citizens of 
the United States or resident aliens on Dec. 31, 1958, who sustained any 
loss of property prior to Jan. 1, 1964, and which was not a loss 
described in par. (1) or (2) of subsec. (c), to treat such loss as a 
loss under subsec. (c)(3), except that in cases of tangible property, 
the property had to be held by the taxpayer, and located in Cuba, on 
Dec. 31, 1958, for provisions which permitted any loss of tangible 
property to be treated as a loss from a casualty within subsec. (c)(3), 
therein, and added pars. (2) and (3).
    Pub. L. 88-272, Sec. 238, added subsec. (i). Former subsec. (i) 
redesignated (j).
    Subsec. (j). Pub. L. 88-272, Sec. 238, redesignated former subsec. 
(i) as (j).
    1962--Subsecs. (h), (i). Pub. L. 87-426 added subsec. (h) and 
redesignated former subsec. (h) as (i).
    1958--Subsec. (g)(3)(B). Pub. L. 85-866, Sec. 7, substituted 
``rental of'' for ``rental from''.
    Subsec. (h)(3), (4). Pub. L. 85-866, Sec. 57(c)(1), added pars. (3) 
and (4).
    Subsec. (h)(5). Pub. L. 85-866, Sec. 202(a), added par. (5).


                    Effective Date of 2000 Amendment

    Pub. L. 106-554, Sec. 1(a)(7) [title III, Sec. 318(b)(3)], Dec. 21, 
2000, 114 Stat. 2763, 2763A-645, provided that: ``The amendments made by 
this subsection [amending this section] shall apply to taxable years 
beginning after December 31, 1984.''


                    Effective Date of 1997 Amendment

    Section 912(b) of Pub. L. 105-34 provided that: ``The amendment made 
by subsection (a) [amending this section] shall take effect on the date 
of the enactment of this Act [Aug. 5, 1997].''


                    Effective Date of 1988 Amendment

    Amendment by Pub. L. 100-647 effective, except as otherwise 
provided, as if included in the provision of the Tax Reform Act of 1986, 
Pub. L. 99-514, to which such amendment relates, see section 1019(a) of 
Pub. L. 100-647, set out as a note under section 1 of this title.


                    Effective Date of 1986 Amendment

    Amendment by section 905(a) of Pub. L. 99-514 applicable to taxable 
years beginning after Dec. 31, 1981, see section 905(c)(1) of Pub. L. 
99-514, as amended, set out as a note under section 451 of this title.
    Section 1004(b) of Pub. L. 99-514 provided that: ``The amendment 
made by this section [amending this section] shall apply to losses 
sustained in taxable years beginning after December 31, 1986.''


                    Effective Date of 1984 Amendment

    Amendment by section 42(a)(4) of Pub. L. 98-369 applicable to 
taxable years ending after July 18, 1984, see section 44 of Pub. L. 98-
369, set out as an Effective Date note under section 1271 of this title.
    Amendment by section 711(c)(1) of Pub. L. 98-369 effective as if 
included in the provision of the Tax Equity and Fiscal Responsibility 
Act of 1982, Pub. L. 97-248, to which such amendment relates, see 
section 715 of Pub. L. 98-369, set out as a note under section 31 of 
this title.
    Section 711(c)(2)(A)(v) of Pub. L. 98-369 provided that: ``The 
amendments made by this subparagraph [amending this section and sections 
873, 931, and 1231 of this title] shall apply to taxable years beginning 
after December 31, 1983.''
    Section 1051(b) of Pub. L. 98-369 provided that: ``The amendment 
made by subsection (a) [amending this section] shall apply to taxable 
years ending after December 31, 1981, with respect to residences in 
areas determined by the President of the United States, after such date, 
to warrant assistance by the Federal Government under the Disaster 
Relief Act of 1974 [42 U.S.C. 5121 et seq.].''


                    Effective Date of 1982 Amendment

    Section 203(c) of Pub. L. 97-248, as amended by Pub. L. 99-514, 
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ``The amendments 
made by this section [amending this section] shall apply to taxable 
years beginning after December 31, 1982. Such amendments shall also 
apply to the taxpayer's last taxable year beginning before January 1, 
1983, solely for purposes of determining the amount allowable as a 
deduction with respect to any loss taken into account for such year by 
reason of an election under section 165(i) of the Internal Revenue Code 
of 1986 [formerly I.R.C. 1954] (as amended by this section).''
    Amendment by section 310(b)(5) of Pub. L. 97-248 applicable to 
obligations issued after Dec. 31, 1982, with exceptions for certain 
warrants, see section 310(d) of Pub. L. 97-248, set out as a note under 
section 103 of this title.


                    Effective Date of 1976 Amendment

    Amendment by Pub. L. 94-455 applicable with respect to taxable years 
beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, 
set out as a note under section 2 of this title.


                    Effective Date of 1974 Amendment

    Amendment by Pub. L. 93-288 effective Apr. 1, 1974, see section 605 
of Pub. L. 93-288, set out as an Effective Date note under section 5121 
of Title 42, The Public Health and Welfare.


                    Effective Date of 1972 Amendments

    Section 2(c) of Pub. L. 92-418 provided in part that: ``The 
amendment made by subsection (a) [amending this section] shall apply to 
disasters occurring after December 31, 1971, in taxable years ending 
after such date.''
    Section 2(b) of Pub. L. 92-336 provided that: ``The amendment made 
by subsection (a) [amending this section] shall apply to disasters 
occurring after December 31, 1971, in taxable years ending after such 
date.''


                    Effective Date of 1971 Amendments

    Section 2 of Pub. L. 91-687 provided that: ``The amendments made by 
this Act [amending this section] shall apply with respect to taxable 
years beginning on or after January 1, 1970.''
    Section 1(b)(1) of Pub. L. 91-677 provided that: ``The amendments 
made by subsection (a) [amending this section] shall apply in respect of 
losses sustained in taxable years ending after December 31, 1958.''


                    Effective Date of 1970 Amendment

    Section 304 of Pub. L. 91-606 provided that: ``This Act [enacting 
sections 4401 to 4485 of Title 42, The Public Health and Welfare, 
amending this section, sections 5064 and 5708 of this title, sections 
1706e, 1709, 1715l of Title 12, Banks and Banking, sections 241-1, 646 
and 758 of Title 20, Education, section 1820 [now 3720] of Title 38, 
Veterans' Benefits, section 461 of Title 40, Public Buildings, Property, 
and Works, section 1681 note of Title 42, repealing sections 1855 to 
1855g, 1855aa, 1855aa note, 1855bb to 1855ii, 1855aaa, 1855aaa note, 
1855bbb to 1855nnn of Title 42, and section 1926 of Title 7, 
Agriculture, and enacting provisions set out as notes under section 4401 
and section 4434 of Title 42] shall take effect immediately upon its 
enactment [Dec. 31, 1970], except that sections 226(b), 237, 241, 
252(a), and 254 [sections 4436(b), 4456, 4460, 4482(a), and 4484 of 
Title 42, respectively] shall take effect as of August 1, 1969, and 
sections 231, 232, and 233 [sections 4451, 4452 of Title 42 and 
amendments to section 1820 [now 3720] of Title 38, respectively] shall 
take effect as of April 1, 1970.''


                    Effective Date of 1964 Amendments

    Section 208(b) of Pub. L. 88-272 provided that: ``The amendment made 
by subsection (a) [amending this section] shall apply to losses 
sustained after December 31, 1963, in taxable years ending after such 
date.''
    Section 3(b) of Pub. L. 88-348 provided that: ``The amendment made 
by subsection (a) [amending this section] shall apply in respect of 
losses sustained in taxable years ending after December 31, 1958.''


                    Effective Date of 1962 Amendment

    Section 2(b) of Pub. L. 87-426 provided that: ``The amendments made 
by this section [amending this section] shall be effective with respect 
to any disaster occurring after December 31, 1961.''


                    Effective Date of 1958 Amendment

    Section 1(c) of title I of Pub. L. 85-866, as amended by Pub. L. 99-
514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ``Except as 
otherwise expressly provided--
        ``(1) amendments made by this title to subtitle A of the 
    Internal Revenue Code of 1986 [formerly I.R.C. 1954] (relating to 
    income taxes) [enacting section 558 of this title and amending this 
    section and sections 152, 166, 168, 170, 172, 213, 337, 404, 421, 
    535, 545, 556, 582, 611, 613, 851, 1015, 1031, 1033, 1034, 1053, 
    1232, 1233, 1234, 1237, 1341, and 1347 of this title] shall apply to 
    taxable years beginning after December 31, 1953, and ending after 
    August 16, 1954; and
        ``(2) amendments made by this title to subtitle F of such Code 
    (relating to procedure and administration) [enacting sections 7513 
    and 7514 of this title and amending sections 6013, 6015, 6212, 6325, 
    6338, 6339, 6501, 6504, 6511, 6601, 6652, 6653, 6851, 6871, 7213, 
    7324, 7325, and 7422 of this title] shall take effect as of August 
    17, 1954, and such subtitle, as so amended, shall apply as provided 
    in section 7851 of the Internal Revenue Code of 1986''.
    Amendment by section 57(c)(1) of Pub. L. 85-866 applicable with 
respect to taxable years beginning after Sept. 2, 1958, see section 
57(d) of Pub. L. 85-866, set out as a note under section 243 of this 
title.


                  Transitional Rule for 1984 Amendment

    Section 711(c)(2)(B) of Pub. L. 98-369, as amended by Pub. L. 99-
514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ``In the case 
of taxable years beginning before January 1, 1984--
        ``(i) For purposes of paragraph (1)(B) of section 165(h) of the 
    Internal Revenue Code of 1986 [formerly I.R.C. 1954], adjusted gross 
    income shall be determined without regard to the application of 
    section 1231 of such Code to any gain or loss from an involuntary 
    conversion of property described in subsection (c)(3) of section 165 
    of such Code arising from fire, storm, shipwreck, or other casualty 
    or from theft.
        ``(ii) Section 1231 of such Code shall be applied after the 
    application of paragraph (1) of section 165(h) of such Code.''


    Clarification of Treatment of Certain FSLIC Financial Assistance

    Pub. L. 103-66, title XIII, Sec. 13224, Aug. 10, 1993, 107 Stat. 
485, provided that:
    ``(a) General Rule.--For purposes of chapter 1 of the Internal 
Revenue Code of 1986--
        ``(1) any FSLIC assistance with respect to any loss of 
    principal, capital, or similar amount upon the disposition of any 
    asset shall be taken into account as compensation for such loss for 
    purposes of section 165 of such Code, and
        ``(2) any FSLIC assistance with respect to any debt shall be 
    taken into account for purposes of section 166, 585, or 593 of such 
    Code in determining whether such debt is worthless (or the extent to 
    which such debt is worthless) and in determining the amount of any 
    addition to a reserve for bad debts arising from the worthlessness 
    or partial worthlessness of such debts.
    ``(b) FSLIC Assistance.--For purposes of this section, the term 
`FSLIC assistance' means any assistance (or right to assistance) with 
respect to a domestic building and loan association (as defined in 
section 7701(a)(19) of such Code without regard to subparagraph (C) 
thereof) under section 406(f) of the National Housing Act [former 12 
U.S.C. 1729(f)] or section 21A of the Federal Home Loan Bank Act [12 
U.S.C. 1441a] (or under any similar provision of law).
    ``(c) Effective Date.--
        ``(1) In general.--Except as otherwise provided in this 
    subsection--
            ``(A) The provisions of this section shall apply to taxable 
        years ending on or after March 4, 1991, but only with respect to 
        FSLIC assistance not credited before March 4, 1991.
            ``(B) If any FSLIC assistance not credited before March 4, 
        1991, is with respect to a loss sustained or charge-off in a 
        taxable year ending before March 4, 1991, for purposes of 
        determining the amount of any net operating loss carryover to a 
        taxable year ending on or after March 4, 1991, the provisions of 
        this section shall apply to such assistance for purposes of 
        determining the amount of the net operating loss for the taxable 
        year in which such loss was sustained or debt written off. 
        Except as provided in the preceding sentence, this section shall 
        not apply to any FSLIC assistance with respect to a loss 
        sustained or charge-off in a taxable year ending before March 4, 
        1991.
        ``(2) Exceptions.--The provisions of this section shall not 
    apply to any assistance to which the amendments made by section 
    1401(a)(3) of the Financial Institutions Reform, Recovery, and 
    Enforcement Act of 1989 [Pub. L. 101-73, amending section 597 of 
    this title and repealing provisions set out as a note under section 
    597 of this title] apply.''


Overpayments or Underpayments of Tax Attributable to Certain Amendments 
                  by Pub. L. 99-514 or Pub. L. 100-647

    Section 1009(d)(4) of Pub. L. 100-647 provided that: ``If on the 
date of the enactment of this Act [Nov. 10, 1988] (or at any time before 
the date 1 year after such date of enactment) credit or refund of any 
overpayment of tax attributable to amendments made by section 905 of the 
Reform Act [section 905 of Pub. L. 99-514, amending this section and 
section 451 of this title] or by this subsection [amending this section 
and section 451 of this title and provisions set out as a note under 
section 451 of this title] (or the assessment of any underpayment of tax 
so attributable) is barred by any law or rule of law--
        ``(A) credit or refund of any such overpayment may nevertheless 
    be made if claim therefore [sic] is filed before the date 1 year 
    after such date of enactment, and
        ``(B) assessment of any such underpayment may nevertheless be 
    made if made before the date 1 year after such date of enactment.''


       Deduction for Bus and Freight Forwarder Operating Authority

    Section 243 of Pub. L. 99-514, as amended by Pub. L. 100-647, title 
I, Sec. 1002(j), Nov. 10, 1988, 102 Stat. 3371, provided that:
    ``(a) Bus Operating Authority.--
        ``(1) In general.--Subject to the modifications contained in 
    paragraph (2), section 266 of the Economic Recovery Tax Act of 1981 
    [section 266 of Pub. L. 97-34, set out below] shall be applied as if 
    the term `motor carrier operating authority' included a bus 
    operating authority.
        ``(2) Modifications.--For purposes of paragraph (1), section 266 
    of such Act shall be applied--
            ``(A) by substituting `November 19, 1982' for `July 1, 1980' 
        each place it appears, and
            ``(B) by substituting `November 1982' for `July 1980' in 
        subsection (a) thereof.
        ``(3) Bus operating authority defined.--For purposes of this 
    subsection and section 266 of such Act, the term `bus operating 
    authority' means--
            ``(A) a certificate or permit held by a motor common or 
        contract carrier of passengers which was issued pursuant to 
        subchapter II of chapter 109 of title 49, United States Code, 
        and
            ``(B) a certificate or permit held by a motor carrier 
        authorizing the transportation of passengers, as a common 
        carrier, over regular routes in intrastate commerce which was 
        issued by the appropriate State agency.
    ``(b) Freight Forwarder Operating Authority.--
        ``(1) In general.--Subject to the modifications contained in 
    paragraph (2), section 266 of the Economic Recovery Tax Act of 1981 
    [section 266 of Pub. L. 97-34, set out below] shall be applied as if 
    subsection (b) thereof contained `or a freight forwarder' after 
    `contract carrier of property'.
        ``(2) Modifications.--The modifications referred to in this 
    paragraph are:
            ``(A) 60-month period.--The 60-month period referred to in 
        section 266(a) of such Act shall begin with the later of--
                ``(i) the deregulation month, or
                ``(ii) at the election of the taxpayer, the 1st month of 
            the taxpayer's 1st taxable year beginning after the 
            deregulation month.
            ``(B) Authority must be held as of beginning of 60-month 
        period.--A motor carrier operating authority shall not be taken 
        into account unless such authority is held by the taxpayer at 
        the beginning of the 60-month period applicable to the taxpayer 
        under subparagraph (A).
            ``(C) Adjusted basis not to exceed adjusted basis at 
        beginning of 60-month period.--The adjusted basis taken into 
        account with respect to any motor carrier operating authority 
        shall not exceed the adjusted basis of such authority as of the 
        beginning of the 60-month period applicable to the taxpayer 
        under subparagraph (A).
        ``(3) Deregulation month.--For purposes of this section, the 
    term `deregulation month' means the month in which the Secretary of 
    the Treasury or his delegate determines that a Federal law has been 
    enacted which deregulates the freight forwarding industry.
    ``(c) Special Rule for Motor Carrier Operating Authority.--In the 
case of a corporation which was incorporated on December 29, 1969, in 
the State of Delaware, notwithstanding any other provision of law, there 
shall be allowed as a deduction for the taxable year of the taxpayer 
beginning in 1980 an amount equal to $2,705,188 for its entire loss due 
to a decline in value of its motor carrier operating authority by reason 
of deregulation.
    ``(d) Application of Section 334(b)(2).--For purposes of subsections 
(a) and (b), the reference to section 334(b)(2) in section 
266(c)(2)(A)(ii) of the Economic Recovery Tax Act of 1981 [section 
266(c)(2)(A)(ii) of Pub. L. 97-34, set out below] shall be a reference 
to such section as in effect before its repeal.
    ``(e) Effective Dates.--
        ``(1) Bus operating authority.--
            ``(A) In general.--Subsection (a) shall apply to taxable 
        years ending after November 18, 1982.
            ``(B) Statute of limitations.--If refund or credit of any 
        overpayment of tax resulting from subsection (a) is prevented at 
        any time on or before the date which is 1 year after the date of 
        the enactment of this Act [Oct. 22, 1986] by the operation of 
        any law or rule of law (including res judicata), refund or 
        credit of such overpayment (to the extent attributable to the 
        application of such subsection) may, notwithstanding such law or 
        rule of law, be made or allowed if claim therefore [sic] is 
        filed on or before the date which is 18 months after such date 
        of enactment.
        ``(2) Freight forwarder operating authority.--Subsection (b) 
    shall apply to taxable years ending after the month preceding the 
    deregulation month.''


             Deduction for Motor Carrier Operating Authority

    Pub. L. 97-34, title II, Sec. 266, Aug. 13, 1981, 95 Stat. 265, as 
amended by Pub. L. 97-424, title V, Sec. 517(a), Jan. 6, 1983, 96 Stat. 
2183; Pub. L. 97-448, title I, Sec. 102(n), Jan. 12, 1983, 96 Stat. 
2374; Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided 
that:
    ``(a) General Rule.--For purposes of chapter 1 of the Internal 
Revenue Code of 1986 [formerly I.R.C. 1954] [this chapter], in computing 
the taxable income of a taxpayer who, on July 1, 1980, held one or more 
motor carrier operating authorities, an amount equal to the aggregate 
adjusted basis of all motor carrier operating authorities held by the 
taxpayer on July 1, 1980, or acquired subsequent thereto pursuant to a 
binding contract in effect on July 1, 1980, shall be allowed as a 
deduction ratably over a period of 60 months. Such 60-month period shall 
begin with the month of July 1980 (or if later, the month in which 
acquired), or at the election of the taxpayer, the first month of the 
taxpayer's first taxable year beginning after July 1, 1980.
    ``(b) Definition of Motor Carrier Operating Authority.--For purposes 
of this section, the term `motor carrier operating authority' means a 
certificate or permit held by a motor common or contract carrier of 
property and issued pursuant to subchapter II of chapter 109 of title 49 
of the United States Code.
    ``(c) Special Rules.--
        ``(1) Adjusted basis.--For purposes of the Internal Revenue Code 
    of 1986, proper adjustments shall be made in the adjusted basis of 
    any motor carrier operating authority held by the taxpayer on July 
    1, 1980, for the amounts allowable as a deduction under this 
    section.
        ``(2) Certain stock acquisitions.--
            ``(A) In general.--Under regulations prescribed by the 
        Secretary of the Treasury or his delegate, and at the election 
        of the holder of the authority, in any case in which a 
        corporation--
                ``(i) on or before July 1, 1980 (or after such date 
            pursuant to a binding contract in effect on such date), 
            acquired stock in a corporation which held, directly or 
            indirectly, any motor carrier operating authority at the 
            time of such acquisition, and
                ``(ii) would have been able to allocate to the basis of 
            such authority that portion of the acquiring corporation's 
            cost basis in such stock attributable to such authority if 
            the acquiring corporation had received such authority in the 
            liquidation of the acquired corporation immediately 
            following such acquisition and such allocation would have 
            been proper under section 334(b)(2) of such Code,
    the holder of the authority may, for purposes of this section, 
        allocate a portion of the basis of the acquiring corporation in 
        the stock of the acquired corporation to the basis of such 
        authority in such manner as the Secretary may prescribe in such 
        regulations.
            ``(B) Treatment of certain noncorporate taxpayers.--Under 
        regulations prescribed by the Secretary of the Treasury or his 
        delegate, and at the election of the holder of the authority, in 
        any case in which--
                ``(i) a noncorporate taxpayer or group of noncorporate 
            taxpayers on or before July 1, 1980, acquired in one 
            purchase stock in a corporation which held, directly or 
            indirectly, any motor carrier operating authority at the 
            time of such acquisition, and
                ``(ii) the acquisition referred to in clause (i) would 
            have satisfied the requirements of subparagraph (A) if the 
            stock had been acquired by a corporation,
    then, for purposes of subparagraphs (A) and (C), the noncorporate 
        taxpayer or group of noncorporate taxpayers referred to in 
        clause (i) shall be treated as a corporation. The preceding 
        sentence shall apply only if such noncorporate taxpayer (or 
        group of noncorporate taxpayers) on July 1, 1980, held stock 
        constituting control (within the meaning of section 368(c) of 
        the Internal Revenue Code of 1986) of the corporation holding 
        (directly or indirectly) the motor carrier operating authority.
            ``(C) Adjustment to basis.--Under regulations prescribed by 
        the Secretary of the Treasury or his delegate, proper adjustment 
        shall be made to the basis of the stock or other assets in the 
        manner provided by such regulations to take into account any 
        allocation under subparagraph (A).
        ``(3) Section 381 of the internal revenue code of 1986 to 
    apply.--For purposes of section 381 of the Internal Revenue Code of 
    1986, any item described in this section shall be treated as an item 
    described in subsection (c) of such section 381.
    ``(d) Effective Date.--The provisions of this section shall apply to 
taxable years ending after June 30, 1980.''
    [Section 517(b) of Pub. L. 97-424 provided that: ``The amendment 
made by subsection (a) [adding subsec. (c)(2)(B) of this note] shall 
apply to taxable years ending after July 30, 1980.'']


              Tax Treatment of Certain 1972 Disaster Loans

    Section 2103 of Pub. L. 94-455, as amended by Pub. L. 99-514, 
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
    ``(a) Application of Section.--This section shall apply to any 
individual--
        ``(1) who was allowed a deduction under section 165 of the 
    Internal Revenue Code of 1986 [formerly I.R.C. 1954] (relating to 
    losses) for a loss attributable to a disaster occurring during 
    calendar year 1972 which was determined by the President, under 
    section 102 of the Disaster Relief Act of 1970, to warrant disaster 
    assistance by the Federal Government.
        ``(2) who in connection with such disaster--
            ``(A) received income in the form of cancellation of a 
        disaster loan under section 7 of the Small Business Act [section 
        636 of Title 15, Commerce and Trade] or an emergency loan under 
        subtitle C of the Consolidated Farm and Rural Development Act 
        [section 1961 et seq. of Title 7, Agriculture], or
            ``(B) received income in the form of compensation (not taken 
        into account in computing the amount of the deduction) for such 
        loss in settlement of any claim of the taxpayer against a person 
        for that person's liability in tort for the damage or 
        destruction of that taxpayer's property in connection with the 
        disaster, and
        ``(3) who elects (at such time and in such manner as the 
    Secretary of the Treasury or his delegate may by regulations 
    prescribe) to take the benefits of this section.
    ``(b) Effect of Election.--In the case of any individual to whom 
this section applies--
        ``(1) the tax imposed by chapter 1 of the Internal Revenue Code 
    of 1986 for the taxable year in which the income taken into account 
    is received or accrued which is attributable to such income shall 
    not exceed the additional tax under such chapter which would have 
    been payable for the year in which the deduction for the loss was 
    taken if such deduction had not been taken for such year,
        ``(2) any amount of tax imposed by chapter 1 attributable to the 
    income taken into account which, on October 1, 1975, was unpaid may 
    be paid in 3 equal annual installments (with the first such 
    installment due and payable on April 15, 1977), and
        ``(3) no interest on any deficiency shall be payable for any 
    period before April 16, 1977, to the extent such deficiency is 
    attributable to the receipt of such compensation, and no interest on 
    any installment referred to in paragraph (2) shall be payable for 
    any period before the due date of such installment.
    ``(c) Income Taken Into Account.--For purposes of this section, the 
income taken into account is--
        ``(1) in the case of an individual described in subsection 
    (a)(2)(A), the amount of income (not in excess of $5,000) 
    attributable to the cancellation of a disaster loan under section 7 
    of the Small Business Act or an emergency loan under subtitle C of 
    the Consolidated Farm and Rural Development Act received by reason 
    of the disaster described in subsection (a)(1), or
        ``(2) in the case of an individual described in subsection 
    (a)(2)(B), the amount of compensation (not in excess of $5,000) for 
    the loss in settlement of any claim of the taxpayer against a person 
    for that person's liability in tort for the damage or destruction of 
    that taxpayer's property in connection with the disaster described 
    in subsection (a)(1).
    ``(d) Phaseout Where Adjusted Gross Income Exceeds $15,000.--If for 
the taxable year for which the deduction for the loss was taken the 
individual's adjusted gross income exceeded $15,000, the $5,000 limit 
set forth in paragraph (1) or (2) of subsection (c) (whichever applies) 
shall be reduced by one dollar for each full dollar that such adjusted 
gross income exceeds $15,000. In the case of a married individual filing 
a separate return, the preceding sentence shall be applied by 
substituting `$7,500' for `$15,000'.
    ``(e) Statute of Limitations.--If refund or credit of any 
overpayment of income tax resulting from an election made under this 
section is prevented on the date of the enactment of this Act [Oct. 4, 
1976], or at any time within one year after such date, by the operation 
of any law, or rule of law, refund or credit of such overpayment (to the 
extent attributable to such election) may, nevertheless, be made or 
allowed if claim therefor is filed within one year after such date. If 
the taxpayer makes an election under this section and if assessment of 
any deficiency for any taxable year resulting from such election is 
prevented on the date of the enactment of this Act [Oct. 4, 1976], or at 
any time within one year after such date, by the operation of any law or 
rule of law, such assessment (to the extent attributable to such 
election) may, nevertheless, be made if made within one year after such 
date.''


    Refund or Credit of Overpayment; Time for Filing Claim; Interest

    Section 1(b)(2) of Pub. L. 91-677 authorized refund or credit of 
overpayment attributable to the amendments made by subsec. (a) to 
subsec. (i) of this section if claim therefor was filed after Jan. 12, 
1971, and before July 1, 1971, without interest for any period before 
Jan. 1, 1972.

                  Section Referred to in Other Sections

    This section is referred to in sections 56, 62, 67, 68, 80, 86, 148, 
166, 172, 195, 271, 272, 451, 593, 709, 832, 873, 877, 897, 1042, 1212, 
1351, 1367, 6227, 6405, 6511 of this title.
