
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC267]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
               Subchapter B--Computation of Taxable Income
 
                      PART IX--ITEMS NOT DEDUCTIBLE
 
Sec. 267. Losses, expenses, and interest with respect to 
        transactions between related taxpayers
        

(a) In general

                 (1) Deduction for losses disallowed

        No deduction shall be allowed in respect of any loss from the 
    sale or exchange of property, directly or indirectly, between 
    persons specified in any of the paragraphs of subsection (b). The 
    preceding sentence shall not apply to any loss of the distributing 
    corporation (or the distributee) in the case of a distribution in 
    complete liquidation.

    (2) Matching of deduction and payee income item in the case 
                          of expenses and interest

        If--
            (A) by reason of the method of accounting of the person to 
        whom the payment is to be made, the amount thereof is not 
        (unless paid) includible in the gross income of such person, and
            (B) at the close of the taxable year of the taxpayer for 
        which (but for this paragraph) the amount would be deductible 
        under this chapter, both the taxpayer and the person to whom the 
        payment is to be made are persons specified in any of the 
        paragraphs of subsection (b),

    then any deduction allowable under this chapter in respect of such 
    amount shall be allowable as of the day as of which such amount is 
    includible in the gross income of the person to whom the payment is 
    made (or, if later, as of the day on which it would be so allowable 
    but for this paragraph). For purposes of this paragraph, in the case 
    of a personal service corporation (within the meaning of section 
    441(i)(2)), such corporation and any employee-owner (within the 
    meaning of section 269A(b)(2), as modified by section 441(i)(2)) 
    shall be treated as persons specified in subsection (b).

                   (3) Payments to foreign persons

        The Secretary shall by regulations apply the matching principle 
    of paragraph (2) in cases in which the person to whom the payment is 
    to be made is not a United States person.

(b) Relationships

    The persons referred to in subsection (a) are:
        (1) Members of a family, as defined in subsection (c)(4);
        (2) An individual and a corporation more than 50 percent in 
    value of the outstanding stock of which is owned, directly or 
    indirectly, by or for such individual;
        (3) Two corporations which are members of the same controlled 
    group (as defined in subsection (f));
        (4) A grantor and a fiduciary of any trust;
        (5) A fiduciary of a trust and a fiduciary of another trust, if 
    the same person is a grantor of both trusts;
        (6) A fiduciary of a trust and a beneficiary of such trust;
        (7) A fiduciary of a trust and a beneficiary of another trust, 
    if the same person is a grantor of both trusts;
        (8) A fiduciary of a trust and a corporation more than 50 
    percent in value of the outstanding stock of which is owned, 
    directly or indirectly, by or for the trust or by or for a person 
    who is a grantor of the trust;
        (9) A person and an organization to which section 501 (relating 
    to certain educational and charitable organizations which are exempt 
    from tax) applies and which is controlled directly or indirectly by 
    such person or (if such person is an individual) by members of the 
    family of such individual;
        (10) A corporation and a partnership if the same persons own--
            (A) more than 50 percent in value of the outstanding stock 
        of the corporation, and
            (B) more than 50 percent of the capital interest, or the 
        profits interest, in the partnership;

        (11) An S corporation and another S corporation if the same 
    persons own more than 50 percent in value of the outstanding stock 
    of each corporation;
        (12) An S corporation and a C corporation, if the same persons 
    own more than 50 percent in value of the outstanding stock of each 
    corporation; or
        (13) Except in the case of a sale or exchange in satisfaction of 
    a pecuniary bequest, an executor of an estate and a beneficiary of 
    such estate.

(c) Constructive ownership of stock

    For purposes of determining, in applying subsection (b), the 
ownership of stock--
        (1) Stock owned, directly or indirectly, by or for a 
    corporation, partnership, estate, or trust shall be considered as 
    being owned proportionately by or for its shareholders, partners, or 
    beneficiaries;
        (2) An individual shall be considered as owning the stock owned, 
    directly or indirectly, by or for his family;
        (3) An individual owning (otherwise than by the application of 
    paragraph (2)) any stock in a corporation shall be considered as 
    owning the stock owned, directly or indirectly, by or for his 
    partner;
        (4) The family of an individual shall include only his brothers 
    and sisters (whether by the whole or half blood), spouse, ancestors, 
    and lineal descendants; and
        (5) Stock constructively owned by a person by reason of the 
    application of paragraph (1) shall, for the purpose of applying 
    paragraph (1), (2), or (3), be treated as actually owned by such 
    person, but stock constructively owned by an individual by reason of 
    the application of paragraph (2) or (3) shall not be treated as 
    owned by him for the purpose of again applying either of such 
    paragraphs in order to make another the constructive owner of such 
    stock.

(d) Amount of gain where loss previously disallowed

    If--
        (1) in the case of a sale or exchange of property to the 
    taxpayer a loss sustained by the transferor is not allowable to the 
    transferor as a deduction by reason of subsection (a)(1) (or by 
    reason of section 24(b) of the Internal Revenue Code of 1939); and
        (2) after December 31, 1953, the taxpayer sells or otherwise 
    disposes of such property (or of other property the basis of which 
    in his hands is determined directly or indirectly by reference to 
    such property) at a gain,

then such gain shall be recognized only to the extent that it exceeds so 
much of such loss as is properly allocable to the property sold or 
otherwise disposed of by the taxpayer. This subsection applies with 
respect to taxable years ending after December 31, 1953. This subsection 
shall not apply if the loss sustained by the transferor is not allowable 
to the transferor as a deduction by reason of section 1091 (relating to 
wash sales) or by reason of section 118 of the Internal Revenue Code of 
1939.

(e) Special rules for pass-thru entities

                           (1) In general

        In the case of any amount paid or incurred by, to, or on behalf 
    of, a pass-thru entity, for purposes of applying subsection (a)(2)--
            (A) such entity,
            (B) in the case of--
                (i) a partnership, any person who owns (directly or 
            indirectly) any capital interest or profits interest of such 
            partnership, or
                (ii) an S corporation, any person who owns (directly or 
            indirectly) any of the stock of such corporation,

            (C) any person who owns (directly or indirectly) any capital 
        interest or profits interest of a partnership in which such 
        entity owns (directly or indirectly) any capital interest or 
        profits interest, and
            (D) any person related (within the meaning of subsection (b) 
        of this section or section 707(b)(1)) to a person described in 
        subparagraph (B) or (C),

    shall be treated as persons specified in a paragraph of subsection 
    (b). Subparagraph (C) shall apply to a transaction only if such 
    transaction is related either to the operations of the partnership 
    described in such subparagraph or to an interest in such 
    partnership.

                        (2) Pass-thru entity

        For purposes of this section, the term ``pass-thru entity'' 
    means--
            (A) a partnership, and
            (B) an S corporation.

       (3) Constructive ownership in the case of partnerships

        For purposes of determining ownership of a capital interest or 
    profits interest of a partnership, the principles of subsection (c) 
    shall apply, except that--
            (A) paragraph (3) of subsection (c) shall not apply, and
            (B) interests owned (directly or indirectly) by or for a C 
        corporation shall be considered as owned by or for any 
        shareholder only if such shareholder owns (directly or 
        indirectly) 5 percent or more in value of the stock of such 
        corporation.

      (4) Subsection (a)(2) not to apply to certain guaranteed 
                          payments of partnerships

        In the case of any amount paid or incurred by a partnership, 
    subsection (a)(2) shall not apply to the extent that section 707(c) 
    applies to such amount.

         (5) Exception for certain expenses and interest of 
                   partnerships owning low-income housing

        (A) In general

            This subsection shall not apply with respect to qualified 
        expenses and interest paid or incurred by a partnership owning 
        low-income housing to--
                (i) any qualified 5-percent or less partner of such 
            partnership, or
                (ii) any person related (within the meaning of 
            subsection (b) of this section or section 707(b)(1)) to any 
            qualified 5-percent or less partner of such partnership.

        (B) Qualified 5-percent or less partner

            For purposes of this paragraph, the term ``qualified 5-
        percent or less partner'' means any partner who has (directly or 
        indirectly) an interest of 5 percent or less in the aggregate 
        capital and profits interests of the partnership but only if--
                (i) such partner owned the low-income housing at all 
            times during the 2-year period ending on the date such 
            housing was transferred to the partnership, or
                (ii) such partnership acquired the low-income housing 
            pursuant to a purchase, assignment, or other transfer from 
            the Department of Housing and Urban Development or any State 
            or local housing authority.

        For purposes of the preceding sentence, a partner shall be 
        treated as holding any interest in the partnership which is held 
        (directly or indirectly) by any person related (within the 
        meaning of subsection (b) of this section or section 707(b)(1)) 
        to such partner.

        (C) Qualified expenses and interest

            For purpose of this paragraph, the term ``qualified expenses 
        and interest'' means any expense or interest incurred by the 
        partnership with respect to low-income housing held by the 
        partnership but--
                (i) only if the amount of such expense or interest (as 
            the case may be) is unconditionally required to be paid by 
            the partnership not later than 10 years after the date such 
            amount was incurred, and
                (ii) in the case of such interest, only if such interest 
            is incurred at an annual rate not in excess of 12 percent.

        (D) Low-income housing

            For purposes of this paragraph, the term ``low-income 
        housing'' means--
                (i) any interest in property described in clause (i), 
            (ii), (iii), or (iv) of section 1250(a)(1)(B), and
                (ii) any interest in a partnership owning such property.

                         (6) Cross reference

            For additional rules relating to partnerships, see section 
        707(b).

(f) Controlled group defined; special rules applicable to controlled 
        groups

                    (1) Controlled group defined

        For purposes of this section, the term ``controlled group'' has 
    the meaning given to such term by section 1563(a), except that--
            (A) ``more than 50 percent'' shall be substituted for ``at 
        least 80 percent'' each place it appears in section 1563(a), and
            (B) the determination shall be made without regard to 
        subsections (a)(4) and (e)(3)(C) of section 1563.

       (2) Deferral (rather than denial) of loss from sale or 
                          exchange between members

        In the case of any loss from the sale or exchange of property 
    which is between members of the same controlled group and to which 
    subsection (a)(1) applies (determined without regard to this 
    paragraph but with regard to paragraph (3))--
            (A) subsections (a)(1) and (d) shall not apply to such loss, 
        but
            (B) such loss shall be deferred until the property is 
        transferred outside such controlled group and there would be 
        recognition of loss under consolidated return principles or 
        until such other time as may be prescribed in regulations.

        (3) Loss deferral rules not to apply in certain cases

        (A) Transfer to DISC

            For purposes of applying subsection (a)(1), the term 
        ``controlled group'' shall not include a DISC.

        (B) Certain sales of inventory

            Except to the extent provided in regulations prescribed by 
        the Secretary, subsection (a)(1) shall not apply to the sale or 
        exchange of property between members of the same controlled 
        group (or persons described in subsection (b)(10)) if--
                (i) such property in the hands of the transferor is 
            property described in section 1221(a)(1),
                (ii) such sale or exchange is in the ordinary course of 
            the transferor's trade or business,
                (iii) such property in the hands of the transferee is 
            property described in section 1221(a)(1), and
                (iv) the transferee or the transferor is a foreign 
            corporation.

        (C) Certain foreign currency losses

            To the extent provided in regulations, subsection (a)(1) 
        shall not apply to any loss sustained by a member of a 
        controlled group on the repayment of a loan made to another 
        member of such group if such loan is payable in a foreign 
        currency or is denominated in such a currency and such loss is 
        attributable to a reduction in value of such foreign currency.

    (4) Determination of relationship resulting in disallowance 
                  of loss, for purposes of other provisions

        For purposes of any other section of this title which refers to 
    a relationship which would result in a disallowance of losses under 
    this section, deferral under paragraph (2) shall be treated as 
    disallowance.

(g) Coordination with section 1041

    Subsection (a)(1) shall not apply to any transfer described in 
section 1041(a) (relating to transfers of property between spouses or 
incident to divorce).

(Aug. 16, 1954, ch. 736, 68A Stat. 78; Pub. L. 95-628, Sec. 2(a), Nov. 
10, 1978, 92 Stat. 3627; Pub. L. 97-354, Sec. 3(h), Oct. 19, 1982, 96 
Stat. 1689; Pub. L. 98-369, div. A, title I, Sec. 174(a)-(b)(4), title 
VII, Sec. 721(s), July 18, 1984, 98 Stat. 704-707, 970; Pub. L. 99-514, 
title VIII, Secs. 803(b)(5), 806(c)(2), title XVIII, Secs. 1812(c)(1), 
(2), (3)(C), (4)(A), 1842(a), Oct. 22, 1986, 100 Stat. 2356, 2364, 2834, 
2835, 2852; Pub. L. 100-647, title I, Secs. 1006(e)(9), 1008(e)(6), Nov. 
10, 1988, 102 Stat. 3401, 3441; Pub. L. 105-34, title XIII, 
Sec. 1308(a), title XVI, Sec. 1604(e)(1), Aug. 5, 1997, 111 Stat. 1041, 
1098; Pub. L. 106-170, title V, Sec. 532(c)(2)(C), Dec. 17, 1999, 113 
Stat. 1930.)

                       References in Text

    Sections 24(b) and 118 of the Internal Revenue Code of 1939, 
referred to in subsec. (d), were classified to sections 24(b) and 118 of 
former Title 26, Internal Revenue Code. Sections 24(b) and 118 were 
repealed by section 7851(a)(1) of this title. For table of comparisons 
of the 1939 Code to the 1986 Code [formerly I.R.C. 1954], see Table I 
preceding section 1 of this title. See, also, section 7851(e) of this 
title for provision that references in the 1986 Code to a provision of 
the 1939 Code, not then applicable, shall be deemed a reference to the 
corresponding provision of the 1986 Code, which is then applicable.


                               Amendments

    1999--Subsec. (f)(3)(B)(i), (iii). Pub. L. 106-170 substituted 
``1221(a)(1)'' for ``1221(1)''.
    1997--Subsec. (b)(13). Pub. L. 105-34, Sec. 1308(a), added par. 
(13).
    Subsec. (f)(4). Pub. L. 105-34, Sec. 1604(e)(1), added par. (4).
    1988--Subsec. (a)(1). Pub. L. 100-647, Sec. 1006(e)(9), struck out 
``(other than a loss in case of a distribution in corporate 
liquidation)'' after ``exchange of property'' and inserted at end ``The 
preceding sentence shall not apply to any loss of the distributing 
corporation (or the distributee) in the case of a distribution in 
complete liquidation.''
    Subsec. (a)(2). Pub. L. 100-647, Sec. 1008(e)(6), made technical 
correction to directory language of Pub. L. 99-514, Sec. 806(c)(2), see 
1986 Amendment note below.
    1986--Subsec. (a)(2). Pub. L. 99-514, Sec. 806(c)(2), as amended by 
Pub. L. 100-647, Sec. 1008(e)(6), inserted at end ``For purposes of this 
paragraph, in the case of a personal service corporation (within the 
meaning of section 441(i)(2)), such corporation and any employee-owner 
(within the meaning of section 269A(b)(2), as modified by section 
441(i)(2)) shall be treated as persons specified in subsection (b).''
    Subsec. (a)(3). Pub. L. 99-514, Sec. 1812(c)(1), added par. (3).
    Subsec. (b)(12). Pub. L. 99-514, Sec. 1812(c)(4)(A), substituted 
``same persons own'' for ``same persons owns''.
    Subsec. (e)(5)(D). Pub. L. 99-514, Sec. 803(b)(5), substituted in 
cl. (i) ``interest in property described in clause (i), (ii), (iii), or 
(iv) of section 1250(a)(1)(B)'' for ``interest in low-income housing (as 
defined in paragraph (5) of section 189(e))'' and in cl. (ii) ``such 
property'' for ``low-income housing (as so defined)''.
    Subsec. (e)(6). Pub. L. 99-514, Sec. 1812(c)(3)(C), added par. (6).
    Subsec. (f)(3)(B). Pub. L. 99-514, Sec. 1812(c)(2), inserted ``(or 
persons described in subsection (b)(10))''.
    Subsec. (g). Pub. L. 99-514, Sec. 1842(a), added subsec. (g).
    1984--Subsec. (a). Pub. L. 98-369, Sec. 174(a), amended subsec. (a) 
generally, substituting ``In general'' for ``Deduction disallowed'' in 
heading, ``Deduction for losses disallowed'' for ``Losses'' in par. (1) 
heading, and provisions dealing with matching of deduction and payee 
income item in the case of expenses and interest for provisions dealing 
with unpaid expenses and interest in par. (2).
    Subsec. (b)(3). Pub. L. 98-369, Sec. 174(b)(2)(A), substituted ``Two 
corporations which are members of the same controlled group (as defined 
in subsection (f))'' for ``Two corporations more than 50 percent in 
value of the outstanding stock of each of which is owned, directly or 
indirectly, by or for the same individual, if either one of such 
corporations, with respect to the taxable year of the corporation 
preceding the date of the sale or exchange was, under the law applicable 
to such taxable year, a personal holding company or a foreign personal 
holding company''.
    Subsec. (b)(10). Pub. L. 98-369, Sec. 174(b)(3), substituted ``A 
corporation'' for ``An S corporation'' in introductory provisions and 
``the corporation'' for ``the S corporation'' in subpar. (A).
    Subsec. (b)(12). Pub. L. 98-369, Sec. 174(b)(4), substituted ``the 
same persons'' for ``the same individual''.
    Subsec. (e). Pub. L. 98-369, Sec. 174(b)(1), added subsec. (e).
    Pub. L. 98-369, Sec. 174(a)(2), struck out subsec. (e) which 
provided that for purposes of subsection (a)(2) where the last day of 
the 2\1/2\ month period falls on Saturday, Sunday, or a legal holiday, 
such last day be treated as falling on the next succeeding day which is 
not a Saturday, Sunday, or a legal holiday, and the determination of 
what constitutes a legal holiday be made under section 7503 with respect 
to the payor's return of tax under this chapter for the preceding 
taxable year.
    Subsec. (f). Pub. L. 98-369, Sec. 174(b)(2)(B), added subsec. (f).
    Pub. L. 98-369, Sec. 174(b)(1), struck out subsec. (f) which related 
to special rules for unpaid expenses and interest of S corporations and 
treatment under such provisions of certain shareholders, etc., as 
related persons.
    Pub. L. 98-369, Sec. 721(s), in closing provision of par. (1) 
substituted ``then any deduction allowable under such sections in 
respect of such amount shall be allowable as of the day as of which such 
payment is includible in the gross income of the person to whom the 
payment is made (or, if later, as of the day on which it would be so 
allowable but for this paragraph)'' for ``then no deduction shall be 
allowed in respect of expenses otherwise deductible under section 162 or 
212, or of interest otherwise deductible under section 163, before the 
day as of which the amount thereof is includible in the gross income of 
the person to whom the payment is made''.
    1982--Subsec. (b)(10) to (12). Pub. L. 97-354, Sec. 3(h)(1), (3), 
added pars. (10) to (12).
    Subsec. (f). Pub. L. 97-354, Sec. 3(h)(2), added subsec. (f).
    1978--Subsec. (e). Pub. L. 95-628 added subsec. (e).


                    Effective Date of 1999 Amendment

    Amendment by Pub. L. 106-170 applicable to any instrument held, 
acquired, or entered into, any transaction entered into, and supplies 
held or acquired on or after Dec. 17, 1999, see section 532(d) of Pub. 
L. 106-170, set out as a note under section 170 of this title.


                    Effective Date of 1997 Amendment

    Section 1308(c) of Pub. L. 105-34 provided that: ``The amendments 
made by this section [amending this section and section 1239 of this 
title] shall apply to taxable years beginning after the date of the 
enactment of this Act [Aug. 5, 1997].''
    Section 1604(e)(2) of Pub. L. 105-34 provided that: ``The amendment 
made by paragraph (1) [amending this section] shall take effect as if 
included in section 174(b) of the Tax Reform Act of 1984 [Pub. L. 98-
369].''


                    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

    If any interest costs incurred after Dec. 31, 1986, are attributable 
to costs incurred before Jan. 1, 1987, the amendment by section 
803(b)(5) of Pub. L. 99-514 is applicable to such interest costs only to 
the extent such interest costs are attributable to costs which were 
required to be capitalized under section 263 of the Internal Revenue 
Code of 1954 and which would have been taken into account in applying 
section 189 of the Internal Revenue Code of 1954 (as in effect before 
its repeal by section 803 of Pub. L. 99-514) or, if applicable, section 
266 of such Code, see section 7831(d)(2) of Pub. L. 101-239, set out as 
an Effective Date note under section 263A of this title.
    Amendment by section 803(b)(5) of Pub. L. 99-514 applicable, except 
as otherwise provided, to costs incurred after Dec. 31, 1986, in taxable 
years ending after that date, see section 803(d) of Pub. L. 99-514, set 
out as a note under section 263A of this title.
    Amendment by section 806(c)(2) of Pub. L. 99-514 applicable to 
taxable years beginning after Dec. 31, 1986, with special provisions 
applicable to taxpayers who are required to change their accounting 
periods, see section 806(e) of Pub. L. 99-514, set out as a note under 
section 1378 of this title.
    Amendment by sections 1812(c)(1), (2), (3)(C), (4)(A) and 1842(a) of 
Pub. L. 99-514 effective, except as otherwise provided, as if included 
in the provisions of the Tax Reform Act of 1984, Pub. L. 98-369, div. A, 
to which such amendment relates, see section 1881 of Pub. L. 99-514, set 
out as a note under section 48 of this title.


                    Effective Date of 1984 Amendment

    Section 174(c) of Pub. L. 98-369, as amended by Pub. L. 99-514, 
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
    ``(1) Subsections (a) and (b)(1).--The amendments made by 
subsections (a) and (b)(1) [amending this section] shall apply to 
amounts allowable as deductions under chapter 1 of the Internal Revenue 
Code of 1986 [formerly I.R.C. 1954] for taxable years beginning after 
December 31, 1983. For purposes of the preceding sentence, the 
allowability of a deduction shall be determined without regard to any 
disallowance or postponement of deductions under section 267 of such 
Code.
    ``(2) Subsection (b) (other than paragraph (1)).--
        ``(A) In general.--Except as provided in subparagraph (B), the 
    amendments made by subsection (b) (other than paragraph (1) thereof) 
    [amending this section and sections 170, 368, 514, and 1235 of this 
    title] shall apply to transactions after December 31, 1983, in 
    taxable years ending after such date.
        ``(B) Exception for transfers to foreign corporations on or 
    before march 1, 1984.--The amendments made by subsection (b)(2) 
    [amending this section] shall not apply to property transferred to a 
    foreign corporation on or before March 1, 1984.
    ``(3) Exception for existing indebtedness, etc.--
        ``(A) In general.--The amendments made by this section [amending 
    this section and sections 170, 368, 514, and 1235 of this title] 
    shall not apply to any amount paid or incurred--
            ``(i) on indebtedness incurred on or before September 29, 
        1983, or
            ``(ii) pursuant to a contract which was binding on September 
        29, 1983, and at all times thereafter before the amount is paid 
        or incurred.
        ``(B) Treatment of renegotiations, extensions, etc.--If any 
    indebtedness (or contract described in subparagraph (A)) is 
    renegotiated, extended, renewed, or revised after September 29, 
    1983, subparagraph (A) shall not apply to any amount paid or 
    incurred on such indebtedness (or pursuant to such contract) after 
    the date of such renegotiation, extension, renewal, or revision.''
    Amendment by section 721(s) of Pub. L. 98-369 effective as if 
included in the Subchapter S Revision Act of 1982, Pub. L. 97-354, see 
section 721(y)(1) of Pub. L. 98-369, set out as a note under section 
1361 of this title.


                    Effective Date of 1982 Amendment

    Amendment by Pub. L. 97-354 applicable to taxable years beginning 
after Dec. 31, 1982, see section 6(a) of Pub. L. 97-354, set out as an 
Effective Date note under section 1361 of this title.


                    Effective Date of 1978 Amendment

    Section 2(b) of Pub. L. 95-628 provided that: ``The amendment made 
by subsection (a) [amending this section] shall apply with respect to 
payments made after the date of the enactment of this Act [Nov. 10, 
1978].''


              Construction of Section 806 of Pub. L. 99-514

    Nothing in section 806 of Pub. L. 99-514 [amending this section] or 
in any legislative history relating thereto to be construed as requiring 
the Secretary of the Treasury or his delegate to permit an automatic 
change of a taxable year, see section 1008(e)(9) of Pub. L. 100-647, set 
out as a note under section 1378 of this title.


           Plan Amendments Not Required Until January 1, 1989

    For provisions directing that if any amendments made by subtitle A 
or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or title XVIII 
[Secs. 1800-1899A] of Pub. L. 99-514 require an amendment to any plan, 
such plan amendment shall not be required to be made before the first 
plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. 
L. 99-514, as amended, set out as a note under section 401 of this 
title.


                   Exception for Certain Indebtedness

    Section 1812(c)(5) of Pub. L. 99-514 provided that: ``Clause (i) of 
section 174(c)(3)(A) of the Tax Reform Act of 1984 [section 
174(c)(3)(A)(i) of Pub. L. 98-369, set out as a note above] shall be 
applied by substituting `December 31, 1983' for `September 29, 1983' in 
the case of indebtedness which matures on January 1, 1999, the payments 
on which from January 1989 through November 1993 equal U/L plus $77,600, 
the payments on which from December 1993 to maturity equal U/L plus 
$50,100, and which accrued interest at 13.75 percent through December 
31, 1989.''

                  Section Referred to in Other Sections

    This section is referred to in sections 40, 42, 45D, 51, 56, 108, 
121, 144, 147, 163, 165, 167, 170, 179, 179A, 197, 213, 221, 263A, 274, 
280A, 280F, 304, 336, 341, 351, 355, 409, 447, 453, 464, 465, 468B, 469, 
475, 483, 503, 514, 613A, 631, 643, 664, 685, 707, 860L, 864, 871, 936, 
988, 1031, 1033, 1060, 1202, 1235, 1237, 1239, 1259, 1397, 1400B, 1400C, 
2057, 4946, 4951, 4975, 5881, 6038, 6038A, 6111, 6166, 7612 of this 
title; title 29 sections 1108, 1384.
