Internal Revenue Code:Sec. 165. Losses

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Contents


Location in Internal Revenue Code


     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
       

Statute

    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 Robert T.
      Stafford 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 Robert T. 
    Stafford 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.
 

Sources

    (Aug. 16, 1954, ch. 736, 68A Stat. 49; Pub. L. 85-866, title I,
    Sec. 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, Sec. 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

                             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.
 

Miscellaneous

                                 AMENDMENTS
      2005 - P.L. 109-73
SEC. 402. SUSPENSION OF CERTAIN LIMITATIONS ON PERSONAL CASUALTY LOSSES.
    Paragraphs (1) and (2)(A) of section 165(h) of the Internal Revenue 
Code of 1986 shall not apply to losses described in section 165(c)(3) of 
such Code which arise in the Hurricane Katrina disaster area on or after 
August 25, 2005, and which are attributable to Hurricane 
Katrina. <<NOTE: Applicability.>> In the case of any other losses, 
section 165(h)(2)(A) of such Code shall be applied without regard to the 
losses referred to in the preceding sentence.

      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.
 

References

                   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,
    1022, 1042, 1212, 1351, 1367, 6227, 6405, 6511 of this title.
 

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