Internal Revenue Code:Sec. 67. 2-percent floor on miscellaneous itemized deductions

From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.

From TaxAlmanac

Jump to: navigation, search

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 I - DEFINITION OF GROSS INCOME, ADJUSTED GROSS INCOME, TAXABLE
               INCOME, ETC.
        

Statute

    Sec. 67. 2-percent floor on miscellaneous itemized deductions
 
    (a) General rule
      In the case of an individual, the miscellaneous itemized
    deductions for any taxable year shall be allowed only to the extent
    that the aggregate of such deductions exceeds 2 percent of adjusted
    gross income.
    (b) Miscellaneous itemized deductions
      For purposes of this section, the term ''miscellaneous itemized
    deductions'' means the itemized deductions other than -
        (1) the deduction under section 163 (relating to interest),
        (2) the deduction under section 164 (relating to taxes),
        (3) the deduction under section 165(a) for casualty or theft
      losses described in paragraph (2) or (3) of section 165(c) or for
      losses described in section 165(d),
        (4) the deductions under section 170 (relating to charitable,
      etc., contributions and gifts) and section 642(c) (relating to
      deduction for amounts paid or permanently set aside for a
      charitable purpose),
        (5) the deduction under section 213 (relating to medical,
      dental, etc., expenses),
        (6) any deduction allowable for impairment-related work
      expenses,
        (7) the deduction under section 691(c) (relating to deduction
      for estate tax in case of income in respect of the decedent),
        (8) any deduction allowable in connection with personal
      property used in a short sale,
        (9) the deduction under section 1341 (relating to computation
      of tax where taxpayer restores substantial amount held under
      claim of right),
        (10) the deduction under section 72(b)(3) (relating to
      deduction where annuity payments cease before investment
      recovered),
        (11) the deduction under section 171 (relating to deduction for
      amortizable bond premium), and
        (12) the deduction under section 216 (relating to deductions in
      connection with cooperative housing corporations).
    (c) Disallowance of indirect deduction through pass-thru entity
      (1) In general
        The Secretary shall prescribe regulations which prohibit the
      indirect deduction through pass-thru entities of amounts which
      are not allowable as a deduction if paid or incurred directly by
      an individual and which contain such reporting requirements as
      may be necessary to carry out the purposes of this subsection.
      (2) Treatment of publicly offered regulated investment companies
        (A) In general
          Paragraph (1) shall not apply with respect to any publicly
        offered regulated investment company.
        (B) Publicly offered regulated investment companies
          For purposes of this subsection -
          (i) In general
            The term ''publicly offered regulated investment company''
          means a regulated investment company the shares of which are
          -
              (I) continuously offered pursuant to a public offering
            (within the meaning of section 4 of the Securities Act of
            1933, as amended (15 U.S.C. 77a to 77aa)),
              (II) regularly traded on an established securities
            market, or
              (III) held by or for no fewer than 500 persons at all
            times during the taxable year.
          (ii) Secretary may reduce 500 person requirement
            The Secretary may by regulation decrease the minimum
          shareholder requirement of clause (i)(III) in the case of
          regulated investment companies which experience a loss of
          shareholders through net redemptions of their shares.
      (3) Treatment of certain other entities
        Paragraph (1) shall not apply -
          (A) with respect to cooperatives and real estate investment
        trusts, and
          (B) except as provided in regulations, with respect to
        estates and trusts.
    (d) Impairment-related work expenses
      For purposes of this section, the term ''impairment-related work
    expenses'' means expenses -
        (1) of a handicapped individual (as defined in section
      190(b)(3)) for attendant care services at the individual's place
      of employment and other expenses in connection with such place of
      employment which are necessary for such individual to be able to
      work, and
        (2) with respect to which a deduction is allowable under
      section 162 (determined without regard to this section).
    (e) Determination of adjusted gross income in case of estates and
        trusts
      For purposes of this section, 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 -
        (1) the deductions for costs which are paid or incurred in
      connection with the administration of the estate or trust and
      which would not have been incurred if the property were not held
      in such trust or estate, and
        (2) the deductions allowable under sections 642(b), 651, and
      661,
    shall be treated as allowable in arriving at adjusted gross
    income.  Under regulations, appropriate adjustments shall be made
    in the application of part I of subchapter J of this chapter to
    take into account the provisions of this section.
    (f) Coordination with other limitation
      This section shall be applied before the application of the
    dollar limitation of the second sentence of section 162(a)
    (relating to trade or business expenses).
 

Sources

    (Added Pub. L. 99-514, title I, Sec. 132(a), Oct. 22, 1986, 100
    Stat. 2113; amended Pub. L. 100-647, title I, Sec. 1001(f), title
    IV, Sec. 4011(a), Nov. 10, 1988, 102 Stat. 3351, 3655; Pub. L.
    101-239, title VII, Sec. 7814(f), Dec. 19, 1989, 103 Stat. 2414;
    Pub. L. 103-66, title XIII, Sec. 13213(c)(2), Aug. 10, 1993, 107
    Stat. 474; Pub. L. 105-277, div.  J, title IV, Sec. 4004(b)(1),
    Oct. 21, 1998, 112 Stat. 2681-910; Pub. L. 106-554, Sec. 1(a)(7)
    (title III, Sec. 319(2)), Dec. 21, 2000, 114 Stat. 2763,
    2763A-646.)
 

References in Text

                             REFERENCES IN TEXT
      Section 4 of the Securities Act of 1933, referred to in subsec.
    (c)(2)(B)(i)(I), is classified to section 77d of Title 15, Commerce
    and Trade.
 

Miscellaneous

                                 AMENDMENTS
      2000 - Subsec. (f). Pub. L. 106-554 substituted ''the second
    sentence'' for ''the last sentence''.
      1998 - Subsec. (b)(3). Pub. L. 105-277 substituted ''for casualty
    or theft losses described in paragraph (2) or (3) of section 165(c)
    or for losses described in section 165(d)'' for ''for losses
    described in subsection (c)(3) or (d) of section 165''.
      1993 - Subsec. (b)(6) to (13). Pub. L. 103-66 redesignated pars.
    (7) to (13) as (6) to (12), respectively, and struck out former
    par. (6) which read as follows: ''the deduction under section 217
    (relating to moving expenses),''.
      1989 - Subsec. (c)(4). Pub. L. 101-239 struck out par. (4) which
    read as follows: ''Termination. - This subsection shall not apply
    to any taxable year beginning after December 31, 1989.''
      1988 - Subsec. (b)(4). Pub. L. 100-647, Sec. 1001(f)(2),
    substituted ''deductions'' for ''deduction'' and inserted before
    comma at end ''and section 642(c) (relating to deduction for
    amounts paid or permanently set aside for a charitable purpose)''.
      Subsec. (c). Pub. L. 100-647, Sec. 4011(a), amended subsec. (c)
    generally.  Prior to amendment subsec. (c) read as follows: ''The
    Secretary shall prescribe regulations which prohibit the indirect
    deduction through pass-thru entities of amounts which are not
    allowable as a deduction if paid or incurred directly by an
    individual and which contain such reporting requirements as may be
    necessary to carry out the purposes of this subsection.  The
    preceding sentence shall not apply -
        ''(1) with respect to cooperatives and real estate investment
      trusts, and
        ''(2) except as provided in regulations, with respect to
      estates and trusts.''
      Pub. L. 100-647, Sec. 1001(f)(4), amended last sentence
    generally.  Prior to amendment, last sentence read as follows:
    ''The preceding sentence shall not apply with respect to estates,
    trusts, cooperatives, and real estate investment trusts.''
      Subsec. (e). Pub. L. 100-647, Sec. 1001(f)(3), amended subsec.
    (e) generally.  Prior to amendment, subsec. (e) read as follows:
    ''For purposes of this section, 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 which are
    paid or incurred in connection with the administration of the
    estate or trust and would not have been incurred if the property
    were not held in such trust or estate shall be treated as allowable
    in arriving at adjusted gross income.''
      Subsec. (f). Pub. L. 100-647, Sec. 1001(f)(1), added subsec. (f).
                      EFFECTIVE DATE OF 1998 AMENDMENT
      Pub. L. 105-277, div.  J, title IV, Sec. 4004(c)(2), Oct. 21,
    1998, 112 Stat. 2681-911, provided that: ''The amendment made by
    subsection (b)(1) (amending this section) shall apply to taxable
    years beginning after December 31, 1986.''
                      EFFECTIVE DATE OF 1993 AMENDMENT
      Amendment by Pub. L. 103-66 applicable to expenses incurred after
    Dec. 31, 1993, see section 13213(e) of Pub. L. 103-66 set out as a
    note under section 62 of this title.
                      EFFECTIVE DATE OF 1989 AMENDMENT
      Amendment by Pub. L. 101-239 effective, except as otherwise
    provided, as if included in the provision of the Technical and
    Miscellaneous Revenue Act of 1988, Pub. L. 100-647, to which such
    amendment relates, see section 7817 of Pub. L. 101-239, set out as
    a note under section 1 of this title.
                      EFFECTIVE DATE OF 1988 AMENDMENT
      Amendment by section 1001(f) of 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.
      Section 4011(b) of Pub. L. 100-647 provided that: ''The amendment
    made by subsection (a) (amending this section) shall apply to
    taxable years beginning after December 31, 1987.''
                               EFFECTIVE DATE
      Section applicable to taxable years beginning after Dec. 31,
    1986, see section 151(a) of Pub. L. 99-514, set out as an Effective
    Date of 1986 Amendment note under section 1 of this title.
     1-YEAR DELAY IN TREATMENT OF PUBLICLY OFFERED REGULATED INVESTMENT
                      COMPANIES UNDER 2-PERCENT FLOOR
      Pub. L. 100-203, title X, Sec. 10104(a), Dec. 22, 1987, 101 Stat.
    1330-386, provided that:
      ''(1) General rule. - Section 67(c) of the Internal Revenue Code
    of 1986 to the extent it relates to indirect deductions through a
    publicly offered regulated investment company shall apply only to
    taxable years beginning after December 31, 1987.
      ''(2) Publicly offered regulated investment company defined. -
    For purposes of this subsection -
        ''(A) In general. - The term 'publicly offered regulated
      investment company' means a regulated investment company the
      shares of which are -
          ''(i) continuously offered pursuant to a public offering
        (within the meaning of section 4 of the Securities Act of 1933,
        as amended (15 U.S.C. 77a to 77aa) (15 U.S.C. 77d)),
          ''(ii) regularly traded on an established securities market,
        or
          ''(iii) held by or for no fewer than 500 persons at all times
        during the taxable year.
        ''(B) Secretary may reduce 500 person requirement. - The
      Secretary of the Treasury or his delegate may by regulation
      decrease the minimum shareholder requirement of subparagraph
      (A)(iii) in the case of regulated investment companies which
      experience a loss of shareholders through net redemptions of
      their shares.''
 

References

                   SECTION REFERRED TO IN OTHER SECTIONS
      This section is referred to in sections 56, 642, 772, 773, 6654
    of this title.
 

Personal tools