102 STAT. 3520	PUBLIC LAW 100-647—NOV. 10,1988
For purposes of subparagraph (C), the term 'related person' has
the meaning given such term by section 954(dX3) determined by
substituting 'foreign corporation' for 'controlled foreign corpora-
tion* each place it appears in section 954(d)(3)."
(B) The paragraph heading for paragraph (2) of section 1296(b)
of the 1986 Code is amended by striking out "exception for
certain banks and insurance companies" and inserting in
lieu thereof "exceptions".
(27)	Subsection (a) of section 1296 of the 1986 Code is amended
by adding at the end thereof the following new sentences:
"A foreign corporation may elect to have the determination under
paragraph (2) based on the adjusted bases of its assets in lieu of their
value. Such an election, once made, may be revoked only with the
consent of the Secretary."
(28)	Paragraph (2) of section 1291(d) of the 1986 Code is
amended by striking out subparagraph (B) and inserting in lieu
thereof the following:
"(B) additional election for shareholder of con-
trolled FOREIGN CORPORATIONS.—
"(i) IN GENERAL.—If—
"(I) a passive foreign investment company be-
comes a qualified electing fund for a taxable year
which begins after December 31,1986,
"(II) the taxpayer holds stock in such company
on the first day of such taxable year, and
"(III) such company is a controlled foreign cor-
poration (as defined in section 957(a)),
the taxpayer may elect to include in gross income as a
dividend received on such first day an amount equal to
the portion of the post-1986 earnings and profits of such
company attributable (under regulations prescribed by
the Secretary) to the stock in such company held by the
taxpayer on such first day. The amount treated as a
dividend under the preceding sentence shall be treated
as an excess distribution and shall be allocated under
subsection (aXIXA) only to days during periods taken
into account in determining the post-1986 earnings and
profits so attributable.
"(ii) POST-1986 EARNINGS AND PROFITS.—For purposes
of clause (i), the term 'post-1986 earnings and profits'
means earnings and profits which were accumulated in
taxable years of such company beginning after Decem-
ber 31,1986, and during the period or periods the stock
was held by the taxpayer while the company was a
passive foreign investment company.
"(iii) coordination with section 959(e).—For pur-
poses of section 959(e), any amount included in gross
income under this subparagraph shall be treated as
included in gross income under section 1248(a).
"(C) adjustments.—In the case of any stock to which
subparagraph (A) or (B) applies—
"(i) the adjusted basis of such stock shall be increased
by the gain recognized under subparagraph (A) or the
amount treated as a dividend under subparagraph (B),
as the case may be, and