102 STAT. 3424 PUBLIC LAW 100-647—NOV. 10, 1988

transfer is through an agent for a disqualified organization,
such tax shall be paid by such agent.

"(4) TRANSFEREE FURNISHES AFFIDAVIT.—The person (other-
wise liable for any tax imposed by paragraph (D) shall be
relieved of liability for the tax imposed by paragraph (1) with
respect to any transfer if—

"(A) the transferee furnishes to such person an affidavit
that the transferee is not a disqualified organization, and
"(B) as of the time of the transfer, such person does not
have actual knowledge that such affidavit is false.
"(5) DISQUALIFIED ORGANIZATION.—For purposes of this sec-
tion, the term 'disqualified organization* means—

"(A) the United States, any State or political subdivision
thereof, any foreign government, any international
organization, or any agency or instrumentality of any of the
foregoing,

"(B) any organization (other than a cooperative described
in section 521) which is exempt from tax imposed by this
chapter unless such organization is subject to the tax im-
posed by section 511, and

"(C) any organization described in section 1381(a)(2)(C).
For purposes of subparagraph (A), the rules of section
168(h)(2)(D) (relating to treatment of certain taxable instrumen-
talities) shall apply; except that, in the case of the Federal
Home Loan Mortgage Corporation, clause (ii) of such section
shall not apply.
"(6) TREATMENT OF PASS-THRU ENTITIES.—

"(A) IMPOSITION OF TAX.—If, at any time during any
taxable year of a pass-thru entity, a disqualified organiza-
tion is the record holder of an interest in such entity, there
is hereby imposed on such entity for such taxable year a tax
equal to the product of—

"(i) the amount of excess inclusions for such taxable
year allowable to the interest held by such disqualified
organization, multiplied by

'(ii) the highest rate of tax specified in section
tt H(bXD.

"(B) PASS-THRU ENTITY.—-For purposes of this paragraph,
the term 'pass-thru entity* means—

"(i) any regulated investment company, real estate
investment trust, or common trust fund,
"(ii) any partnership, trust, or estate, and
"(iii) any organization to which part I of subchapter
T applies.

Except as provided in regulations, a person holding an
interest in a pass-thru entity as a nominee for another
person shall, with respect to such interest, be treated as a
pass-thru entity.

"(C) TAX TO BE DEDUCTIBLE.—Any tax imposed by this
paragraph with respect to any excess inclusion of any pass-
thru entity for any taxable year shall, for purposes of this
title (other than this subsection), be applied against (and
operate to reduce) the amount included in gross income
with respect to the residual interest involved.

"(D) I&CEPTION WHERE HOLDER FURNISHES AFFIDAVIT.—No

tax shall be imposed by subparagraph (A) with respect to
any interest in a pass-thru entity for any period if—