§281 Terminal Railroad Corporations and Their Shareholders

Summary

Prevents terminal railroad corporations and their shareholders from counting certain internal credits, waived charges, or discharged liabilities as taxable income. If a terminal railroad cancels or offsets a railroad’s debt by crediting it with “related terminal income,” or if it reduces or doesn’t charge a fee because it used related terminal income to set the price, those amounts are not treated as income for the terminal railroad and do not cause ordinary deductions to be denied. The same rule applies to the shareholders when figuring their tax, but it does not apply if, for any taxable year ending after the date of the enactment of this section, using the rule would create or increase a net operating loss. These rules apply only when the arrangement is in a written agreement signed by all shareholders before the taxable year starts. The Secretary must write rules to carry this out. Short definitions: terminal railroad corporation — a U.S. railroad company whose owners are rail carriers, whose main business is terminal and switching services, that mainly serves one or more of its owners, and whose owners use the same tax year; related terminal income — income from the usual terminal services and facility use (including use by non-rail users), charges to railroads for operations, and U.S. payments for mail handling; related terminal services — the services counted when computing related terminal income. A substantial addition built after the date of the enactment of this section is treated as a separate facility.