the amount of gain recognized by the taxpayer on account of the transfer (other than amounts taken into account under subsection (c)(2)(B)). (e) Source of income Amounts included in gross income under this section shall be treated as derived from sources within the United States. (f) Basis adjustments Consistent with such regulations or other guidance as the Secretary shall prescribe, proper adjustments shall be made in the adjusted basis of the taxpayer’s stock in the specified 10-percent owned foreign corporation to which the transfer is made, and in the transferee’s adjusted basis in the property transferred, to reflect amounts included in gross income under this section. . (2) Clerical amendment The table of sections for part II of subchapter B of chapter 1 is amended by adding at the end the following new item: Sec. 91. Certain foreign branch losses transferred to specified 10-percent owned foreign corporations. . (3) Effective date The amendments made by this subsection shall apply to transfers after December 31, 2017. (e) Repeal of active trade or business exception under section 367 (1) In general Section 367(a) is amended by striking paragraph (3) and redesignating paragraphs (4), (5), and (6) as paragraphs (3), (4), and (5), respectively (2) Conforming amendments Section 367(a)(4), as redesignated by paragraph (1), is amended— (A) by striking Paragraphs (2) and (3) and inserting Paragraph (2) , and (B) by striking Paragraphs (2) and (3) in the heading and inserting Paragraph (2) . (3) Effective date The amendments made by this subsection shall apply to transfers after December 31, 2017. 14103. Treatment of deferred foreign income upon transition to participation exemption system of taxation (a) In general Section 965 is amended to read as follows: 965. Treatment of deferred foreign income upon transition to participation exemption system of taxation (a) Treatment of deferred foreign income as subpart F income In the case of the last taxable year of a deferred income corporation which begins before