of Interest Partially Tax-Exempt Under Section 133 For purposes of this section and subsections (a) and (b) of section 807, the terms gross investment income and tax-exempt interest shall not include any interest received with respect to a securities acquisition loan (as defined in section 133(b)). Such interest shall not be included in life insurance gross income for purposes of subsection (b)(3). . (3) Paragraph (5) of section 852(b) of such Code is amended by adding at the end the following: (C) Interest on certain loans used to acquire employer securities For purposes of this section— (i) the applicable percentage (as defined in section 133(a)(3)) of the amount of any loan held by a regulated investment company which qualifies as a securities acquisition loan (as defined in section 133) shall be treated as an obligation described in section 103(a), and (ii) such applicable percentage of the interest received on such loan shall be treated as interest excludable from gross income under section 103. . (4) Paragraph (2) of section 4978(b) of such Code is amended by striking subparagraphs (A) and (B) and all that follows and inserting: (A) first, from section 133 securities (as defined in section 4978B(e)(2)) acquired during the 3-year period ending on the date of such disposition, beginning with the securities first so acquired, (B) second, from section 133 securities (as so defined) acquired before such 3-year period unless such securities (or proceeds from the disposition) have been allocated to accounts of participants or beneficiaries, (C) third, from qualified securities to which section 1042 applied acquired during the 3-year period ending on the date of the disposition, beginning with the securities first so acquired, and (D) then from any other employer securities. If subsection (d) or section 4978B(d) applies to a disposition, the disposition shall be treated as made from employer securities in the opposite order of the preceding sentence. . (5) (A) Chapter 43 of such Code is amended by inserting before