was allowed to the taxpayer, over (2) the sum of— (A) any taxable income of such branch for a taxable year after the taxable year in which the loss was incurred and through the close of the taxable year of the transfer, and (B) any amount which is recognized under section 904(f)(3) on account of the transfer. (c) Reduction for recognized gains (1) In general In the case of a transfer not described in section 367(a)(3)(C), the transferred loss amount shall be reduced (but not below zero) by the amount of gain recognized by the taxpayer on account of the transfer (other than amounts taken into account under subsection (c)(2)(B)). (2) Coordination with recognition under section 367 In the case of a transfer described in section 367(a)(3)(C), the transferred loss amount shall not exceed the excess (if any) of— (A) the excess of the amount described in section 367(a)(3)(C)(i) over the amount described in section 367(a)(3)(C)(ii) with respect to such transfer, over (B) the amount of gain recognized under section 367(a)(3)(C) with respect to such transfer. (d) Source of income Amounts included in gross income under this section shall be treated as derived from sources within the United States. (e) Basis adjustments Consistent with such regulations or other guidance as the Secretary may 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) Amounts recognized under section 367 on transfer of foreign branch with previously deducted losses treated as United States source Section 367(a)(3)(C) is amended by striking outside in the last sentence and inserting within . (3) 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