(3) Portfolio interest not to include interest received by 10-percent shareholders For purposes of this subsection— (A) In general The term “portfolio interest” shall not include any interest described in paragraph (2) which is received by a 10-percent shareholder. (B) 10-Percent shareholder The term “10-percent shareholder” means— (i) in the case of an obligation issued by a corporation, any person who owns 10 percent or more of the total combined voting power of all classes of stock of such corporation entitled to vote, or (ii) in the case of an obligation issued by a partnership, any person who owns 10 percent or more of the capital or profits interest in such partnership. (C) Attribution rules For purposes of determining ownership of stock under subparagraph (B)(i) the rules of section 318(a) shall apply, except that— (i) section 318(a)(2)(C) shall be applied without regard to the 50-percent limitation therein, (ii) section 318(a)(3)(C) shall be applied— (I) without regard to the 50-percent limitation therein; and (II) in any case where such section would not apply but for subclause (I), by considering a corporation as owning the stock (other than stock in such corporation) which is owned by or for any shareholder of such corporation in that proportion which the value of the stock which such shareholder owns in such corporation bears to the value of all stock in such corporation, and (iii) any stock which a person is treated as owning after application of section 318(a)(4) shall not, for purposes of applying paragraphs (2) and (3) of section 318(a), be treated as actually owned by such person. Under regulations prescribed by the Secretary, rules similar to the rules of the preceding sentence shall be applied in determining the ownership of the capital or profits interest in a partnership for purposes of subparagraph (B)(ii).
 - Shopify)