If, at any time, a beneficial interest in an electing Settlement Trust may be disposed of to a person in a manner which would not be permitted by section 7(h) of the Alaska Native Claims Settlement Act (
43 U.S.C.
1606
(h)) if such interest were Settlement Common Stock—
(B)
if such an election is in effect as of such time—
(i)
such election shall cease to apply as of the first day of the taxable year in which such disposition is first permitted,
(ii)
the provisions of this section shall not apply to such trust for such taxable year and all taxable years thereafter, and
(iii)
the distributable net income of such trust shall be increased by the current or accumulated earnings and profits of the sponsoring Native Corporation as of the close of such taxable year after proper adjustment is made for all distributions made by the sponsoring Native Corporation during such taxable year.
In no event shall the increase under clause (iii) exceed the fair market value of the trust’s assets as of the date the beneficial interest of the trust first becomes so disposable. The earnings and profits of the sponsoring Native Corporation shall be adjusted as of the last day of such taxable year by the amount of earnings and profits so included in the distributable net income of the trust.