Page:United States Statutes at Large Volume 100 Part 3.djvu/1065

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2873

(B) by striking out "the taxpayer elects" in paragraph (1) and inserting in lieu thereof "the taxpayer or executor elects in such form as the Secretary may prescribe". (2)(A) Section 1042G))(2) (relating to requirement that employees must own 30 percent of stock) is amended to read as follows: "(2) PLAN MUST HOLD 30 PERCENT OF STOCK AFTER SALE.—The

plan or cooperative referred to in paragraph (1) owns (after application of section 318(a)(4)), immediately after the sale, at least 30 percent of— "(A) each class of outstanding stock of the corporation (other than stock described in section 1504(a)(4)) which L^. issued the qualified securities, or • "(B) the total value of all outstanding stock of the corporation (other than stock described in section 1504(a)(4)). (B)(i) The requirement that section 1042(b) of the Internal Revenue Code of 1954 shall be applied with regard to section 318(a)(4) of such Code shall apply to sales after May 6, 1986. (ii) In the case of sales after July 18, 1984, and before the date of the enactment of this Act, paragraph (2) of section 1042(b) of such Code shall apply as if it read as follows: "(2) EMPLOYEES MUST OWN 30 PERCENT OF STOCK AFTER

SALE.—The plan or cooperative referred to in paragraph (1) owns, immediately after the sale, at least 30 percent of the employer securities or 30 percent of the value of employer securities (within the meaning of section 409(1)) outstanding at the time of sale." (3)(A) Section 409 is amended by redesignating subsection (n) as subsection (o) and by inserting after subsection (m) the following new subsection: "(n) SECURITIES RECEIVED IN CERTAIN TRANSACTIONS.—

"(1) IN GENERAL.—A plan to which section 1042 applies and an eligible worker-owned cooperative (within the meaning of section 1042(c)) shall provide that no portion of the assets of the plan or cooperative attributable to (or allocable in lieu of) employer securities acquired by the plan or cooperative in a sale to which section 1042 applies may accrue (or be allocated directly or indirectly under any plan of the employer meeting the requirements of section 401(a))— "(A) during the nonallocation period, for the benefit of— "(i) any taxpayer who makes an election under section 1042(a) with respect to employer securities, "(ii) any individual who is related to the taxpayer (within the meaning of section 267(b)), or "(B) for the benefit of any other person who owns (after . r - application of section 318(a)) more than 25 percent of— "(i) any class of outstanding stock of the corporation which issued such employer securities or of any corporation which is a member of the same controlled ? group of corporations (within the meaning of subsection (1)(4)) as such corporation, or "(ii) the total value of any class of outstanding stock of any such corporation. For purposes of subparagraph (B), section 318(a) shall be applied without regard to the employee trust exception in paragraph (2)(B)(i). "(2) FAILURE TO MEET REQUIREMENTS.—If a plan fails to meet the requirements of paragraph (1)—

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