Page:United States Statutes at Large Volume 100 Part 3.djvu/1068

 100 STAT. 2876

PUBLIC LAW 99-514—OCT. 22, 1986

(i) before January 1, 1987, the taxpayer acquired any security (as defined in section 165(g)(2) of the Internal Revenue Code of 1954) issued by a domestic corporation or •-' by any State or political subdivision thereof, W-i'"'(ii) the taxpayer treated such security as qualified replacement property for purposes of section 1042 of such -A'Code, and (iii) such property does not meet the requirements of section 1042(c)(4) of such Code (as amended by subparagraph (A)), then, with respect to so much of any gain which the taxpayer treated as not recognized under section 1042(a) by reason of the acquisition of such property, the replacement period for purposes of such section shall not expire before January 1, 1987. (6)(A) Section 1042(c) (relating to definitions and special rules) is amended by adding at the end thereof the following new ^ paragraph: jnt

"(Y) SECTION NOT TO APPLY TO GAIN OF CORPORATION.—

Subsection (a) shall not apply to any gain on the sale of any "' qualified securities which is includible in the gross income of any C corporation." (B) The amendment made by subparagraph (A) shall apply to sales after March 28, 1985, except that such amendment shall not apply to sales made before July 1, 1985, if made pursuant to a binding contract in effect on March 28, 1985, and at all times thereafter. (C) The amendment made by subparagraph (A) shall not apply to any sale occurring on December 20, 1985, with respect to which— «^f (i) a commitment letter was issued by a bank on October 31, 1984, and gj^f (ii) a final purchase agreement was entered into on November 5, 1985. (D) In the case of a sale on September 27, 1985, with respect to which a preliminary commitment letter was issued by a bank on April 10, 1985, and with respect to which a commitment letter was issued by a bank on June 28, 1985, the amendment made by subparagraph (A) shall apply but such sale shall be treated as having occurred on September 27, 1986. ,.ri:i (7) Section 1042(d) (relating to basis of qualified replacement property) is amended by adding at the end thereof the following new flush sentence: "Any reduction in basis under this subsection shall not be taken into account for purposes of section 1278(a)(2)(A)(ii) (relating to definition of market discount)." (8)(A) Section 1042 is amended by redesignating subsection (e) as subsection (f) and by inserting after subsection (d) the following new subsection: "(e) RECAPTURE OF GAIN ON DISPOSITION OF QUALIFIED REPLACEMENT PROPERTY.—
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"(1) IN GENERAL.—If a taxpayer disposes of any qualified replacement property, then, notwithstanding any other provision of this title, gain (if any) shall be recognized to the extent of the gain which was not recognized under subsection (a) by reason of the acquisition by such taxpayer of such qualified replacement property.

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