Page:United States Statutes at Large Volume 100 Part 3.djvu/1070

 100 STAT. 2878

PUBLIC LAW 99-514—OCT. 22, 1986

(D) The amendments made by this paragraph shall apply to sales of securities after the date of the enactment of this Act. '' (10) Paragraph (5) of section 1042(c) (relating to securities ^ acquired by underwriter) is amended— (A) by striking out "acquisition" and inserting in lieu •^ thereof "sale", ^: (B) by inserting "to an employee stock ownership plan or "^ * eligible worker-owned cooperative" before "in", and (C) by striking out "ACQUIRED" in the heading thereof and '^ inserting in lieu thereof "SOLD". (11) The heading for section 1042 is amended by inserting "EMPLOYEE" before "STOCK". ^ (12) The table of sections for part III of subchapter O of chapter 1 is amended by striking out the item relating to section 1042 and inserting in lieu thereof the following new item: "Sec. 1042. Sales of stock to employee stock ownership plans or certain cooperatives." (b) AMENDMENTS RELATED TO SECTION 542.—

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(1) Paragraph (5) of section 72(e) is amended by adding at the end of subparagraph (D) the following new flush sentence: "Any dividend described in section 404(k) which is received by a • participant or beneficiary shall, for purposes of this subpara,^ graph, be treated as paid under a separate contract to which ^; clause (ii)(I) applies." (2) Section 404(k) is amended— (A) by adding at the end thereof the following new flush sentence: "Any deduction under subparagraph (A) or (B) of paragraph (2) shall be allowed in the taxable year of the corporation in which the dividend is paid or distributed to the participant under paragraph (2).", and (B) by striking out "during the taxable year" in the matter preceding paragraph (1). (3) Section 404(k), as amended by paragraph (2), is amended by ^^1 adding at the end thereof the following new sentence: "A plan to which this subsection applies shall not be treated as violating the requirements of section 401, 409, or 4975(e)(7) merely by reason of any distribution described in paragraph (2)." (4) Subsection (k) of section 404 is amended by adding at the end thereof the following new sentence: "The Secretary may disallow the deduction under this subsection for any dividend if the Secretary determines that such dividend constitutes, in substance, an avoidance of taxation." (5) Paragraph (2) of section 404(k) is amended by striking out "participants in the plan" each place it appears and inserting in lieu thereof "participants in the plan or their beneficiaries". (6) The amendments made by paragraphs (1) and (2) shall not apply to dividends paid before January 1, 1986, if the taxpayer ,, f treated such dividends in a manner inconsistent with such amendments on a return filed with the Secretary before the date of the enactment of this Act. (c) AMENDMENTS RELATED TO SECTION 543.— (1) Subparagraph (B) of section 291(e)(l) (defining financial institution preference item) is amended by adding at the end
 * ' thereof the following new clause:

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