Page:United States Statutes at Large Volume 100 Part 3.djvu/451

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2259

"(B) shall be subject to limitation under this section in the same manner as a pre-change loss. "(5) SPECIAL RULES FOR POST-CHANGE YEAR WHICH INCLUDES CHANGE DATE.—For purposes of subsection (b)(3)—

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"(A) in applying subparagraph (A) thereof, taxable income shall be computed without regard to recognized built-in gains and losses, and gain described in paragraph (1)(C), for the year, and "(B) in applying subparagraph (B) thereof, the section 382 limitation shall be computed without regard to recognized built-in gains, and gain described in paragraph (I)(C), for the year. "(6) SECRETARY MAY TREAT CERTAIN DEDUCTIONS AS BUILT-IN

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LOSSES.—The Secretary may by regulation treat amounts which accrue on or before the change date but which are allowable as a deduction after such date as recognized built-in losses. "(7) RECOGNITION PERIOD, ETC.— «(^) RECOGNITION PERIOD.—The

term 'recognition period' means, with respect to any ownership change, the 5-year period beginning on the change date. "(B) RECOGNITION PERIOD TAXABLE YEAR.—The term 'recognition period taxable year' means any tsixable year any portion of which is in the recognition period.

"(8)

DETERMINATION OF FAIR MARKET VALUE IN CERTAIN

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CASES.—If 80 percent or more in value of the stock of a corporation is acquired in 1 transaction (or in a series of related transactions during any 12-month period), for purposes of determining the net unrealized built-in loss, the fair market value of the assets of such corporation shall not exceed the grossed up " amount paid for such stock properly adjusted for indebtedness ^ of the corporation and other relevant items. X "(9) TAX-FREE EXCHANGES OR TRANSFERS.—The Secretary shall prescribe such regulations as may be necessary to carry out the ••'' purposes of this subsection where property held on the change date is transferred in a transaction where gain or loss is not recognized (in whole or in part). "(i) TESTING PERIOD.—For purposes of this section— "^ "(1) 3-YEAR PERIOD.—Except as otherwise provided in this ^I section, the testing period is the 3-year period ending on the day of any owner shift involving a 5-percent shareholder or equity structure shift. "(2) SHORTER PERIOD WHERE THERE HAS BEEN RECENT OWNERSHIP CHANGE.—If there has been an ownership change under

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this section, the testing period for determining whether a 2nd ownership change has occurred shall not begin before the 1st day following the change date for such earlier ownership change. "(3) SHORTER PERIOD WHERE ALL LOSSES ARISE AFTER 3-YEAR

PERIOD BEGINS.—The testing period shall not begin before the 1st day of the 1st taxable year from which there is a carryforward of a loss or of an excess credit to the 1st postchange year. Except as provided in regulations, this paragraph shall not apply to any loss corporation which has a net unrealized built-in loss (determined after application of subsection (h)(3)(B)). "(j) CHANGE DATE.—For purposes of this section, the change date is—

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