Page:United States Statutes at Large Volume 100 Part 3.djvu/455

 PUBLIC LAW 99-514—OCT. 22, 1986

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100 STAT. 2263

plies, shall not be treated as a new loss corporation having substantial nonbusiness assets. "(C) NONBUSINESS ASSETS.—For purposes of this paragraph, the term 'nonbusiness assets' means assets held for investment. "(D) NONBUSINESS ASSET SHARE.—For purposes of this paragraph, the nonbusiness asset share of the indebtedness of the corporation is an amount which bears the same ratio to such indebtedness as— "(i) the fair market value of the nonbusiness assets of the corporation, bears to "(ii) the fair market value of all assets of such corporation. "(E) TREATMENT OF SUBSIDIARIES.—For purposes of this paragraph, stock and securities in any subsidiary corporation shall be disregarded and the parent corporation shall be deemed to own its ratable share of the subsidiary's assets. For purposes of the preceding sentence, a corporation shall be treated as a subsidiary if the parent owns 50 percent or more of the combined voting power of all clsisses of stock entitled to vote, and 50 percent or more of the total value of shares of all classes of stock. "(5) TITLE i i OR SIMILAR CASE.—

"(A) IN GENERAL.—Subsection (a) shall not apply to any ownership change if— "(i) the old loss corporation is (immediately before such ownership change) under the jurisdiction of the court in a title 11 or similar case, and "(ii) the shareholders and creditors of the old loss corporation (determined immediately before such ownership change) own (immediately after such ownership change) stock of the new loss corporation (or stock of controlling corporation if also in bankruptcy) which meets the requirements of section 1504(a)(2) (determined by substituting '50 percent' for '80 percent' each place it appears). "(B) REDUCTION FOR INTEREST PAYMENTS TO CREDITORS BECOMING SHAREHOLDERS.—In any case to which subpara-

graph (A) applies, the net operating loss deduction under section 172(a) for any post-change year shall be determined as if no deduction was allowable under this chapter for the interest paid or accrued by the old loss corporation on indebtedness which was converted into stock pursuant to title 11 or similar case during— "(i) any taxable year ending during the 3-year period preceding the taxable year in which the ownership change occurs, and "(ii) the period of the taxable year in which the ownership change occurs on or before the change date. "(C) REDUCTION OF CARRYFORWARDS WHERE DISCHARGE OF

INDEBTEDNESS.—In any case to which subparagraph (A) applies, the pre-change losses and excess credits (within the meaning of section 383(a)(2)) which may be carried to a postchange year shall be computed as if 50 percent of the amount which, but for the application of section 108(e)(10XB), would have been includible in gross income for any taxable year had been so included.

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