Page:United States Statutes at Large Volume 100 Part 3.djvu/462

 100 STAT. 2270

PUBLIC LAW 99-514—OCT. 22, 1986

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, erty which is acquired by the liquidating corporation in a transaction to which section 351 applied, or as a contribution to capital, during the 5-year period ending on the date of the distribution. Such term includes any property if the adjusted basis of such property is determined (in whole or in part) by reference to the adjusted basis of property described in the preceding sentence. "(2) SPECIAL RULE FOR CERTAIN PROPERTY ACQUIRED IN CERTAIN CARRYOVER BASIS TRANSACTIONS.—

"(A) IN GENERAL.—For purposes of determining the amount of loss recognized by any liquidating corporation on ';i. any sale, exchange, or distribution of property described in . subparagraph (B), the adjusted basis of such property shall be reduced (but not below zero) by the excess (if any) of— f»i:. "(i) the adjusted basis of such property immediately after its acquisition by such corporation, over "(ii) the fair market value of such property as of such time. "(B) DESCRIPTION OF PROPERTY.—

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"(i) IN GENERAL.—For purposes of subparagraph (A), property is described in this subparagraph if^ iti^ "(I) such property is acquired by the liquidating corporation in a transaction to which section 351 .. ..',. applied or as a contribution to capital, and "(II) the acquisition of such property by the liq, uidating corporation was part of a plan a principal ' •' purpose of which was to recognize loss by the liquidating corporation with respect to such property in connection with the liquidation. ,, Other property shall be treated as so described if the adjusted basis of such other property is determined (in whole or in part) by reference to the adjusted basis of property described in the preceding sentence. "(ii)

CERTAIN ACQUISITIONS TREATED AS PART OF

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PLAN.—For purposes of clause (i), any property described in clause (i)(I) acquired by the liquidating corporation during the 2-year period ending on the date of the adoption of the plan of complete liquidation shall, except as provided in regulations, be treated as part of a plan described in clause (i)(II). "(C) RECAPTURE IN LIEU OF DISALLOWANCE.—The Secretary may prescribe regulations under which, in lieu of disallowing a loss under subparagraph (A) for a prior taxable year, the gross income of the liquidating corporation for the taxable year in which the plan of complete liquidation is adopted shall be increased by the amount of the disallowed loss.

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"(3) SPECIAL RULE IN CASE OF LIQUIDATION TO WHICH SECTION

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332 APPLIES.—In the case of any liquidation to which section 332 applies, no loss shall be recognized to the liquidating corporation on any distribution in such liquidation. "(e) CERTAIN STOCK SALES AND DISTRIBUTIONS MAY B E TREATED As

ASSET TRANSFERS.—Under regulations prescribed by the Secretary, if— "(1) a corporation owns stock in another corporation meeting the requirements of section 1504(a)(2), and

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