Page:United States Statutes at Large Volume 100 Part 3.djvu/469

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2277

"(3) RECOGNITION PERIOD.—The term 'recognition period' means the 10-year period beginning with the 1st day of the 1st taxable year for which the corporation was an S corporation. "(4) TAXABLE INCOME.—Taxable income of the corporation shall be determined under section 63(a)— "(A) without regard to the deductions allowed by part VIII of subchapter B (other than the deduction allowed by section 248, relating to organization expenditures), and "(B) without regard to the deduction under section 172." (b) TREATMENT OF DISTRIBUTIONS.—Subsection (e) of section 1363 is amended to read as follows: "(e) SUBSECTION (d) NOT TO APPLY TO REORGANIZATIONS, ETC.—

Subsection (d) shall not apply to any distribution to the extent it consists of property permitted by section 354, 355, or 356 to be received without the recognition of gain." (c) CONFORMING AMENDMENTS.—

(1) Subparagraph (G) of section 26(b)(2) is amended by striking out "certain capital gains" and inserting in lieu thereof "certain built-in gains". (2) Paragraph (2) of section 1366(f) is amended to read as follows: "(2) REDUCTION IN PASS-THRU FOR TAX IMPOSED ON BUILT-IN

GAINS.—If any tax is imposed under section 1374 for any taxable year on an S corporation, for purposes of subsection (a), the amount of each recognized built-in gain (as defined in section 1374(d)(2)) for such taxable year shall be reduced by its proportionate share of such tax." (3) Subparagraph (B) of section 13750t))(l) is amended by striking out "section 1374(d)" and inserting in lieu thereof "section 1374(d)(4)". (d) CLERICAL AMENDMENT.—The table of sections for part III of subchapter S of chapter 1 is amended by striking out the item relating to section 1374 and inserting in lieu thereof the following: "Sec. 1374. Tax imposed on certain built-in gains." SEC. 633. EFFECTIVE DATES.

(a) GENERAL RULE.—Except as otherwise provided in this section, the amendments made by this subtitle shall apply to— (1) any distribution in complete liquidation, and any sale or exchange, made by a corporation after July 31, 1986, unless such corporation is completely liquidated before January 1, 1987, (2) any transaction described in section 338 of the Internal Revenue Code of 1986 for which the acquisition date occurs after December 31, 1986, and (3) any distribution (not in complete liquidation) made after December 31, 1986. 03) BUILT-IN GAINS OF S CORPORATIONS.—The amendments made by section 632 (other than subsection (b) thereof) shall apply to taxable years beginning after December 31, 1986, but only in cases where the 1st taxable year for which the corporation is an S corporation is pursuant to an election made after December 31, 1986. (c) EXCEPTION FOR CERTAIN PLANS OF LIQUIDATION AND BINDING CONTRACTS.—

(1) IN GENERAL.—The amendments made by this subtitle shall not apply to—

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