Page:United States Statutes at Large Volume 101 Part 2.djvu/1209

 PUBLIC LAW 100-203—DEC. 22, 1987

101 STAT. 1330-415

"(B) TREATMENT OF CERTAIN INCOME ITEMS.—Any item of income which is properly taken into account for any recognition period taxable year but which is attributable to periods before the acquisition date shall be treated as a recognized built-in gain for the taxable year in which it is properly taken into account and shall be taken into account I'mir: in determining the amount of the net unrealized built-in gain. ii « "(C) LIMITATION.—The amount of the recognized built-in gains for any recognition period taxable year shall not .^.„ „ _ exceed— "(i) the net unrealized built-in gain, reduced by "(ii) the recognized built-in gains for prior years ending in the recognition period which (but for this section) would have been offset by preacquisition losses. "(2) ACQUISITION DATE.—The term 'acquisition date' means the date on which the gain corporation becomes a member of the affiliated group or, in any case described in subsection (a)(2), the date of the distribution or transfer in the liquidation or reorganization. "(3) PREACQUISITION LOSS.—

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"(A) IN GENERAL.—The term 'preacquisition loss' means— "(i) any net operating loss carryforward to the taxable year in which the acquisition date occurs, and "(ii) any net operating loss for the taxable year in which the acquisition date occurs to the extent such loss is allocable to the period in such year on or before the acquisition date. Except as provided in regulations, the net operating loss shall, for purposes of clause (ii), be allocated ratably to each day in the year. "(B) TREATMENT OF RECOGNIZED BUILT-IN LOSS.—In the

Case of a corporation with a net unrealized built-in loss, the term 'preacquisition loss' includes any recognized built-in "(4) OTHER DEFINITIONS.—Except as provided in regulations,

the terms 'net unrealized built-in gain', 'net unrealized built-in loss', 'recognized built-in loss', 'recognition period', and 'recognition period taxable year', have the same respective meanings as when used in section 382(h), except that the acquisition date shall be taken into account in lieu of the change date. "(d) LIMITATION ALSO TO APPLY TO EXCESS CREDITS OR NET CAPITAL

LOSSES.—Rules similar to the rules of subsection (a) shall also apply in the csise of any excess credit (as defined in section 383(a)(2)) or net capital loss. (e) REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section, including regulations to ensure that the purposes of this section may not be circumvented through— "(1) the use of any provision of law or regulations (including subchapter K of this chapter), or "(2) contributions of property to the gain corporation." (b) CLERICAL AMENDMENT.—The table of sections for part V of subchapter C of chapter 1 is amended by adding at the end thereof the following new item:

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