Page:United States Statutes at Large Volume 102 Part 4.djvu/471

 PUBLIC LAW 100-647—NOV. 10, 1988

102 STAT. 3441

(i) a participant in a common trust fund shall be treated in the same manner as a partner, and (ii) subparagraph (C) thereof shall be applied by substituting "December 31, 1987" for "December 31, 1986" and as if it did not contain the election to include all income in the short taxable year. (6) Section 806(c)(2) of the Reform Act is amended by striking out "Section 267(a)" and inserting in lieu thereof "Section 267(a)(2)". (7) Subparagraph (C) of section 806(e)(2) of the Reform Act is amended— (A) by striking out "(including such short taxable year)", and (B) by striking out "short taxable year" the second place it appears and inserting in lieu thereof "the partner's or shareholder's taxable year with or within which the partnership's or S corporation's short taxable year ends". (8) Section 806(e)(2) of the Reform Act is amended— (A) by striking out "any taxable year" and inserting in lieu thereof "the taxpayer's first taxable year beginning after December 31, 1986'\ and (B) by striking out "taxpayer" each place it appears and inserting in lieu thereof "partnership, S corporation, or personal service corporation'. (9) Nothing in section 806 of the Reform Act or in any legislative history relating thereto shall be construed as requiring the Secretary of the Treasury or his delegate to permit an automatic change of a taxable year. (10) Subsection (e) of section 806 of the Reform Act is amended by adding at the end thereof the following new paragraph: "(3) BASIS, ETC. RULES.—

"(A) BASIS RULE.—The adjusted basis of any partner's interest in a partnership or shareholder's stock in an S corporation shall be determined as if all of the income to be taken into account ratably in the 4 taxable years referred to in paragraph (2)(C) were included in gross income for the 1st of such taxable years. "(B) TREATMENT OF DISPOSITIONS.—If any interest in a partnership or stock in an S corporation is disposed of before the last taxable year in the spread period, all amounts which would be included in the gross income of the partner or shareholder for subsequent taxable years in the spread period under paragraph (2)(C) and attributable to the interest or stock disposed of shall be included in gross income for the taxable year in which the disposition occurs. For purposes of the preceding sentence, the term 'spread period' means the period consisting of the 4 taxable years referred to in paragraph (2)(C)." (f) AMENDMENTS RELATED TO SECTION 811 OF THE REFORM ACT.—

(1) Paragraph (4) of section 45300)) of the 1986 Code is amended— (A) by striking out "at any time during" and inserting in lieu thereof "as of the close of, and (B) by striking out "as of the close of such taxable year in lieu" and inserting in lieu thereof "as of the close of such taxable year (determined by not taking into account any indebtedness described in paragraph (3)(B)) in lieu"

26 USC 267. 26 USC 1378 ^°^-

26 USC 1378 note. 26 USC 1378 ^°^-

�