Page:United States Statutes at Large Volume 102 Part 4.djvu/610

 102 STAT. 3580

PUBLIC LAW 100-647—NOV. 10, 1988 obligation of another corporation which is such a party if such stock (or right) or obligation is received by the distributing corporation in the exchange. "(C) TREATMENT OF LIABILTTIES.—If any property distributed in the distribution referred to in paragraph (1) is subject to a liability or the shareholder assumes a liability of the distributing corporation in connection with the distribution, then, for purposes of subparagraph (A), the fair market value of such property shall be treated as not less than the amount of such liability. "(3) TREATMENT OF CERTAIN TRANSFERS TO CREDITORS.—For

purposes of this subsection, any transfer of qualified property by the corporation to its creditors in connection with the reorganization shall be treated as a distribution to its shareholders pursuant to the plan of reorganization. "(4) COORDINATION WITH OTHER PROVISIONS.—Section 311

and

subpart B of part II of this subchapter shall not apply to any distribution referred to in paragraph (1).' (B) Section 358 of the 1986 Code is amended by adding at the end thereof the following new subsection: "(f) DEFINITION OF NONRECOGNITION PROPERTY IN CASE OF SECTION

361 EXCHANGE.—For purposes of this section, the property permitted to be received under section 361 without the recognition of gain or loss shall be treated as consisting only of stock or securities in another corporation a party to the reorganization." (C) Section 355 of the 1986 Code is amended by adding at the end thereof the following new subsection: "(c) TAXABILITY OF CORPORATION ON DISTRIBUTION.—Section 311

shall apply to any distribution— "(1) to which this section (or so much of section 356 as relates to this section) applies, and "(2) which is not in pursuance of a plan of reorganization, in the same manner as if such distribution were a distribution to which subpart A of part I applies; except that subsection (b) of section 311 shall not apply to any distribution of stock or securities in the controlled corporation." (D) Subsection (c) of section 336 of the 1986 Code (as amended by section 631 of the Reform Act) is amended to read as follows: "(c) EXCEPTION FOR LIQUIDATIONS WHICH ARE PART OF A REORGANIZATION.— "For provision providing that this subpart does not apply to distributions in pursuance of a plan of reorganization, see section 361(c)(4)."

(E) Subsection (a) of section 311 of the 1986 Code is amended by striking out "distribution, with respect to its stock," and inserting in lieu thereof "distribution (not in complete liquidation) with respect to its stock". (F) The table of sections for subpart C of part III of subchapter C of chapter 1 of the 1986 Code is amended by striking out the item relating to section 361 and inserting in lieu thereof the following new item: "Sec. 361. Nonrecognition of gain or loss to corporations; treatment of distributions."

(G) Effective with respect to transfers on or after June 21, 1988, section 351 of the 1986 Code is amended by redesignating

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