Page:United States Statutes at Large Volume 103 Part 3.djvu/261

 PUBLIC LAW 101-239—DEC. 19, 1989 103 STAT. 2329 - "(iii) with such adjustments as the Secretary may prescribe. "(C) SUBSIDIARY. —The term 'subsidiary* means any cor- poration which is a member of an affiliated group filing a consolidated return other than the common parent. "(D) APPLICABLE PREFERRED STOCK. — The term 'applicable preferred stock' means stock described in section 1504(a)(4) in the subsidiary which is— "(i) issued after November 17, 1989, and "(ii) held by a person other than a member of the same affiliated group as the subsidiary. "(4) REGULATIONS.—The Secretary shall prescribe such regu- lations as may be necessary or appropriate to carry out the provisions of this subsection, including regulations— "(A) to prevent the avoidance of this subsection through the transfer of built-in losses to the subsidiary, "(B) to provide rules for cases in which the subsidiary owns (directly or indirectly) stock in another member of the affiliated group, and "(C) to provide for the application of this subsection where dividends are not paid currently, where the redemp- tion and liquidation righte of the applicable preferred stock exceed the issue price for such stocky or where the stock is otherwise structured to avoid the purposes of this subsec- tion." (b) EFFECTIVE DATES.— 26 USC 1503 (1) IN GENERAL.— The amendment made by this section shall note. apply to taxable years ending after November 17, 1989. (2) BINDING CONTRACT EXCEPTION. —For purposes of section 1503(fK3XD) of the Internal Revenue Code of 1986, stock issued after November 17, 1989, pursuant to a written binding contract in effect on November 17, 1989, and at all times thereafter before such issuance, shall be treated as issued on November 17, 1989. (3) SPECIAL RULE WHEN SUBSIDIARY LEAVES GROUP.—If, by reason of a transaction after November 17, 1989, a corporation ceases to be, or becomes, a member of an affiliated group, the stock of such corporation shall be treated, for purposes of section 1503(f)(3)(D) of such Code, as issued on the date of such cessation or commencement, unless such transaction is of a kind which would not result in the recognition of any deferred intercompany gain under the consolidated return regulations by reason of the acquisition of the entire group. (4) RETIRED STOCK. — (A) Except as provided in subparagraph (B), if stock issued before November 18, 1989, (or described in paragraph (2)), is retired or acquired after November 17, 1989, by the corporation or another member of the same affiliated group, such stock shall be treated, for purposes of section 1503(f)(3)(D) of such Code, as issued on the date of such retirement or acquisition. (B) Subparagraph (A) shall not apply to any retirement or acquisition pursuant to an obligation to reissue under a binding written contract in effect on November 17, 1989,. and at all times thereafter before such retirement or ac- quisition.

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