Page:United States Statutes at Large Volume 106 Part 4.djvu/296

 106 STAT. 3032 PUBLIC LAW 102-486—OCT. 24, 1992 26 USC 3402 (b) EFFECTIVE DATE.—The amendment made by this section ^ applies to payments received after December 31, 1992. SEC. 1935. INCREASE IN BACKUP WITHHOLDING RATE. (a) IN GENERAL.— Section 3406(a)(l) is amended by striking "20 percent" and inserting "31 percent". 26 USC 3406 (b) EFFECTIVE DATE.—The amendment made by subsection (a) "°*®- shall apply to amounts paid after December 31, 1992. SEC. 1936. CLASSIFICATION OF CERTAIN INTEREST AS STOCK OR INDEBTEDNESS. (a) GENERAL RULE. —Section 385 (relating to treatment of certain interests in corporations as stock or indebtedness) is amended by adding at the end thereof the following new subsection: "(c) EFFECT OF CLASSIFICATION BY ISSUER.— "(1) IN GENERAL.—The characterization (as of the time of issuance) by the issuer as to whether an interest in a corporation is stock or indebtedness shall be binding on such issuer and on all holders of such interest (but shall not be binding on the Secretary). "(2) NOTIFICATION OF INCONSISTENT TREATMENT. —Except as provided in regulations, paragraph (1) shall not apply to any holder of an interest if such holder on his return discloses that he is treating such interest in a manner inconsistent with the characterization referred to in paragraph (1). "(3) REGULATIONS.—The Secretary is authorized to require such information as the Secretary determines to be necessary to carry out the provisions of this subsection." 26 USC 385 note. (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to instruments issued aft«r the date of the enactment of this Act. SEC. 1937. RECOGNITION OF PRECONTRIBUTION GAIN IN CASE OF CERTAIN DISTRIBUTIONS TO CONTRIBUTING PARTNER. (a) GENERAL RULE.—Subpart C of part II of subchapter K of chapter 1 (relating to distributions by a partnership) is amended by adding at the end thereof the following new section: "SEC. 737. RECOGNITION OF PRECONTRIBUTION GAIN IN CASE OF CERTAIN DISTRIBUTIONS TO CONTRIBUTING PARTNER. "(a) GENERAL RULE.— In the case of any distribution by a partnership to a partner, such partner shall be treated as recognizing gain in an amount equal to the lesser of— "(1) the excess (if any) of (A) the fair market value of property (other than money) received in the distribution over (B) the adjusted basis of such partner's interest in the partnership immediately before the distribution reduced (but not below zero) by the amount of money received in the distribution, or "(2) the net precontribution gain of the partner. Gain recognized under the preceding sentence shall be in addition to any gain recognized under section 731. The character of such gain shall be determined by reference to the proportionate character of the net precontribution gain. "(b) NET PRECONTRIBUTION GAIN.— For purposes of this section, the term 'net precontribution gain' means the net gain (if any) which would have been recognized by the distributee partner under section 704(c)(l)(B) if all property which—

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