Page:United States Statutes at Large Volume 111 Part 1.djvu/938

 Ill STAT. 914 PUBLIC LAW 105-34—AUG. 5, 1997 SEC. 1012. APPLICATION OF SECTION 355 TO DISTRIBUTIONS IN CONNECTION WITH ACQUISITIONS AND TO INTRAGROUP TRANSACTIONS. (a) DISTRIBUTIONS IN CONNECTION WITH ACQUISITIONS.—Section 355 (relating to distributions of stock and securities of a controlled corporation) is amended by adding at the end the following new subsection: " (e) RECOGNITION OF GAIN ON CERTAIN DISTRIBUTIONS OF STOCK OR SECURITIES IN CONNECTION WITH ACQUISITIONS. — "(1) GENERAL RULE.—If there is a distribution to which this subsection applies, any stock or securities in the controlled corporation shall not be treated as qualified property for purposes of subsection (c)(2) of this section or section 361(c)(2). " (2) DISTRIBUTIONS TO WHICH SUBSECTION APPLIES.— "(A) IN GENERAL.—T h is subsection shall apply to any distribution— "(i) to which this section (or so much of section 356 as relates to this section) applies, and "(ii) which is part of a plan (or series of related transactions) pursuant to which 1 or more persons acquire directly or indirectly stock representing a 50- percent or greater interest in the distributing corporation or any controlled corporation. " (B) PLAN PRESUMED TO EXIST IN CERTAIN CASES.— If 1 or more persons acquire directly or indirectly stock representing a 50-percent or greater interest in the distributing corporation or any controlled corporation during the 4-year period beginning on the date which is 2 years before the date of the distribution, such acquisition shall be treated as pursuant to a plan described in subparagraph (A)(ii) unless it is established that the distribution and the acquisition are not pursuant to a plan or series of related transactions. "(C) CERTAIN PLANS DISREGARDED.— A plan (or series of related transactions) shall not be treated as described in subparagraph (A)(ii) if, immediately after the completion of such plan or transactions, the distributing corporation and all controlled corporations are members of a single affiliated group (as defined in section 1504 without regard to subsection (b) thereof). "(D) COORDINATION WITH SUBSECTION (d).—Th is subsection shall not apply to any distribution to which subsection (d) applies. " (3) SPECIAL RULES RELATING TO ACQUISITIONS.— "(A) CERTAIN ACQUISITIONS NOT TAKEN INTO ACCOUNT.— Except as provided in regulations, the following acquisitions shall not be treated as described in paragraph (2)(A)(ii): "(i) The acquisition of stock in any controlled corporation by the distributing corporation. "(ii) The acquisition by a person of stock in any controlled corporation by reason of holding stock or securities in the distributing corporation. "(iii) The acquisition by a person of stock in any successor corporation of the distributing corporation or any controlled corporation by reason of holding stock

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