Page:United States Statutes at Large Volume 111 Part 1.djvu/942

 Ill STAT. 918 PUBLIC LAW 105-34—AUG. 5, 1997 the acquirer of the distributing corporation or any controlled corporation, or the transferee, whichever is applicable. SEC. 1013. TAX TREATMENT OF REDEMPTIONS INVOLVING RELATED CORPORATIONS. (a) STOCK PURCHASES BY RELATED CORPORATIONS.—The last sentence of section 304(a)(1) (relating to acquisition by related corporation other than subsidiary) is amended to read as follows: "To the extent that such distribution is treated as a distribution to which section 301 applies, the transferor and the acquiring corporation shall be treated in the same manner as if the transferor had transferred the stock so acquired to the acquiring corporation in exchange for stock of the acquiring corporation in a transaction to which section 351(a) applies, and then the acquiring corporation had redeemed the stock it was treated as issuing in such transaction.". (b) COORDINATION WITH SECTION 1059. —Clause (iii) of section 1059(e)(1)(A), as amended by this title, is amended to read as follows: "(iii) which would not have been treated (in whole or in part) as a dividend if— "(I) any options had not been taken into account under section 318(a)(4), or "(II) section 304(a) had not apphed,". (c) SPECIAL RULE FOR ACQUISITIONS BY FOREIGN CORPORA- TIONS.—Section 304(b) (relating to special rules for application of subsection (a)) is amended by adding at the end the following new paragraph: " (5) ACQUISITIONS BY FOREIGN CORPORATIONS. — "(A) IN GENERAL.—In the case of any acquisition to which subsection (a) applies in which the acquiring corpora- ! tion is a foreign corporation, the only earnings and profits taken into account under paragraph (2)(A) shall be those earnings and profits— "(i) which are attributable (under regulations prescribed by the Secretary) to stock of the acquiring corporation owned (within the meaning of section 958(a)) by a corporation or individual which is— "(I) a United States shareholder (within the meaning of section 951(b)) of the acquiring corporation, and "(II) the transferor or a person who bears a relationship to the transferor described in section 267(b) or 707(b), and "(ii) which were accumulated during the period or periods such stock was owned by such person while the acquiring corporation was a controlled foreign corporation. "(B) APPLICATION OF SECTION 1248. —For purposes of subparagraph (A), the rules of section 1248(d) shall apply except to the extent otherwise provided by the Secretary. "(C) REGULATIONS. —The Secretary shall prescribe such regulations as are appropriate to carry out the purposes of this paragraph.". 26 USC 304 note. (d) EFFECTIVE DATE. — (1) IN GENERAL,—The amendments made by this section shall apply to distributions and acquisitions after June 8, 1997.

�