Page:United States Statutes at Large Volume 111 Part 1.djvu/943

 PUBLIC LAW 105-34—AUG. 5, 1997 111 STAT. 919 (2) TRANSITION RULE.—The amendments made by this section shall not apply to any distribution or acquisition after June 8, 1997, if such distribution or acquisition is— (A) made pursuant to a written agreement which was binding on such date and at all times thereafter, (B) described in a ruling request submitted to the Internal Revenue Service on or before such date, or (C) described in a public Einnouncement or filing with the Securities and Exchange Commission on or before such date. SEC. 1014. CERTAIN PREFERRED STOCK TREATED AS BOOT. (a) SECTION 351. —Section 351 (relating to transfer to corporation controlled by transferor) is amended by redesignating subsection (g) as subsection (h) and by inserting after subsection (f) the following new subsection: "(g) NONQUALIFIED PREFERRED STOCK NOT TREATED AS STOCK.— "(1) IN GENERAL.—In the case of a person who transfers property to a corporation and receives nonqualified preferred stock— "(A) subsection (a) shall not apply to such transferor, "(B) subsection (b) shall apply to such transferor, and "(C) such nonqualified preferred stock shall be treated as other property for purposes of applying subsection (b). "(2) NONQUALIFIED PREFERRED STOCK. —For purposes of paragraph (1)— "(A) IN GENERAL.— The term 'nonqualified preferred stock' means preferred stock if— "(i) the holder of such stock has the right to require the issuer or a related person to redeem or purchase the stock, "(ii) the issuer or a related person is required to redeem or purchase such stock, "(iii) the issuer or a related person has the right to redeem or purchase the stock and, as of the issue date, it is more likely than not that such right will be exercised, or "(iv) the dividend rate on such stock varies in whole or in part (directly or indirectly) with reference to interest rates, commodity prices, or other similar indices. "(B) LIMITATIONS. — Clauses (i), (ii), and (iii) of subparagraph (A) shall apply only if the right or obligation referred to therein may be exercised within the 20-year period beginning on the issue date of such stock and such right or obligation is not subject to a contingency which, as of the issue date, makes remote the likelihood of the redemption or purchase. "(C) EXCEPTIONS FOR CERTAIN RIGHTS OR OBLIGA- TIONS.— "(i) IN GENERAL.—^A right or obligation shall not be treated as described in clause (i), (ii), or (iii) of subparagraph (A) if— "(I) it may be exercised only upon the death, disability, or mental incompetency of the holder, or

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