Page:United States Statutes at Large Volume 113 Part 1.djvu/206

 113 STAT. 182 PUBLIC LAW 106-36—JUNE 25, 1999 26 USC 358. (2) SECTION 358. —Section 358(d)(1) of such Code (relating to assumption of liability) is amended by striking "or acquired from the taxpayer property subject to a liability". (3) SECTION 368. — 26 USC 368. (A) Section 368(a)(1)(C) of such Code is amended by striking ", or the fact that property acquired is subject to a liability,". (B) The last sentence of section 368(a)(2)(B) of such Code is amended by striking ", and the amount of any liability to which any property acquired from the acquiring corporation is subject,", (b) CLARIFICATION OF ASSUMPTION OP LIABILITY.— (1) IN GENERAL.— Section 357 of the Internal Revenue Code 26 USC 357. of 1986 is amended by adding at the end the following new subsection: " (d) DETERMINATION OF AMOUNT OF LIABILITY ASSUMED.— "(1) IN GENERAL.— For purposes of this section, section 358(d), section 362(d), section 368(a)(1)(C), and section 368(a)(2)(B), except as provided in regulations— "(A) a recourse liability (or portion thereof) shall be treated as having been assumed if, as determined on the basis of all facts and circumstances, the transferee has agreed to, and is expected to, satisfy such liability (or portion), whether or not the transferor has been relieved of such liability; and "(B) except to the extent provided in paragraph (2), a nonrecourse liability shall be treated as having been assumed by the transferee of any asset subject to such liability. "(2) EXCEPTION FOR NONRECOURSE LIABILITY. — The amount of the nonrecourse liability treated as described in paragraph (1)(B) shall be reduced by the lesser of— "(A) the amount of such liability which an owner of other assets not transferred to the transferee and also subject to such liability has agreed with the transferee to, and is expected to, satisfy; or "(B) the fair market value of such other assets (determined without regard to section 7701(g)). "(3) REGULATIONS. — The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subsection and section 362(d). The Secretary may also prescribe regulations which provide that the manner in which a liability is treated as assumed under this subsection is applied, where appropriate, elsewhere in this title.". (2) LIMITATION ON BASIS INCREASE ATTRIBUTABLE TO 26 USC 362. ASSUMPTION OF LIABILITY.— Section 362 of such Code is amended by adding at the end the following new subsection: " (d) LIMITATION ON BASIS INCREASE ATTRIBUTABLE TO ASSUMP- TION OF LIABILITY.— "(1) IN GENERAL.—In no event shall the basis of any property be increased under subsection (a) or (b) above the fair market value of such property (determined without regard to section 7701(g)) by reason of any gain recognized to the transferor as a result of the assumption of a liability. " (2) TREATMENT OF GAIN NOT SUBJECT TO TAX. —Except as provided in regulations, if—

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