Page:United States Statutes at Large Volume 118.djvu/1679

 118 STAT. 1649 PUBLIC LAW 108–357—OCT. 22, 2004 ‘‘(B) a debtor partnership transfers a capital or profits interest in such partnership, to a creditor in satisfaction of its recourse or nonrecourse indebtedness, such corporation or partnership shall be treated as having satisfied the indebtedness with an amount of money equal to the fair market value of the stock or interest. In the case of any partnership, any discharge of indebtedness income recognized under this paragraph shall be included in the distributive shares of taxpayers which were the partners in the partnership immediately before such discharge.’’. (b) EFFECTIVE DATE.—The amendment made by this section shall apply with respect to cancellations of indebtedness occurring on or after the date of the enactment of this Act. SEC. 897. DENIAL OF INSTALLMENT SALE TREATMENT FOR ALL READILY TRADABLE DEBT. (a) IN GENERAL.—Section 453(f)(4)(B) (relating to purchaser evidences of indebtedness payable on demand or readily tradable) is amended by striking ‘‘is issued by a corporation or a government or political subdivision thereof and’’. (b) EFFECTIVE DATE.—The amendment made by this section shall apply to sales occurring on or after the date of the enactment of this Act. SEC. 898. MODIFICATION OF TREATMENT OF TRANSFERS TO CREDI TORS IN DIVISIVE REORGANIZATIONS. (a) IN GENERAL.—Section 361(b)(3) (relating to treatment of transfers to creditors) is amended by adding at the end the following new sentence: ‘‘In the case of a reorganization described in section 368(a)(1)(D) with respect to which stock or securities of the corpora tion to which the assets are transferred are distributed in a trans action which qualifies under section 355, this paragraph shall apply only to the extent that the sum of the money and the fair market value of other property transferred to such creditors does not exceed the adjusted bases of such assets transferred.’’. (b) LIABILITIES IN EXCESS OF BASIS.—Section 357(c)(1)(B) is amended by inserting ‘‘with respect to which stock or securities of the corporation to which the assets are transferred are distributed in a transaction which qualifies under section 355’’ after ‘‘section 368(a)(1)(D)’’. (c) EFFECTIVE DATE.—The amendments made by this section shall apply to transfers of money or other property, or liabilities assumed, in connection with a reorganization occurring on or after the date of the enactment of this Act. SEC. 899. CLARIFICATION OF DEFINITION OF NONQUALIFIED PRE FERRED STOCK. (a) IN GENERAL.—Section 351(g)(3)(A) is amended by adding at the end the following: ‘‘Stock shall not be treated as participating in corporate growth to any significant extent unless there is a real and meaningful likelihood of the shareholder actually partici pating in the earnings and growth of the corporation.’’. (b) EFFECTIVE DATE.—The amendment made by this section shall apply to transactions after May 14, 2003. 26 USC 351 note. 26 USC 357 note. 26 USC 453 note. 26 USC 108 note.

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