Page:United States Statutes at Large Volume 120.djvu/390

 PUBLIC LAW 109–222—MAY 17, 2006

120 STAT. 359

Section 355 (relating to distributions of stock and securities of a controlled corporation) is amended by adding at the end the following new subsection: ‘‘(g) SECTION NOT TO APPLY TO DISTRIBUTIONS INVOLVING DISQUALIFIED INVESTMENT CORPORATIONS.— ‘‘(1) IN GENERAL.—This section (and so much of section 356 as relates to this section) shall not apply to any distribution which is part of a transaction if— ‘‘(A) either the distributing corporation or controlled corporation is, immediately after the transaction, a disqualified investment corporation, and ‘‘(B) any person holds, immediately after the transaction, a 50-percent or greater interest in any disqualified investment corporation, but only if such person did not hold such an interest in such corporation immediately before the transaction. ‘‘(2) DISQUALIFIED INVESTMENT CORPORATION.—For purposes of this subsection— ‘‘(A) IN GENERAL.—The term ‘disqualified investment corporation’ means any distributing or controlled corporation if the fair market value of the investment assets of the corporation is— ‘‘(i) in the case of distributions after the end of the 1-year period beginning on the date of the enact2⁄3 or more of the fair market ment of this subsection, value of all assets of the corporation, and ‘‘(ii) in the case of distributions during such 13⁄4 or more of the fair market value of year period, all assets of the corporation. ‘‘(B) INVESTMENT ASSETS.— ‘‘(i) IN GENERAL.—Except as otherwise provided in this subparagraph, the term ‘investment assets’ means— ‘‘(I) cash, ‘‘(II) any stock or securities in a corporation, ‘‘(III) any interest in a partnership, ‘‘(IV) any debt instrument or other evidence of indebtedness, ‘‘(V) any option, forward or futures contract, notional principal contract, or derivative, ‘‘(VI) foreign currency, or ‘‘(VII) any similar asset. ‘‘(ii) EXCEPTION FOR ASSETS USED IN ACTIVE CONDUCT OF CERTAIN FINANCIAL TRADES OR BUSINESSES.— Such term shall not include any asset which is held for use in the active and regular conduct of— ‘‘(I) a lending or finance business (within the meaning of section 954(h)(4)), ‘‘(II) a banking business through a bank (as defined in section 581), a domestic building and loan association (within the meaning of section 7701(a)(19)), or any similar institution specified by the Secretary, or ‘‘(III) an insurance business if the conduct of the business is licensed, authorized, or regulated by an applicable insurance regulatory body.

VerDate 14-DEC-2004

10:20 Jul 12, 2007

Jkt 059194

PO 00001

Frm 00357

Fmt 6580

Sfmt 6581

E:\PUBLAW\PUBL001.109

26 USC 355.

APPS06

PsN: PUBL001

�