Page:United States Statutes at Large Volume 52.djvu/594

 52 STAT.] 75TH CONG., 3D SESS.-CH. 289-MAY 28, 1938 (b) LIMITATIONS. - Despite the provisions of paragraph (1) a cor- poration shall not be considered as a mutual investment company if at any time during the taxable year- (1) More than 5 per centum of the gross assets of the corpo- ration, taken at cost, was invested in stock or securities, or both, of any one corporation, government, or political subdivision thereof, but this limitation shall not apply to investments in obligations of the United States or in obligations of any corpora- tion organized under general Act of Congress if such corporation is an instrumentality of the United States; or (2) It owned more than 10 per centum of the outstanding stock or securities, or both, of any one corporation; or (3) It had any outstanding bonds or indebtedness in excess of 10 per centum of its gross assets taken at cost; or (4) It fails to comply with any rule or regulation prescribed by the Commissioner, with the approval of the Secretary, for the purpose of ascertaining the actual ownership of its out- standing stock. SEC. 362. TAX ON MUTUAL INVESTMENT COMPANIES. (a) SUPPLEMENT Q NET INCOME. -For the purposes of this title the term "Supplement Q net income" means the adjusted net income minus the basic surtax credit computed under section 27 (b) without the application of paragraphs (2) and (3). (b) IMPOSITION OF TAX.-There shall be levied, collected, and paid for each taxable year upon the Supplement Q net income of every mutual investment company a tax equal to 161/2 per centum of the amount thereof. Supplement R-Exchanges and Distributions in Obedience to Orders of Securities and Exchange Commission SEC. 371. NONRECOGNITION OF GAIN OR LOSS. (a) EXCHANGES OF STOCK OR SECURITIES ONLY.- No gain or loss shall be recognized to the transferor if stock or securities in a cor- poration which is a registered holding company or a majority-owned subsidiary company are transferred to such corporation or to an associate company thereof which is a registered holding company or a majority-owned subsidiary company solely in exchange for stock or securities (other than stock or securities which are nonexempt property), and the exchange is made by the transferee corporation in obedience to an order of the Securities and Exchange Commission. (b) EXCHANGES OF PROPERTY FOR PROPERTY BY CORPORATIONS. -No gain or loss shall be recognized to a transferor corporation which is a registered holding company or an associate company of a registered holding company, if such corporation, in obedience to an order of the Securities and Exchange Commission transfers property solely in exchange for property (other than nonexempt property), and such order recites that such exchange by the transferor corpora- tion is necessary or appropriate to the integration or simplification of the holding company system of which the transferor corporation is a member. (c) DISTRIBUTION OF STOCK OR SECURITIES ONLY.-If there is dis- tributed, in obedience to an order of the Securities and Exchange Commission, to a shareholder in a corporation which is a registered holding company or a majority-owned subsidiary company, stock or securities (other than stock or securities which are nonexempt prop- erty), without the surrender by such shareholder of stock or securities 553 Limitations. Tax. Supplement Q net income. Ante, p. 468. Imposition of tax. Exchanges and dis- tributions in obedi- ence to orders of Secu- rities and Exchange Commission. Nonrecognition of gain or loss. Exchanges of stock or securities only. Exchanges of prop- erty for property by corporations. Distribution of stock or securities only.

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