Page:United States Statutes at Large Volume 56 Part 1.djvu/909

 56 STAT.] 77TH CONG., 2D SESS.-CH. 619-OCT. 21, 1942 a capital gain dividend shall be only that proportion of the amount so designated which such excess of the net long-term capital gain over the net short-term capital loss bears to the aggregate amount so designated." (b) TECHNICAL AMENDMENTS. - (1) Section 4 (relating to applicability of supplements) is amended by striking out "(j) Mutual investment companies,- Supplement Q" and inserting in lieu thereof "(j) Regulated investment companies,-Supplement Q". (2) Section 14 (e) (relating to tax on corporations) is amended to read as follows: "(e) REGULATED INVESTMENT COMPANIES.-In the case of a cor- poration subject to the tax imposed by Supplement Q (relating to regulated investment companies), the tax shall be as provided in such supplement." (c) RETROACTIVE PROVISIONS RELATING TO EARNINGS AND PROFITS. - For any taxable year beginning after December 31, 1935, and before January 1, 1942, of a corporation which filed an income tax return as a mutual investment company, the earnings and profits of such corporation for such taxable year (but not its accumulated earnings and profits) shall not be reduced by any amount which is not allow- able as a deduction in computing its net income for such taxable year; except that this subsection shall not result in earnings and profits of the taxable year in excess of the aggregate of the distribu- tions made by the corporation to its shareholders during the taxable year exclusive of the amounts, if any, which the corporation advised its shareholders to be nontaxable for Federal income tax purposes. SEC. 171. AMENDMENTS TO SUPPLEMENT R. (a) EXCHANGES AND SALES OF PRoPERTY.- Section 371 (b) (relat- ing to exchanges of property for property) is amended to read as follows: "(b) EXCHANGES AND SALES OF PROPERTY BY CORPORATIONS.-No gain shall be recognized to a transferor corporation which is a regis- tered holding company or an associate company of a registered hold- ing company, if such corporation, in obedience to an order of the Securities and Exchange Commission transfers property in exchange for property, and such order recites that such exchange by the trans- feror corporation is necessary or appropriate to the integration or simplification of the holding company system of which the transferor corporation is a member. If any such' property so received is non- exempt property, gain shall be recognized unless such nonexempt property or an amount equal to the fair market value of such prop- erty at the time of the transfer is, within 24 months of the transfer under regulations prescribed by the Commissioner with the approval of the Secretary, and in accordance with an order of the Securities and Exchange Commission, expended for property other than non- exempt property or is invested as a contribution to the capital, or as paid-in surplus, of another corporation, and such order recites that such expenditure or investment by the transferor corporation is neces- sary or appropriate to the integration or simplification of the holding company system of which the transferor corporation is a member. If the fair market value of such nonexempt property at the time of the transfer exceeds the amount expended and the amount invested, as required in the second sentence of this paragraph, the gain, if any, to the extent of such excess, shall be recognized. Any gain, to the extent that it cannot be applied in reduction of basis under section 881 53 Stat. 4. 26U.S. C. §4;Supp. I,§4. 53 Stat. 9. 26U.S.C.114(e). Ante, p. 878. 53 Stat. 99 . 26U. S. c. 371(b). Nonexempt prop- erty. Rtcogultion of gain. 65714°- 43 -Tr. I---56

�