Page:United States Statutes at Large Volume 56 Part 1.djvu/957

 56 STAT.] 77TH CONG. , 2D SESS.-CH. 619-OCT. 21, 1942 then to the extent that the consideration for such acquisition was not the issuance of the taxpayer's or first corporation's, as the case may be, own stock, the Supplement A average base period net income of the taxpayer shall be reduced, and the transferred capital addition and reduction adjusted, in respect of the income and capital addition and reduction of the corporation whose stock was so acquired and in respect of the income and capital addition and reduction of any other corporation which at the time of such acquisition was connected directly or indirectly through stock ownership with the corporation whose stock was so acquired and which thereafter became a com- ponent corporation of the taxpayer, in such amounts and in such manner as shall be determined in accordance with regulations pre- scribed by the Commissioner with the approval of the Secretary. For the purposes of this paragraph, stock which has, in the hands of the taxpayer or first corporation, as the case may be, a basis deter- mined with reference to the basis of stock previously acquired by the issuance of the taxpayer's or first corporation's, as the case may be, own stock, shall be considered as having been acquired in considera- tion of the issuance of the taxpayer's or first corporation's, as the case may be, own stock. "(2) If during the taxable year for which tax is computed under this subchapter the taxpayer acquires assets in a transaction which constitutes it an acquiring corporation, the amount includible under subsection (a), attributable to such transaction, shall be limited to an amount which bears the same ratio to the amount computed without regard to this subsection as the number of days in the taxable year after such transaction bears to the total number of days in such taxable year. "(g) In the case of a partnership which is a component corporation by virtue of section 740 (b) (5), the computations required by this Supplement shall be made, under rules and regulations prescribed by the Commissioner with the approval of the Secretary, as if such partnership had been a corporation. For the purpose of such com- putations, in making the adjustment for income taxes required by section 711 (b) (1) (A), the partnership so regarded as a corpora- tion shall be considered as having distributed all its net income as a dividend. "(h) INCREASED EARNINGS IN LAST HALF OF BASE PERIOD.- "(1) GENERAL RULE.- T he Supplement A average base period net income determined under this subsection shall be computed by ascertaining for each half of the base period the sum of the plus amounts determined under subsection (a) reduced if for any year in such half a minus amount was determined by the minus amount for such year. If the amount ascertained for the second half exceeds the amount ascertained for the first half, the Supplement A average base period net income shall be the sum divided by two, of the amount so ascertained for the second half plus one-half of such excess, except that it shall not exceed the largest plus amount determined under subsection (a) with respect to any base period year. "(2) LIMITATION ON AMOUNT INCLUDIBLE FOR CERTAIN TAXABLE YEARS ENDING AFTER MAY 31, 1940.--For the purposes of this sub- section the excess profits net income of any corporation for any taxable year beginning in 1939 and ending after May 31, 1940, shall in no case exceed an amount computed as follows: "(A) By reducing the excess profits net income by an amount which bears the same ratio thereto as the number of 929 Ante. p. 924. 54 Stat. 977 . 26U.S.C.i711 (b) (1) (A); Supp. I, § 711 (b) (1) (A). 65714°- 43-PT. 1 - 59

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