Page:United States Statutes at Large Volume 68A.djvu/129

 CH, 1—NORMAL TAXES AND SURTAXES

B9

be treated as having been included in determining the value of the decedent's gross estate, (c) STOCK W I T H SUBSTITUTED BASIS.—If—

(1) a shareholder owns stock of a corporation (referred to in this subsection as ''new stock") the basis of which is determined by reference to the basis of stock of a corporation (referred to in this '. subsection as "old stock"), (2) the old stock was included (for Federal estate tax purposes) in determining the gross estate of a decedent, and (3) subsection (a) would apply to a distribution of property to such shareholder in redemption of the old stock, then, subject to the limitation specified in subsection (b)(1), subsection (a) shall apply in respect of a distribution in redemption of the new stock. SEC. 304. REDEMPTION THROUGH USE OF RELATED CORPORATIONS. (a)

TEEATMENT OF CERTAIN STOCK PURCHASES,— (1) ACQUISITION BY RELATED CORPORATION (OTHER THAN SUB-

SIDIARY).—For purposes of sections 302 and 303, if— (A) one or more persons are in control of each of two corporations, and (B) in return for property, one of the corporations acquires stock in the other corporation from the person (or persons) so in control, then (unless paragraph (2) applies) such property shall be treated as a distribution in redemption of the stock of the corporation acquiring such stock. In any such case, the stock so acquired shall be treated as having been transferred by the person from whom acquired, and as having been received by the corporation acquiring . it, as a contribution to the capital of such corporation. (2) ACQUISITION BY SUBSIDIARY.—For purposes of sections 302

and 303, if— (A) in return for property, one corporation acquires from a shareholder of another corporation stock in such other corporation, and (B) the issuing corporation controls the acquiring corporation, then such property shall be treated as a distribution in redemption of the stock of the issuing corporation. (b)

SPECIAL RULES FOR APPLICATION OF SUBSECTION (a).— (1) RULE FOR DETERMINATIONS UNDER SECTION 302 (b).—In the

case of any acquisition of stock to which subsection (a) of this section applies, determinations as to whether the acquisition is, by reason of section 302(b), to be treated as a distribution in part or full payment in exchange for the stock shall be made by reference to the stock of the issuing corporation. In applying section 318(a) (relating to constructive ownership of stock) with respect to section 302 (b) for purposes of this paragraph, section 318(a)(2)(C) shall ' be applied without regard to the 50 percent limitation contained
 * therein.

(2)

AMOUNT CONSTITUTING DIVIDEND.—

(A) W H E R E SUBSECTION (a)(i) APPLIES.^—In the case of any acquisition of stock to which paragraph (1) (and not paragraph (2)) of subsection (a) of this section applies, the determination of § 304(b)(2)(A) 49012°—54

9

�