Page:United States Statutes at Large Volume 68A.djvu/147

 C H. 1—NORMAL TAXES AND SURTAXES

107

(2) NONRECOGNITION WITH RESPECT TO INVENTORY IN CERTAIN

CASES.—Notwithstanding paragraph (1) of this subsection, if substantially all of the property described in subparagraph (A) of such paragraph (1) which is attributable to a trade or business of the corporation is, in accordance with this section, sold or exchanged to one person in one transaction, then for purposes of subsection (a) the term "property" includes— (A) such property so sold or exchanged, and (B) installment obligations acquired in respect of such sale or exchange. (c) LIMITATIONS.— (1) COLLAPSIBLE CORPORATIONS AND LIQUIDATIONS TO WHICH SECTION 333 APPLIES.—This section shall not apply to any sale or

exchange— (A) made by a collapsible corporation (as defined in section 341 (b)), or _ (B) following the adoption of a plan of complete liquidation, if section 333 applies with respect to such liquidation. (2) LIQUIDATIONS TO WHICH SECTION 332 APPLIES.—In the case of a sale or exchange following the adoption of a plan of complete liquidation, if section 332 applies with respect to such liquidation, then— (A) if the basis of the property of the liquidating corporation in the hands of the distributee is determined under section 334 (b)(1), this section shall not apply; or (B) if the basis of the property of the liquidating corporation in the hands of the distributee is determined under section 334 (b)(2), this section shall apply only to that portion (if any) of the gain which is not greater than the excess of (i) that portion of the adjusted basis (adjusted for any adjustment required under the second sentence of section 334(b)(2)) of the stock of the liquidating corporation which is allocable, under regulations prescribed by the Secretary or his delegate, to the property sold or exchanged, over (ii) the adjusted basis, in the hands of the liquidating corporation, of the property sold or exchanged. SEC. 338. EFFECT ON EARNINGS AND PROFITS. For special rule relating to the effect on earnings and profits of certain distributions in partial liquidation, see section 312(e).

Subpart C—Collapsible Corporations; Foreign Personal Holding Companies Sec. 341. Collapsible corporations. Sec. 342. Liquidation of certain foreign personal holding companies. SEC. 341. COLLAPSIBLE CORPORATIONS. (a) TREATMENT OF G A I N TO SHAREHOLDERS.—Gain

from—• (1) the sale or exchange of stock of a collapsible corporation, (2) a distribution in partial or complete liquidation of a collapsible corporation, which distribution is treated under this part as in part or full payment in exchange for stock, and (3) a distribution made by a collapsible corporation which, under section 301(c)(3)(A), is treated, to the extent it exceeds the basis § 341(a)(3)

�