Page:United States Statutes at Large Volume 68A.djvu/159

 CH. 1

NORMAL TAXES AND SURTAXES

119

then the basis shall be the same as it would be in the hands of the transferor, increased in the amount of gain recognized to the transferor on such transfer. (b) TEANSPERS TO CORPORATIONS.—If property was acquired by a corporation in connection with a reorganization to which this part applies, then the basis shall be the same as it would be in the hands of the transferor, increased in the amount of gain recognized to the transferor on such transfer. This subsection shall not apply if the property acquired consists of stock or securities in a corporation a party to the reorganization, unless acquired by the issuance of stock or securities of the transferee as the consideration in whole or in part for the transfer. (c)

SPECIAL RULE FOR CERTAIN CONTRIBUTIONS TO C A P I T A L. —

(1) PROPERTY OTHER THAN MONEY.—Notwithstanding subsection (a)(2), if property other than money— (A) is acquired by a corporation, on or after June 22, 1954, as a contribution to capital, and (B) is not contributed by a shareholder as such, then the basis of such property shall be zero. (2) MONEY.—Notwithstanding subsection (a)(2), if money— (A) is received by a corporation, on or after June 22, 1954, as a contribution to capital, and (B) is not contributed by a shareholder as such, then the basis of any property acquired with such money during the 12-month period beginning on the day the contribution is received shall be reduced by the amount of such contribution. The excess (if any) of the amount of such contribution over the amount of the reduction under the preceding sentence shall be applied to the reduction (as of the last day of the period specified in the preceding sentence) of the basis of any other property held by the taxpayer. The particular properties to which the reductions required by this paragraph shall be allocated shall be determined under regulations prescribed by the Secretary or his delegate. SEC. 363. EFFECT ON EARNINGS AND PROFITS. For rules relating to the effect on earnings and profits of transactions to which this part applies, see sections 312 and 381.

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Subpart D—Special Rule; Definitions Sec. 367. Foreign corporations. Sec. 368. Definitions relating to corporate reorganizations.

SEC. 367. FOREIGN CORPORATIONS.

In determining the extent to which gain shall be recognized in the case of any of the exchanges described in section 332, 351, 354, 355, 356, or 361, a foreign corporation shall not be considered as a corporation unless, before such exchange, it has been established to the satisfaction of the Secretary or his delegate that such exchange is not in pursuance of a plan having as one of its principal purposes the avoidance of Federal income taxes. For purposes of this section, any distribution described in section 355 (or so much of section 356 as relates to section 355) shall be treated as an exchange whether or not it is an ^exchange. §367

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