Page:United States Statutes at Large Volume 68A.djvu/176

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INTERNAL REVENUE CODE OF 1954: (2) CAPITAL GAINS TREATMENT FOR CERTAIN DISTRIBUTIONS.—

In the case of an employees' trust described in section 401(a), which is exempt from tax under section 501(a), if the total distributions payable with respect to any employee are paid to the distributee within 1 taxable year of the distributee on account of the employee's death or other separation from the service, or on account of the death of the employee after his separation from the service, the amount of such distribution, to the extent exceeding the amounts contributed by the employee (determined by applying section 72(f)), which employee contributions shall be reduced by any amounts theretofore distributed to him which were not includible in gross income, shall be considered a gain from the sale or exchange of a capital asset held for more than 6 months. Where such total distributions include securities of the employer corporation, there shall be excluded from such excess the net unrealized appreciation attributable to that part of the total distributions which consists of the securities of the employer corporation so distributed. The amount of such net unrealized appreciation and the resulting adjustments to basis of the securities of the employer corporation so distributed shall be determined in accordance with regulations prescribed by the Secretary or his delegate. (3) DEFINITIONS.—For purposes of this subsection— (A) The term "securities" means only shares of stock and bonds or debentures issued by a corporation with interest coupons or in registered form. (B) The term "securities of the employer corporation" includes securities of a parent or subsidiary corporation (as defined in section 421(d)(2) and (3)) of the employer corporation. (C) The term "total distributions payable" means the balance to the credit of an employee which becomes payable to a distributee on account of the employee's death or other separation from the service, or on account of his death after separation from the service. (b) TAXABILITY OF BENEFICIARY OF N O N - E X E M P T T R U S T. — C o n t r i -

butions to an employees' trust made by an employer during a taxable year of the employer which ends within or with a taxable year of the trust for which the trust is not exempt from tax under section 501(a) shall be included in the gross income of an employee for the taxable year in which the contribution is made to the trust in the case of an employee whose beneficial interest in such contribution is nonforfeitable at the time the contribution is made. The amount actually distributed or made available to any distributee by any such trust shall be taxable to him, in the year in which so distributed or made available, under section 72 (relating to annuities) except that section 72 (e)(3) shall not apply. (c) TAXABILITY OF BENEFICIARY

OF CERTAIN FOREIGN

SITUS

TRUSTS.—For purposes of subsections (a) and (b), a stock bonus, pension, or profit-sharing trust which would qualify for exemption from tax under section 501(a) except for the fact that it is a trust created or organized outside the United States shall be treated as if it were a trust exempt from tax under section 501(a). § 402(a)(2)

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