Page:United States Statutes at Large Volume 68A.djvu/352

 312

INTERNAL REVENUE CODE OF 1954

taxpayer under this section shall be made by a statement to that ejffect in his return for the taxable year in which the sale or exchange takes place, and such election shall be binding for the taxable year and all subsequent taxable years, (b)

BASIS.— For basis of property acquired on a sale or exchange treated as an involuntary conversion under subsection (a), see section 1033(c).

PART VI—EXCHANGES IN OBEDIENCE TO S. E. C. ORDERS Sec. 1081. Nonrecognition of gain or loss on exchanges or distributions in obedience to orders of S. E. C. Sec. 1082. Basis for determining gain or loss. Sec. 1083. Definitions. SEC. 1081. NONRECOGNITION OF GAIN OR LOSS ON EXCHANGES OR DISTRIBUTIONS IN OBEDIENCE TO ORDERS OF S. E. C. (a) EXCHANGES OF STOCK OR SECURITIES O N L Y. — N o gain or loss

shall be recognized to the transferor if stock or securities in a corporation which is a registered holding company or a majority-owned subsidiary company are transferred to such corporation or to an associate company thereof which is a registered holding company or a majority-owned subsidiary company solely in exchange for stock or securities (other than stock or securities which are nonexempt property), and the exchange is made by the transferee corporation in obedience to an order of the Securities and Exchange Commission. (b) EXCHANGES AND SALES OF PROPERTY BY CORPORATIONS.— (1) GENERAL RULE.—No gain shall be recognized to a transferor

corporation which is a registered holding company or an associate company of a registered holding company, if such corporation, in obedience to an order of the Securities and Exchange Commission, transfers property in exchange for property, and such order recites that such exchange by the transferor corporation is necessary or appropriate to the integration or simplification of the holding company system of which the transferor corporation is a member. Any gain, to the extent that it cannot be applied in reduction of basis under section 1082(a)(2), shall be recognized. (2) NONEXEMPT PROPERTY.—If any such property so received is nonexempt property, gain shall be recognized unless such nonexempt property or an amount equal to the fair market value of such property at the time of the transfer is, within 24 months of the transfer, under regulations prescribed by the Secretary or his delegate, and in accordance with an order of the Securities and Exchange Commission, expended for property other than nonexempt property or is invested as a contribution to the capital, or as paid-in surplus, of another corporation, and such order recites that such expenditure or investment by the transferor corporation is necessary or appropriate to the integration or simplification of the holding company system of which the transferor corporation is a member. If the fair market value of such nonexempt property a t the time of the transfer exceeds the amount expended and the amount invested, as required in the preceding sentence, the gain, if any, to the extent of such excess, shall be recognized. (3) CANCELLATION OR REDEMPTION OF STOCK OR SECURITIES.—

For purposes of this subsection, a distribution in cancellation or § 1071(a)

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