Page:United States Statutes at Large Volume 68A.djvu/392

 352

INTERNAL REVENUE CODE OF 1954

(2) there shall be allowed as deductions only such items properly allocable to the operation of the business of such enterprise, except deductions allocable to the proprietor or partners under subsection •

(i)(2). (k) DISTRIBUTIONS OTHER

THAN

IN LIQUIDATION.—Except

as

provided in subsection (1), a distribution with respect to a proprietorship or partnership interest by an enterprise as to which an election has been made under subsection (a), other than a distribution of personal holding company income under subsection (i)(3), shall be treated as a corporate distribution in accordance with part I of subchapter C of this chapter. (1) DISTRIBUTIONS IN LIQUIDATION.—A distribution in partial or complete liquidation with respect to a proprietorship or partnership interest by an enterprise as to which an election has been made under subsection (a), shall be treated as a corporate liquidation in accordance with part II of subchapter C of this chapter. (m) ORGANIZATIONS AND REORGANIZATIONS.—An enterprise as to which an election has been made under subsection (a) shall not be considered a corporation, nor shall the proprietor or partners of such enterprise be considered shareholders, for purposes of parts III and IV of subchapter C of this chapter (relating to corporate organizations, and reorganizations, and insolvency reorganizations) except in the case of— (1) a contribution of property, constituting either paid-in surplus or a contribution to capital, on which gain or loss is recognized; and (2) the organization of an enterprise as to which the election described in subsection (a) is made for its first taxable year.

§ 1361(j)(2)

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