Page:United States Statutes at Large Volume 70.djvu/461

 70 S T A T. ]

405

PUBLIC LAW 629-JUNE 29, 1966

United States and remaining unpaid for more than 5 years from the date such claim first accrued and paid prior to January 1, 1950, the portion of the tax imposed by section 12 attributable to such amount (other than interest) shall not exceed 30 percent thereof. I n applying section 291(a) (relating to additions to the tax for failure to file a return) in any case to which paragraph (b) of this section applies, the term 'reasonable cause' shall include the filing of a timely incomplete return under circumstances which led the taxpayer to believe that no tax was due on amounts received under a settlement with the United States." (b) The amendment made by this section shall apply with respect to taxable years ending after December 31, 1948, notwithstanding the operation of any law or rule of law (other than section 3760 of the Internal Revenue Code of 1939 or section 7121 of the Internal Revenue Code of 1954, relating to closing agreements, and other than section 3761 of the Internal Revenue Code of 1939 or section 7122 of the Internal Revenue Code of 1964, relating to compromises). Notwithstanding the preceding sentence, no claim for credit or refund of any overpayment resulting from the amendment made by this section shall be allowed or made after the period of limitation applicable to such overpayment, except that such period shall not expire before the expiration of one year after the date of the enactment of this Act.

Effective date.

Restriction.

SEC. 3. CERTAIN DISTRIBUTIONS IN KIND.

(a) Section 115 of the Internal Revenue Code of 1939 (relating to distributions by corporations) is hereby amended by adding at the end thereof the following new subsection: "(n)

CERTAIN DISTRIBUTIONS I N K I N D. —

"(1) Notwithstanding ^ny other provision of this section, a distribtition of property by a corporation to its stockholders, with respect to its stock, shall be (except as provided in p a r a ^ a p h (2)) considered to be a distribution which is not a dividend (whether or not otherwise a dividend) to the extent that the fair market value of such property exceeds the earnings and profits of such corporation accumulated after February 28, 1913, and the earnings and profits of the taxable year (computed as of the close of the taxable year without diminution by reason of any distributions, except those described in subparagraphs (A), (B), and (C) of paragraph (3), made during the taxable year) without regard to the amount of the earnings and profits at the time the distribution was made. The preceding sentence shall not prevent the application of subsection (d) to any such distribution. "(2) If any portion of a distribution of property by a corporation to its shareholders, with respect to its stock, is a dividend solely by reason of the last sentence of subsection (a), then— " (A) paragraph (1) shall not apply to such distribution, but " (B) such distribution shall be considered to be a distribution which is not a dividend (whether or not otherwise a dividend) to the extent that the fair market value of such property exceeds the Subchapter A net income referred to in the last sentence of subsection (a), adjusted as provided in such sentence. I n applying this paragraph, distributions described in subparagraphs (A), (B), and (C) of paragraph (3) shall be taken into account before other distributions.

53 Stat. 46.

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