Page:United States Statutes at Large Volume 76.djvu/1030

 982

PUBLIC LAW 87-834-OCT. 16, 1962

[76 STAT.

out of the amount referred to in subparagraph (A), and then out of such other accounts as may be proper. "(2)

AMOUNTS CHARGED TO RESERVE ACCOUNTS AND INCLUDED IN

GR03S INCOME.—If any distribution is treated under paragraph (1) as having been made out of the reserves described in subparagraphs (B) and (C) of such paragraph, the amount charged against such reserve shall be the amount which, when reduced by the amount of tax imposed under this chapter and attributable to the inclusion of such amount in gross income, is equal to the amount of such distribution; and the amount so charged against such reserve shall be included in gross income of the taxpayer. "(3)

SPECIAL RULES.—

"(xA) For purposes of paragraph (1)(B), additions to the reserve for losses on qualifying real property loans for the taxable year in which the distribution occurs shall be taken into account. " (B) For purposes of computing under this section the amount of a reasonable addition to the reserve for losses on qualifying real property loans for any taxable year, any amount charged during any year to such reserve pursuant to the provisions of paragraph (2) shall not be taken into account." (b)

FORECLOSURE ON PROPERTY SECURING LOANS.—Part II of

sub-

26 USC 591-594. chapter H of chapter 1 (relating to mutual savings banks, etc.) is amended by adding at the end thereof the following new section:

"SEC. 595. FORECLOSURE ON PROPERTY SECURING LOANS. Ante. p. 977.

26 USC 166,

221.

" (a) NONRECOGNITION OF G A I N OR Loss AS A RESULT OF FORECLOSURE.—In the case of a creditor which is an organization described in section 593(a), no gain or loss shall be recognized, and no debt shall be considered as becoming worthless or partially worthless, as the result of such organization having bid in at foreclosure, or having otherwise reduced to ownership or possession by agreement or process of law, any property which was security for the payment of any indebtedness. "(b) CHARACTER or PROPERTY.—For purposes of sections 166 and 1221, any property acquired in a transaction with respect to which gain or loss to an organization was not recognized by reason of subsection (a) shall be considered as property having the same characteristics as the indebtedness for which such property was security. Any amount realized by such organization with respect to such property shall be treated for purposes of this chapter as a payment on account of such indebtedness, and any loss with respect thereto shall be treated as a bad debt to which the provisions of section 166 (relating to allowance of a deduction for bad debts) apply. "(c) BASIS.—The basis of any property to which subsection (a) applies shall be the basis of the indebtedness for which such property was security (determined as of the date of the acquisition of such property), properly increased for costs of acquisition. " (d) REGULATORY AUTHORITY.—The Secretary or his delegate shall prescribe such regulations as he may deem necessary to carry out the purposes of this section." (c)

DEFINITION OF DOMESTIC BUILDING AND LOAN ASSOCIATION.—

Paragraph (19) of section 7701(a) (definition of domestic building and loan association) is amended to read as follows: "(19) DOMESTIC BUILDING AND LOAN ASSOCIATION.—The term 'domestic building and loan association' means a domestic building and loan association, a domestic savings and loan association, and a Federal savings and loan association—

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