Page:United States Statutes at Large Volume 76.djvu/875

 76 STAT. ]

PUBLIC LAW 87-792-OCT. 10, 1962

827

" (d) TAXABILITY OF BENEFICIARY OF QUALIFIED BOND PURCHASE PLAN.— " (1) GROSS INCOME NOT TO INCLUDE BONDS AT TIME OF DISTRI-

BUTION.—For purposes of this chapter, in the case of a distributee of a bond described in subsection (b) under a qualified bond purchase plan, or from a trust described in section 401(a) which is 26 USC 401,501. exempt from tax under section 501(a), gross income does not include any amount attributable to the receipt of such bond. Upon redemption of such bond, the proceeds shall be subject to taxation under this chapter, but the provisions of section 72 (relat26 USC 72. ing to annuities, etc.) and section 1232 (relating to bonds and 26 USC 1232. other evidences of indebtedness) shall not apply. "(2) BASIS.—The basis of any bond received by a distributee under a qualified bond purchase plan— " (A) if such bond is distributed to an employee, or with respect to an employee, who at the time of purchase of the bond, was an employee other than an employee within the meaning of section 401(c)(1), shall be the amount of the Ante, p. s n. contributions by the employee which were used to purchase the bond, and " (B) if such bond is distributed to an employee, or with respect to an employee, who, at the time of purchase of the bond, was an employee within the meaning of section 401(c) (1), shall be the amount of the contributions used to purchase the bond which were made on behalf of such employee and were not allowed as a deduction under subsection (c). The basis of any bond described in subsection (b) received by a distributee from a trust described in section 401(a) which is exempt from tax under section 501(a) shall be determined under regulations prescribed by the Secretary or his delegate. " (e) CAPITAL GAINS TREATMENT NOT TO APPLY TO BONDS D I S TRIBUTED BY TRUSTS.—Section 402(a)(2) shall not apply to any bond

26 USC 402.

described in subsection (b) distributed to any distributee and, for purposes of applying such section, any such bond distributed to any distributee and any such bond to the credit of any employee shall not be taken into account. " (f) EMPLOYEE DEFINED.—For purposes of this section, the term 'employee' includes an individual who is an employee within the meaning of section 401(c)(1), and the employer of such individual shall be the person treated as his employer under section 401(c)(4). Ante, p. 812. "(g) PROOF OF PURCHASE.—At the time of purchase of any bond to which this section applies, proof of such purchase shall be furnished in such form as will enable the purchaser, and the employee in whose name such bond is purchased, to comply with the provisions of this section. " (h) REGULATIONS.—The Secretary or his delegate shall prescribe such regulations as may be necessary to carry out the provisions of this section." (b) CLERICAL AMENDMENT.—The table of sections for such part is amended by adding at the end thereof the following new item: "Sec. 405. Qualified bond purchase plans." SEC. 6. PROHIBITED TRANSACTIONS. Section 503 of the Internal Revenue Code of 1954 (relating to pro- 26 USC 503. hibited transactions) is amended by adding at the end thereof the following new subsection: " (j) TRUSTS BENEFITING CERTAIN OWNER-EMPLOYEES.— " (1) PROHIBITED TRANSACTIONS.—In the case of a trust

described in section 401(a) which is part of a plan providing contributions or benefits for employees some or all of whom are owner-employees (as defined in section 401(c)(3)) who control (within the meaning of section 401(d)(9)(B)) the trade or business with respect

Ante, p. sis.

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