Page:United States Statutes at Large Volume 78.djvu/639

 78 STAT. ]

PUBLIC LAW 88-484-AUG. 22, 1964

597

a security interest), and unrealized receivables or fees (as defined in subsection (b)(4)), shall be treated as property which is not a capital asset. " (B) PROPERTY UNDER CONSTRUCTION.—If manufacture, construction, or production with respect to any property described in subparagraph (A) has commenced before any date of sale described therein, the term 'subsection (f) asset' includes the property resulting from such manufacture, construction, or production. " (C) SPECIAL RULE FOR LAND,—In the case of land or any interest in real property (other than a security interest) described in subparagraph (A), the term 'subsection (f) asset' includes any improvements resulting from construction with respect to such property if such construction is commenced (by the consenting corporation or by a transferee corporation which has agreed to the application of paragraph (2)) within 2 years after the date of any sale described in subparagraph (A). " (5) 5-YEAR LIMITATION AS TO SHAREHOLDER.—Paragraph (1)

shall not apply to the sale of stock of a corporation by a shareholder if, during the 5-year period ending on the date of such sale, such shareholder (or any related person within the meaning of subsection (e)(8)(A)) sold any stock of another consenting corporation within any 6-month period beginning on a date on which a consent was filed under paragraph (1) by such other corporation. " (6) SPECIAL RULE FOR STOCK OWNERSHIP I N OTHER CORPORA-

TIONS.—If a corporation (hereinafter in this paragraph referred to as 'owning corporation') owns 5 percent or more in value of the outstanding stock of another corporation on the date of any sale of stock of the owning corporation during a 6-month period with respect to which a consent under paragraph (1) was filed by the owning corporation, such consent shall not be valid with respect to such sale unless such other corporation has (within the 6-month period ending on the date of such sale) filed a valid consent under paragraph (1) with respect to sales of its stock. For purposes of applying paragraph (4) to such other corporation, a sale of stock of the owning corporation to which paragraph (1) applies shall be treated as a sale of stock of such other corporation. In the case of a chain of corporations connected by the 5-percent ownership requirements of this paragraph, rules similar to the rules of the two preceding sentences shall be applied. " (7) ADJUSTMENTS TO BASIS.—The Secretary or his delegate

shall prescribe such regulations as he may deem necessary to provide for adjustments to the basis of property to reflect gain recognized under paragraph (2)." (b)(1) Subsections (b) and (d) of section 301 (relating to amount distributed), and paragraph (3) of section 312(c) (relating to adjustments of earnings and profits), of the Internal Revenue Code of 1954 are each amended by striking out "section 311" and inserting in lieu thereof "section 311, under section 341(f),". (2) Subparagraphs (A) and (B) of section 453(d)(4) of such Code (relating to distribution of installment obligations in certain corporate liquidations) are each amended by inserting "section 341(f) or'' before "section 1245(a)". SEC. 2. The amendments made by the first section of this Act shall apply with respect to transactions after the date of the enactment of this Act in taxable years ending after such date.

^^^l^^*" ^'*' ^^ 301.312. fe'star ^035 26 us^c 453.^"

Effective date.

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