Page:United States Statutes at Large Volume 90 Part 2.djvu/168

 90 STAT. 1636

PUBLIC LAW 94-455—OCT. 4, 1976 (b)

26 USC 1248.

E A R N I N G S AND PROFITS OF SUBSIDIARIES OF FOREIGN CORPORA-

TioNs FOR PURPOSES OF SECTION 1248.—Subparagraph (C) of section 1248(c)(2) is amended by striking out "; and " a t the end thereof and inserting in lieu thereof the following: " (or on the date of any sale or exchange of the stock of such other foreign corporation occurring during the 5-year period ending on the date of the sale or exchange of the stock of such foreign corporation, to the extent not otherwise taken into account under this section b u t not in excess of the fair m a r k e t value of the stock of such other foreign corporation sold or exchanged over the basis of such stock (for determining gain) in the h and s of the transfer o r); and". (c) CERTAIN SECTION 311, 336, OR 337 TRANSACTIONS.—

(1) GENERAL RULE.—Section 1248 (relating to gain from certain sales or exchanges of stock in certain foreign corporations) is amended by redesignating subsections (f) and (g) as subsections (g) and (h), respectively, and by inserting after subsection 'e) the following new subsection: '(f) "(fl CERTAIN SECTION 311, 336, OR 337 TRANSACTIONS.— "(1)

IN GENERAL.—If—

" (A) a domestic corporation satisfies the stock ownership requirements of subsection (a)(2) with respect to a foreign corporation, and " (B) such domestic corporation distributes, sells, or exchanges stock of such foreign corporation in a transaction to which section 311, 336, or 337 applies, then, notwithstanding any other provision of this subtitle, an amount equal to the excess of the fair market value of such stock over its adjusted basis in the h and s of the domestic corporation shall be included in the gross income of the domestic corporation as a dividend to the extent of the earnings and profits of the foreign corporation attributable (under regulations prescribed by the Secretary) to such stock which were accumulated in taxable years of such foreign corporation beginning after December 31, 1962, and during the period or periods the stock was held by such domestic corporation while such foreign corporation was a controlled foreign corporation. For purposes of subsections (c)(2), (d), and (h), a distribution, sale, or exchange of stock to which this subsection applies shall be treated as a sale of stock to which subsection (a) applies. " (2) ExcEiTioN FOR CERTAIN DISTRIBUTIONS.—In the casc of any distribution of stock of a foreign corporation, paragraph (1) shall not apply if such distribution is to a domestic corporation— " (A) which is treated under this section as holding such stock for the period for which the stock was held by the dist r i b u t i n g corporation, and " (B) which, immediately after the distribution, satisfies the stock ownership requirements of subsection (a)(2) with respect to such foreign corporation. "(3)

NONAPPLICATION OF PARAGRAPH (1) I N CERTAIN CASES.

Paragraph (1) shall not apply to a sale or exchange to which section 337 applies if— " (A) throughout the period or periods the stock of the foreign corporation was held by the domestic corporation (or predecessor referred to in paragraph (2)) all the stock of such domestic corporation was owned by United States persons who satisfied the 10-percent stock ownership require-

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