Page:United States Statutes at Large Volume 94 Part 2.djvu/1407

 PUBLIC LAW 96-499—DEC. 5, 1980

94 STAT. 2685

that paragraphs (2)(C) and (3)(C) of section 318(a) shall be 26 USC 318. applied by substituting '5 percent' for '50 percent'). "(d) TREATMENT OF DISTRIBUTIONS, ETC., BY FOREIGN CORPORATIONS.— "(1) DISTRIBUTIONS.—

"(A) IN GENERAL.—Except to the extent otherwise provided in regulations, notwithstanding any other provision of this chapter, gain shall be recognized by a foreign corporation on the distribution (including a distribution in liquidation or redemption) of a United States real property interest in an amount equal to the excess of the fair market value of such interest (as of the time of the distribution) over its adjusted basis. (B) EXCEPTION WHERE THERE IS A CARRYOVER BASIS.—

Subparagraph (A) shall not apply if the basis of the distributed property in the hands of the distributee is the same as the adjusted basis of such property before the distribution increased by the amount of any gain recognized by the distributing corporation. "(2) SECTION 337 NOT TO APPLY.—Section 337 shall not apply to 26 USC 337. any sale or exchange of a United States real property interest by a foreign corporation. "(e) COORDINATION WITH NONRECOGNITION PROVISIONS.—

"(1) IN GENERAL.—Except to the extent otherwise provided in subsection (d) and paragraph (2) of this subsection, any nonrecognition provision shall apply for purposes of this section to a transaction only in the case of an exchange of a United States real property interest for an interest the sale of which would be subject to taxation under this chapter. "(2) REGULATIONS.—The Secretary shall prescribe regulations (which are necessary or appropriate to prevent the avoidance of Federal income taxes) providing— "(A) the extent to which nonrecognition provisions shall, and shall not, apply for purposes of this section, and "(B) the extent to which— "(i) transfers of property in reorganization, and "(ii) changes in interests in, or distributions from, a artnership, trust, or estate, be treated as sales of property at fair market value. "(3) NONRECOGNITION PROVISION DEFINED.—For purposes of this subsection, the term 'nonrecognition provision' means any provision of this title for not recognizing gain or loss.

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"(f) DISTRIBUTIONS BY DOMESTICORPORATIONS TO FOREIGN SHARE-

HOLDERS.—If a domestic corporation distributes a Unted States real property interest to a nonresident alien individual or a foreign corporation in a distribution to which section 301 applies, notwith- 26 USC 301. standing any other provision of this chapter, the basis of such United States real property interest in the hands of such nonresident alien individual or foreign corporation shall not exceed— "(1) the adjusted basis of such property before the distribution, increased by "(2) the sum of— "(A) any gain recognized by the distributing corporation on the distribution, and "(B) any tax paid under this chapter by the distributee on such distribution. "(g) SPECIAL RULE FOR SALES OF INTEREST IN PARTNERSHIPS, TRUSTS,

AND ESTATES.—Under regulations prescribed by the Secretary, the

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