Page:United States Statutes at Large Volume 94 Part 2.djvu/977

 PUBLIC LAW 96-471—OCT. 19, 1980

94 STAT. 2255

person other than the decedent before the death of the decedent, by such person). "(B) FACE AMOUNT TREATED AS FAIR MARKET VALUE IN

CERTAIN CASES.—In any case to which the first sentence of paragraph (2) applies by reason of subparagraph (A), if the decedent and the obligor were related persons (within the meaning of section 453(f)(1)), the fair market value of the Ante, p. 2247. installment obligation shall be treated as not less than its face amount. "(C)

CANCELLATION

INCLUDES

BECOMING

UNENFORCE-

ABLE.—For purposes of subparagraph (A), an installment obligation which becomes unenforceable shall be treated as if it were canceled.". SEC. 4. AMENDMENT OF SECTION 1038. 26 USC 1038. Section 1038 (relating to certain reacquisitions of real property) is amended by adding at the end thereof the following new subsection: "(g) ACQUISITION BY ESTATE, ETC., OF SELLER.—Under regulations prescribed by the Secretary, if an installment obligation is indebtedness to the seller which is described in subsection (a), and if such obligation is, in the hands of the taxpayer, an obligation with respect to which section 691(a)(4)(B) applies, then— 26 USC 691. "(1) for purposes of subsection (a), acquisition of real property by the taxpayer shall be treated as reacquisition by the seller, and "(2) the basis of the real property acquired by the taxpayer shall be increased by an amount equal to the deduction under section 691(c) which would (but for this subsection) have been allowable to the taxpayer with respect to the gain on the exchange of the obligation for the real property." SEC. 5. COORDINATION WITH SECTION 1239.

Definitions. 26 USC 1239

Subsections (b) and (c) of section 1239 (defining related persons) are amended to read as follows: "(b) RELATED PERSONS.—For purposes of subsection (a), the term 'related persons' means— "(1) the taxpayer and the taxpayer's spouse, "(2) the taxpayer and an 80-percent owned entity, or "(3) two 80-percent owned entities. "(c) 80-PERCENT OWNED ENTITY DEFINED.— "(1) GENERAL RULE.—For purposes of

this section, the term

"(A) a corporation 80 percent or more in value of the outstanding stock of which is owned (directly or indirectly) by or for the taxpayer, and "(B) a partnership 80 percent or more of the capital interest or profits interest in which is owned (directly or indirectly) by or for the taxpayer. "(2) CONSTRUCTIVE OWNERSHIP.—For purposes of subpara-
 * 80-percent owned entity' means—

graphs (A) and (B) of paragraph (1), the principles of section 318 26 USC 318. shall apply, except that— "(A) the members of an individual's family shall consist only of such individual and such individual's spouse, and "(B) paragraphs (2)(C) and (3)(C) of section 318(a) shall be applied without regard to the 50-percent limitation contained therein.".

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