Page:United States Statutes at Large Volume 94 Part 3.djvu/749

 PUBLIC LAW 96-589—DEC. 24, 1980 by a person bearing a relationship to the debtor specified in section 267(b) or 707(b)(1) from a person who does not bear such a relationship to the debtor shall be treated as the acquisition of such indebtedness by the debtor. Such regulations shall provide for such adjustments in the treatment of any subsequent transactions involving the indebtedness as may be appropriate by reason of the application of the preceding sentence. "(B) MEMBERS OF FAMILY.—For purposes of this paragraph, sections 267(b) and 707(b)(1) shall be applied as if section 267(c)(4) provided that the family of an individual consists of the individual's spouse, the individual's children, grandchildren, and parents, and any spouse of the individual's children or grandchildren. "(C)

94 STAT. 3393 fn?'^^^ ^^^'

ENTITIES UNDER COMMON CONTROL TREATED AS

RELATED.—For purposes of this paragraph, two entities which are treated as a single employer under subsection (b) or (c) of section 414 shall be treated as bearing a relationship to each other which is described in section 267(b). "(5) PURCHASE-MONEY DEBT REDUCTION FOR SOLVENT DEBTOR TREATED AS PRICE REDUCTION.—IF—

"(A) the debt of a purchaser of property to the seller of such property which arose out of the purchase of such property is reduced, "(B) such reduction does not occur— "(i) in a title 11 case, or "(ii) when the purchaser is insolvent, and "(C) but for this paragraph, such reduction would be treated as income to the purchaser from the discharge of indebtedness, then such reduction shall be treated as a purchase price adjustment. '(6) INDEBTEDNESS CONTRIBUTED TO CAPITAL.—For purposes of

determining income of the debtor from discharge of indebtedness, if a debtor corporation acquires its indebtedness from a shareholder as a contribution to capital— "(A) section 118 shall not apply, but "(B) such corporation shall be treated as having satisfied the indebtedness with an amount of money equal to the shareholder's adjusted basis in the indebtedness. "(7) RECAPTURE OF GAIN ON SUBSEQUENT SALE OF STOCK.—

"(A) IN GENERAL.—If a creditor acquires stock of a debtor corporation in satisfaction of such corporation's indebtedness, for purposes of section 1245— "(i) such stock (and any other property the basis of which is determined in whole or in part by reference to the adjusted basis of such stock) shall be treated as section 1245 property, and "(ii) the aggregate amount allowed to the creditor— "(I) as deductions under subsection (a), (b), or (c) of section 166 (by reason of the worthlessness or partial worthlessness of the indebtedness), or "(II) as an ordinary loss on the exchange, shall be treated as an amount allowed as a deduction for depreciation. The amount determined under clause (ii) shall be reduced by the amount (if any) included in the creditor's gross income on the exchange.

11 USC lOi ^* «^9-

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