Page:United States Statutes at Large Volume 94 Part 3.djvu/759

 PUBLIC LAW 96-589—DEC. 24, 1980

94 STAT. 3403

rule shall apply to a transaction otherwise qualifying under paragraph (1)(G) where the requirements of subparagraphs (A) and (B) of section 354(b)(1) are met with respect to the acquisition of the assets or stock." (d) U S E OF STOCK OF CONTROLLING CORPORATION.—Subparagraph

(D) of section 368(a)(2) (relating to use of stock of controlling corpora- 26 USC 368. tion in paragraph (I)(A) cases) is amended to read as follows: "(D) U S E OF STOCK OF CONTROLLING CORPORATION IN PARA-

GRAPH (i)(A) AND (i)(G) CASES.—The acquisition by one corporation, in exchange for stock of a corporation (referred to in this subparagraph as 'controlling corporation') which is in control of the acquiring corporation, of substantially all of the properties of another corporation shall not disqualify a transaction under paragraph (1)(A) or (1)(G) if— "(i) no stock of the acquiring corporation is used in the transaction, and "(ii) in the case of a transaction under paragraph (1)(A), such transaction would have qualified under paragraph (1)(A) had the merger been into the controlling corporation." (e) TREATMENT OF PROPERTY ATTRIBUTABLE TO ACCRUED INTEREST.— (1) AMENDMENT OF SECTION 354.—Subsection (a) of section 354 26 USC 354.

(relating to exchanges of stocks and securities in certain reorganizations) is amended by striking out paragraphs (2) and (3) and inserting in lieu thereof the following: "(2) LIMITATIONS.— "(A) EXCESS PRINCIPAL AMOUNT.—Paragraph (1) shall not

apply if— "(i) the principal amount of any such securities received exceeds the principal amount of any such securities surrendered, or "(ii) any such securities are received and no such securities are surrendered. "(B) PROPERTY ATTRIBUTABLE TO ACCRUED INTEREST.—Nei-

ther paragraph (1) nor so much of section 356 as relates to paragraph (1) shall apply to the extent that any stock, securities, or other property received is attributable to interest which has accrued on securities on or after the beginning of the holder's holding period. "(3) CROSS REFERENCES.— "(A) For treatment of the exchange if any property is received which is not permitted to be received under this subsection (including an excess principal amount of securities received over securities surrendered, but not including property to which paragraph (2)(B) applies), see section 356. "(B) For treatment of accrued interest in the case of an exchange described in paragraph (2)(B), see section 61." (2) AMENDMENT OF SECTION 355.—Subsection (a) of section 355

(relating to distribution of stock and securities of a controlled corporation) is amended by striking out paragraphs (3) and (4) and inserting in lieu thereof the following: "(3) LIMITATIONS.— "(A) EXCESS PRINCIPAL AMOUNT.—Paragraph (1) shall not

apply if— "(i) the principal amount of the securities in the controlled corporation which are received exceeds the principal amount of the securities which are surrendered in connection with such distribution, or

26 USC 355.

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