Page:United States Statutes at Large Volume 95.djvu/315

 PUBLIC LAW 97-34—AUG. 13, 1981

95 STAT. 289

"(ii) during the period which begins on the record date for the qualified reinvested dividend and ends 1 year after the date of the distribution of such dividend, the shareholder disposes of any common stock of such corporation, the shareholder shall be treated as having disposed of the stock received as a qualified reinvested dividend (to the extent there remains such stock to which this paragraph has not applied). "(B) ORDINARY INCOME TREATMENT.—If any stock received as a qualified reinvested dividend is disposed of within 1 year after the date such stock is distributed, such disposition shall be treated as a disposition of property which is not a capital asset. "(10) No REDUCTION IN EARNINGS AND PROFITS FOR DISTRIBUTION OF QUALIFIED COMMON STOCK.—The earnings and profits of any corporation shall not be reduced by reason of the distribution of any qualified common stock of such corporation pursuant to a plan under which shareholders may elect to receive dividends in the form of stock instead of property. "(11) CERTAIN INDIVIDUALS INELIGIBLE.—

"(A) IN GENERAL.—This subsection shall not apply to any individual who is— "(i) a trust or estate, or "(ii) a nonresident alien individual. "(B) 5 PERCENT SHAREHOLDERS INELIGIBLE.—Any distribution by a corporation to a 5 percent shareholder in such corporation shall not be treated as a qualified reinvested dividend. "(C) 5 PERCENT SHAREHOLDER DEFINED.—For purpOSeS of subparagraph (B), the term '5 percent shareholder means any individual who, immediately before the distribution, owns (directly or through the application of section 318)— "(i) stock possessing more than 5 percent of the total combined voting power of the distributing corporation, or "(ii) more than 5 percent of the total value of all classes of stock of the distributing corporation. "(12) TERMINATION.—This subsection shall not apply to distributions after December 31, 1985." (b) AMENDMENT OF SECTION 305(d),—Paragraph (1) of section 305(d) 26 USC 305. (defining stock) is amended by striking out this section" and inserting in lieu thereof "this section (other than subsection (e))". (c) EFFECTIVE DATE.—The amendments made by this section shall 26 USC 305 apply to distributions after December 31, 1981, in taxable years "°*® ending after such date.

Subtitle D—Employee Stock Ownership Provisions SEC. 331. PAYROLL-BASED CREDIT FOR ESTABLISHING EMPLOYEE STOCK OWNERSHIP PLAN. (a) IN GENERAL.—Subpart A of part IV of subchapter A of chapter 1 (relating to credits allowed), as amended by section 221 of this Act, is Ante, p. 241. further amended by inserting immediately after section 44F the following new section:

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