Page:United States Statutes at Large Volume 98 Part 1.djvu/624

 98 STAT. 576

PUBLIC LAW 98-369—JULY 18, 1984

the taxable year to the extent such gain does not exceed the amount of any capital loss carryover to such taxable year under section 1212 (determined without regard to para.Sgd:>P-jn graph (7)(B)). "(C) EARNINGS AND PROFITS.—For purposes of subchapter C, the accumulated earnings and profits at any time shall not be less than they would be if this subsection had applied to the computation of earnings and profits for all taxable years beginning after the date of the enactment of the T^x Ante, p. 494. Reform Act of 1984." 26 USC 532 note. (c) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act. SEC. 59. REPEAL OF STOCK FOR DEBT EXCEPTION FOR PURPOSES OF DETERMINING INCOME FROM DISCHARGE OF INDEBTEDNESS. 26 USC 108.

(a) GENERAL RULE.—Subsection (e) of section 108 (relating to

income from discharge of indebtedness) is amended by adding at the end thereof the following new paragraph: "(10) INDEBTEDNESS SATISFIED BY CORPORATION'S STOCK.—

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"(A) IN GENERAL.—For purposes of determining income of a debtor from discharge of indebtedness, if a debtor corporation transfers stock to a creditor in satisfaction of its indebtedness, such corporation shall be treated as having satisfied the indebtedness with an amount of money equal to the fair market value of the stock.

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"(B) EXCEPTION FOR TITLE i i CASES AND INSOLVENT DEBT-

11 USC 101 et

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ORS.—Subparagraph (A) shall not apply in the case of a debtor in a title 11 case or to the extent the debtor is

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insolvent." (b) EXCEPTION FOR CERTAIN WORKOUTS.— (1) IN GENERAL. — Paragraph (10) of section 108(e) (as added by subsection (a)) is amended by adding a t the e n d thereof the following n e w subparagraph: "(C) EXCEPTION FOR TRANSFERS I N CERTAIN WORKOUTS.— "(i) IN GENERAL. — Subparagraph (A) shall not apply to any transfer of stock in a qualified workout. "(ii) QUALIFIED WORKOUT.—For purposes of clause (i), the term 'qualified workout' means any plan under which stock is transfer r e d to creditors in satisfaction of indebtedness if— K;; "(I) because of cash flow and credit problems, the

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corporation making such transfer will have trouble in meeting liabilities coming due during the next 12 months to such an extent that there is a substantial threat of involuntary proceedings relating to insolvency or bankruptcy, "(II) such corporation in any report to its shareholders for the period during which such transfer occurs includes a statement that such corporation believes it meets the requirement of subclause (I) and that it is availing itself of the workout provisions of this subparagraph, "(III) the holders of more than 50 percent of the total indebtedness of the corporation approve such plan, and

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