Page:United States Statutes at Large Volume 98 Part 1.djvu/937

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 889

"(E) a majority of the allocated earnings and losses of which are allocated to members on the basis of— "(i) patronage, "(ii) capital contributions, or "(iii) some combination of clauses (i) and (ii). "(3) REPLACEMENT PERIOD.—The term 'replacement period' means the period which begins 3 months before the date on which the sale of qualified securities occurs and which ends 12 months after the date of such sale. "(4) QuAUFiED REPLACEMENT PROPERTY.—The term 'qualified replacement property' means any securities (as defined in section 165(g)(2)) issued by a domestic corporation which does not, for the taxable year in which such stock is issued, have passive investment income (as defined in section 1362(d)(3)(D)) that exceeds 25 percent of the gross receipts of such corporation for such taxable year. "(5) SECURITIES ACQUIRED BY UNDERWRITER.—No acquisition of securities by an underwriter in the ordinary course of his trade or business as an underwriter, whether or not guaranteed, shall be treated as a sale for purposes of subsection (a). "(6) TIME FOR FIUNG ELECTION.—An election under subsection

(a) shall be filed not later than the last day prescribed by law (including extensions thereof) for filing the return of tax imposed by this chapter for the taxable year in which the sale occurs. "(d) BASIS OF QUALIFIED REPLACEMENT PROPERTY.—The basis of the taxpayer in qualified replacement property purchased by the taxpayer during the replacement period shall be reduced by the amount of gain not recognized by reason of such purchase and the application of subsection (a). If more than one item of qualified replacement property is purchased, the basis of each of such items shall be reduced by an amount determined by multiplying the total gain not recognized by reason of such purchase and the application of subsection (a) by a fraction— "(1) the numerator of which is the cost of such item of property, and "(2) the denominator of which is the total cost of all such items of property. "(e) STATUTE OF LIMITATIONS.—If any gain is realized by the taxpayer on the sale or exchange of any qualified securities and there is in effect an election under subsection (a) with respect to such gain, then— "(1) the statutory period for the assessment of any deficiency with respect to such gain shall not expire before the expiration of 3 years from the date the Secretary is notified by the taxpayer (in such manner as the Secretary may by regulations prescribe) of— "(A) the taxpayer's cost of purchasing qualified replacement property which the taxpayer claims results in nonrecognition of any part of such gain, "(B) the taxpayer's intention not to purchase qualified replacement property within the replacement period, or "(C) a failure to make such purchase within the replacement period, and "(2) such deficiency may be assessed before the expiration of such 3-year period notwithstanding the provisions of any other

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