§ 304. Redemption through use of related corporations

Legislative history

Reconstructed from this section’s Code source credit and amendment notes, resolved against the local Statutes at Large. Editorial notes are evidence, not the law that made the change.

1. 1954

   Aug. 16, 1954, ch. 736, 68A Stat. 89 · 68A Stat. 89

   Enacted · 26 U.S.C. § 304

   Aug. 16, 1954, ch. 736, 68A Stat. 89

   Source evidence

   Code source credit
   Aug. 16, 1954, ch. 736, 68A Stat. 89

2. 1964

   Pub. L. 88–554 § 4(b)(1) · 78 Stat. 761

   Inserted · 26 U.S.C. § 304(b)(1); 26 U.S.C. § 304(c)(2)

   Pub. L. 88–554 inserted reference to section 318(a)(3)(C) of this title

   Source evidence

   Code amendment note
   Subsecs. (b)(1), (c)(2). Pub. L. 88–554 inserted reference to section 318(a)(3)(C) of this title.

   Enacted provision · exact public law section
   (1) Section 304(b)(1) (relating to rule, for determinations under section 302(b)) and section 304(c) (2) (relating to constructive ownership) of the Internal Revenue Code of 1954 are amended by 68A Stat. 89. 26 USC 304. striking out “section 318(a) (2) (C) ” and inserting in lieu thereof “sections 318(a) (2) (C) and 318 (a) (3) (C)”.

3. 1982

   Pub. L. 97–248 § 226(a)(3) · 96 Stat. 324

   Substituted · 26 U.S.C. § 304(b)(2)(A)

   Pub. L. 97–248, § 226(a)(3), substituted “as if the property were distributed by the issuing corporation to the acquiring corporation and immediately thereafter distributed by the acquiring corporation” for “soley by reference to the earnings and profits of the acquiring corporation” after “dividend shall be made”

   Source evidence

   Code amendment note
   Subsec. (b)(2)(A). Pub. L. 97–248, § 226(a)(3), substituted “as if the property were distributed by the issuing corporation to the acquiring corporation and immediately thereafter distributed by the acquiring corporation” for “soley by reference to the earnings and profits of the acquiring corporation” after “dividend shall be made”.

   Enacted provision · exact public law section
   (3) Determination of earnings and profits.— Subparagraph (A) of section 304(b)(2) (relating to amount constituting dividend) is amended to read as follows: “(A) Where subsection (a)(1) applies.— In the case of any acquisition of stock to which paragraph (1) (and not paragraph (2)) of subsection (a) of this section applies, the determination of the amount which is a dividend shall be made as if the property were distributed by the issuing corporation to the acquiring corporation and immediately thereafter distributed by the acquiring corporation.”

4. 1982

   Pub. L. 97–248 § 226(a)(1)(A) · 96 Stat. 324

   Added · 26 U.S.C. § 304(b)(3)

   Pub. L. 97–248, § 226(a)(1)(A), added par. (3)

   Source evidence

   Code amendment note
   Subsec. (b)(3). Pub. L. 97–248, § 226(a)(1)(A), added par. (3).

   Enacted provision · exact public law section
   (A) Subsection (b) of section 304 (relating to special rules 26 USC 304. for application of subsection (a)) is amended by adding at the end thereof the following new paragraph:

5. 1982

   Pub. L. 97–248 § 226(a)(2) · 96 Stat. 324

   1. Added · 26 U.S.C. § 304(c)(2); 26 U.S.C. § 304(c)(3)

      Pub. L. 97–248, § 226(a)(2), added par. (2)

   2. Redesignated · 26 U.S.C. § 304(c)(2); 26 U.S.C. § 304(c)(3)

      Pub. L. 97–248, § 226(a)(2), redesignated former par. (2) as (3)

   3. Substituted · 26 U.S.C. § 304(c)(2); 26 U.S.C. § 304(c)(3)

      Pub. L. 97–248, § 226(a)(2), substituted “this section” for “paragraph (1)” after “determining control under”

   Source evidence

   Code amendment note
   Subsec. (c)(2), (3). Pub. L. 97–248, § 226(a)(2), added par. (2), redesignated former par. (2) as (3) and substituted “this section” for “paragraph (1)” after “determining control under”.

   Enacted provision · exact public law section
   (2) Application of section 304 where stock is acquired in the transaction.— (A) Subsection (c) of section 304 is amended by redesignating paragraph (2) as paragraph (3) and by inserting after paragraph (1) the following new paragraph: For purposes of subsection (a)(1)— “(A) General rule.— Where 1 or more persons in control 26 USC 304. of the issuing corporation transfer stock of such corporation in exchange for stock of the acquiring corporation, the stock of the acquiring corporation received shall be taken into account in determining whether such person or persons are in control of the acquiring corporation. “(B) Definition of control group.— Where 2 or more persons in control of the issuing corporation transfer stock of such corporation to the acquiring corporation and, after the transfer, the transferors are in control of the acquiring corporation, the person or persons in control of each corporation shall include each of the persons who so transfer stock.” (B) Paragraph (3) of section 304(c) (as redesignated by paragraph (D) is amended by striking out “paragraph (1)” and inserting in lieu thereof “this section”.

6. 1984

   Tax Reform Act of 1984

   Pub. L. 98–369 § 712 · 98 Stat. 494

   Inserted · 26 U.S.C. § 304(b)(2)

   Pub. L. 98–369, § 712(l)(1), consolidated former subpars. “(A) Where subsection (a)(1) applies” and “(B) Where subsection (a)(2) applies” in one paragraph, inserted provision respecting source of dividend, and incorporated in cls. (A) and (B) former subpar. (A) and (B) provisions which had required determination of amount which is a dividend to be made by reference to earnings and profits of the acquiring corporation and as if the property were distributed by the acquiring corporation to the issuing corporation and immediately thereafter distributed by the issuing corporation

   Source evidence

   Code amendment note
   Subsec. (b)(2). Pub. L. 98–369, § 712(l)(1), consolidated former subpars. “(A) Where subsection (a)(1) applies” and “(B) Where subsection (a)(2) applies” in one paragraph, inserted provision respecting source of dividend, and incorporated in cls. (A) and (B) former subpar. (A) and (B) provisions which had required determination of amount which is a dividend to be made by reference to earnings and profits of the acquiring corporation and as if the property were distributed by the acquiring corporation to the issuing corporation and immediately thereafter distributed by the issuing corporation.

   Enacted provision · exact public law section
   SEC. 712. TECHNICAL CORRECTIONS OF PROVISIONS PRIMARILY RELATING TO BUSINESSES. (a) Amendments Related to Section 204.— (1) Clarification of additional amount treated as ordinary income under section 1250.— (A) Paragraph (1) of section 291(a) (relating to section 1250 capital gain treatment) is amended— (i) by striking out “under section 1250” in subparagraph (B) and inserting in lieu thereof “under section 1250 (determined without regard to this paragraph)”, and (ii) by striking out “which is ordinary income” and inserting in lieu thereof “which is ordinary income under section 1250”. (B) Subsection (a) of section 1250 is amended by adding at the end thereof the following new paragraph: “(4) Cross reference.— “For reduction in the case of corporations on capital gain treatment under this section, see section 291(a)(1).” (2) Investment tax credit allowed only for mineral exploration and development costs for deposits located in the united states.— Clause (ii) of section 291(b)(2)(B) is amended by inserting “in the case of a deposit located in the United States,” after “(ii)”. (3) Clarification of coordination with cost depletion.— Paragraph (6) of section 291(b) (relating to coordination with cost depletion) is amended to read as follows: “(6) Coordination with cost depletion.— The portion of the adjusted basis of any property which is attributable to amounts to which paragraph (1) applied shall not be taken into account for purposes of determining depletion under section 611.” (4) Clarification of definition of interest.— Subparagraph (B) of section 291(e)(1) (relating to interest on debt to carry taxexempt obligations acquired after December 31, 1982) is amended by adding at the end thereof the following new clause: “(iii) Interest.— For purposes of this subparagraph, the term ‘interest’ includes amounts (whether or not designated as interest) paid in respect of deposits, investment certificates, or withdrawable or repurchasable shares.” (b) Amendment Related to Section 205.— Subsection (q) of section 48 (relating to basis adjustment to section 38 property) is amended by adding at the end thereof the following new paragraph: “(6) Adjustment in basis of interest in partnership or s corporation.— The adjusted basis of— “(A) a partner’s interest in a partnership, and “(B) stock in an S corporation, shall be appropriately adjusted to take into account adjustments made under this subsection in the basis of property held by the partnership or S corporation (as the case may be).” (c) Amendment Related to Section 207.— Paragraph (4) of section 189(e) (defining residential real property) is amended by striking 26 USC 189. out “or” at the end of subparagraph (A), by striking out the period at the end of subparagraph (B) and inserting in lieu thereof “, or”, and by adding at the end thereof the following new subparagraph: “(C) real property held by a cooperative housing corporation (as defined in section 216(b)) and used for dwelling purposes.” (d) Amendments Related to Section 210.— (1) Special rule where dealer-lessee required to purchase vehicle.— Paragraph (2) of section 210(b) of the Tax Equity and Fiscal Responsibility Act of 1982 (defining terminal rental adjustment clause) is amended by adding 26 USC 168 note. at the end thereof the following new sentence: “Such term also includes a provision of an agreement which requires a lessee who is a dealer in motor vehicles to purchase the motor vehicle for a predetermined price and then resell such vehicle where such provision achieves substantially the same results as a provision described in the preceding sentence.” (2) Exception where lessee took position on return that he was owner.— Section 210 of the Tax Equity and Fiscal Responsibility Act of 1982 is amended by adding at the end thereof the following new subsection: “(c) Exception Where Lessee Took Position on Return.— Subsection (a) shall not apply to deny a deduction for interest paid or accrued claimed by a lessee with respect to a qualified motor vehicle agreement on a return of tax imposed by chapter 1 of the Internal Revenue Code of 1954 which was filed before the date of the enactment 26 USC 1 et seq of this Act or to deny a credit for investment in depreciable property claimed by the lessee on such a return pursuant to an agreement with the lessor that the lessor would not claim the credit.” (e) Amendment Related to Section 211.— Subparagraph (A) of section 211(e)(2) of the Tax Equity and Fiscal Responsibility Act of 1982 (relating to retention of old sections 907(b) and 904(f)(4) where 26 USC 907 note. taxpayer had separate basket foreign loss) is amended by striking out “the 8-year period” and inserting in lieu thereof “the 8-year period (or such shorter period as the taxpayer may select)”. (f) Amendment Related to Section 212.— Paragraph (1) of section 954(h) (defining foreign base company oil-related income) is 26 USC 954. amended by striking out “section 907(c)(2)” and inserting in lieu thereof “paragraphs (2) and (3) of section 907(c)”. (g) Amendment Related to Section 213.— The table contained in subparagraph (C) of section 936(a)(2) is amended by striking 26 USC 936. out “The percentage tax is:” and inserting in lieu thereof “The percentage is:”. (h) Amendment Related to Section 217.— Subsection (e) of section 217 of the Tax Equity and Fiscal Responsibility Act of 1982 (relating to effective date) is amended by adding at the end thereof 26 USC 103 note. the following new sentence: “For purposes of applying section 168(f)(8)(D)(v) of the Internal Revenue Code of 1954, the amendments made by subsection (c) shall apply to agreements entered into after the date of the enactment of this Act.” (i) Amendments Related to Section 222.— (1) Sections 301(e)(2) and 302(f)(3) are each amended by striking out “partial or complete liquidation” and inserting in lieu thereof “complete liquidation”. (2) The paragraph heading of paragraph (1) of section 306(b) (relating to exceptions) is amended by striking out “interest.” and inserting in lieu thereof “interest, etc.”. (3) Paragraph (1) of section 543(a) (defining personal holding company income) is amended by striking out subparagraph (C), by adding “and” at the end of subparagraph (A), and by striking out “, and” at the end of subparagraph (B) and inserting in lieu thereof a period. (j) Amendment Related to Section 223.— Paragraph (1) of section (e) ( 26 USC 311. defining qualified stock) is amended by adding at the end thereof the following new subparagraph: “(C) Rules for passthru entities.— In the case of an S corporation, partnership, trust, or estate— “(i) the determination of whether subparagraph (A) is satisfied shall be made at the shareholder, partner, or beneficiary level (rather than at the entity level), and “(ii) the distribution shall be treated as made directly to the shareholders, partners, or beneficiaries in proportion to their respective interests in the entity. (k) Amendments Related to Section 224.— (1) Assets treated as sold at fair market value.— (A) In general.— Paragraph (1) of section 338(a) (relating to general rule) is amended by inserting “at fair market value” after “acquisition date”. (B) Basis of assets after deemed purchase.— Subsection (b) of section 338 (relating to price at which deemed sale made) is amended to read as follows: “(b) Basis of Assets After Deemed Purchase.— “(1) In general.— For purposes of subsection (a), the assets of the target corporation shall be treated as purchased for an amount equal to the sum of— “(A) the grossed-up basis of the purchasing corporation’s recently purchased stock, and “(B) the basis of the purchasing corporation’s nonrecently purchased stock. “(2) Adjustment for liabilities and other relevant items.— The amount described in paragraph (1) shall be adjusted under regulations prescribed by the Secretary for liabilities of the target corporation and other relevant items. “(3) Election to step-up the basis of certain target stock.— “(A) In general.— Under regulations prescribed by the Secretary, the basis of the purchasing corporation’s nonrecently purchased stock shall be the basis amount determined under subparagraph (B) of this paragraph if the purchasing corporation makes an election to recognize gain as if such stock were sold on the acquisition date for an amount equal to the basis amount determined under subparagraph (B). “(B) Determination of basis amount.— For purposes of subparagraph (A), the basis amount determined under this subparagraph shall be an amount equal to the grossed-up basis determined under subparagraph (A) of paragraph (1) multiplied by a fraction— “(i) the numerator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock, and “(ii) the denominator of which is 100 percent minus the percentage referred to in clause (i). “(4) Grossed-up basis.— For purposes of paragraph (1), the grossed-up basis shall be an amount equal to the basis of the corporation’s recently purchased stock, multiplied by a fraction— “(A) the numerator of which is 100 percent, minus the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock, and “(B) the denominator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s recently purchased stock. “(5) Allocation among assets.— The amount determined under paragraphs (1) and (2) shall be allocated among the assets of the target corporation under regulations prescribed by the Secretary. “(6) Definitions of recently purchased stock and nonrecently purchased stock.— For purposes of this subsection— “(A) Recently purchased stock.— The term ‘recently purchased stock’ means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which was purchased by such corporation during the 12-month acquisition period. “(B) Nonrecently purchased stock.— The term ‘nonrecently purchased stock’ means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which is not recently purchased stock.” (2) Coordination with section 333.— The last sentence of paragraph (1) of section 338(c) (relating to coordination with 26 USC 338. section 337 where purchasing corporation holds less than 100 percent of stock) is amended by striking out “such 1-year period” and inserting in lieu thereof “such 1-year period and section 333 does not apply to such liquidation”. (3) Exceptions to deemed election rule.— Paragraph (2) of section 338(e) (relating to exceptions) is amended— (A) by striking out “(in whole or in part)” in subparagraph i B) and inserting in lieu thereof “wholly”, (B) by inserting “or” at the end of subparagraph (C), and (C) by striking out subparagraphs (D) and (E) and inserting in lieu thereof the following: “(D) such acquisition is described in regulations prescribed by the Secretary and meets such conditions as such regulations may provide.” (4) Time for making election.— Paragraph (1) of section 338(g) (relating to election) is amended to read as follows: “(1) When made.— Except as otherwise provided in regulations, an election under this section shall be made not later than the 15th day of the 9th month beginning after the month in which the acquisition date occurs.” (5) Definition of purchase.— (A) Subparagraph (B) of section 338(h)(3) (defining purchase) is amended to read as follows: “(B) Deemed purchase under subsection (a).— The term ‘purchase’ includes any deemed purchase under subsection (a)(2). The acquisition date for a corporation which is deemed purchased under subsection (a)(2) shall be determined under regulations prescribed by the Secretary.” (B) Paragraph (3) of section 338(h) is amended by adding at the end thereof the following new subparagraph: “(C) Certain stock acquisitions from related corporations.— “(i) In general.— Clause (iii) of subparagraph (A) shall not apply to an acquisition of stock from a related corporation if at least 50 percent in value of the stock of such related corporation was acquired by purchase (within the meaning of subparagraph (A) and (B)). “(ii) Certain distributions.— Clause (i) of subparagraph (A) shall not apply to an acquisition of stock described in clause (i) of this subparagraph if the corporation acquiring such stock— “(I) made a qualified stock purchase of stock of the related corporation, and “(II) made an election under this section (or is treated under subsection (e) as having made such an election) with respect to such qualified stock purchase. “(iii) Related corporation defined.— For purposes of this subparagraph, a corporation is a related corporation if stock owned by such corporation is treated (under section 318(a) other than paragraph (4) thereof) as owned by the corporation acquiring the stock.” (C) Paragraph (1) of section 338(h) (defining 12-month acquisition period) is amended by inserting before the period at the end thereof the following: “(or, if any of such stock was acquired in an acquisition which is a purchase by reason of subparagraph (C) of paragraph (3), the date on which the acquiring corporation is first considered under section 318(a) (other than paragraph (4) thereof) as owning stock owned by the corporation from which such acquisition was made).” (D) Clause (ii) of section 338(h)(3)(A) (defining purchase) is amended to read as follows: “(ii) the stock is not acquired in an exchange to which section 351, 354, 355, or 356 applies and is not acquired in any other transaction described in regulations in which the transferor does not recognize the entire amount of the gain or loss realized on the transaction, and”. (E) Paragraph (4) of section 318(b) (relating to cross references) is amended to read as follows: “(4) section 338(h)(3) (defining purchase);”. (6) Special rules for applying section 338.— (A) Subsection (h) of section 338 (relating to definitions 26 USC 338. and special rules) is amended by striking out paragraph (7), by redesignating paragraphs (8) and (9) as paragraphs (9) and (10), respectively, and by inserting after paragraph (6) the following new paragraphs: “(7) Additional percentage must be attributable to purchase, etc.— For purposes of subsection (c)(1), any increase in the maximum percentage of stock taken into account over the percentage of stock (by value) of the target corporation held by the purchasing corporation on the acquisition date shall be taken into account only to the extent such increase is attributable to— “(A) purchase, or “(B) a redemption of stock of the target corporation— “(i) to which section 302(a) applies, or “(ii) in the case of a shareholder who is not a corporation, to which section 301 applies. “(8) Acquisitions by affiliated group treated as made by i corporation.— Except as provided in regulations prescribed by the Secretary, stock and asset acquisitions made by members of the same affiliated group shall be treated as made by 1 corporation.” (B) Paragraph (9) of section 338(h), as redesignated by subparagraph (A), is amended by striking out “paragraph (9)” and inserting in lieu thereof “paragraph (10)”. (C) Subsection (h) of section 338 is amended by adding at the end thereof the following new paragraphs: “(11) Elective formula for determining fair market value.— For purposes of subsection (a)(1), fair market value may be determined on the basis of a formula provided in regulations prescribed by the Secretary which takes into account liabilities and other relevant items. “(12) Section 337 to apply where target had adopted plan for complete liquidation.— If— “(A) during the 12-month period ending on the acquisition date the target corporation adopted a plan of complete liquidation, “(B) such plan was not rescinded before the close of the acquisition date, and “(C) the purchasing corporation makes an election under this section (or is treated under subsection (e) as having made such an election) with respect to the target corporation, then, subject to rules similar to the rules of subsection (c)(1), for purposes of section 337 (and other provisions which relate to section 337), the target corporation shall be treated as having distributed all of its assets as of the close of the acquisition date. “(13) Tax on deemed sale not taken into account for estimated tax purposes.— For purposes of section 6655, tax attributable to the sale described in subsection (a)(1) shall not be taken into account. “(14) Coordination with section 341.— For purposes of determining whether section 341 applies to a disposition within 1 year after the acquisition date of stock by a shareholder (other than the acquiring corporation) who held stock in the target corporation on the acquisition date, section 341 shall be applied without regard to this section. “(15) Combined deemed sale return.— Under regulations prescribed by the Secretary, a combined deemed sale return may be filed by all target corporations acquired by a purchasing corporation on the same acquisition date if such target corporations were members of the same selling consolidated group (as defined in subparagraph (B) of paragraph (10)).” (7) Subsection (i) of section 338 (relating to regulations) is amended to read as follows: “(i) Regulations.— The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including— “(1) regulations to ensure that the purpose of this section to require consistency of treatment of stock and asset sales and purchases may not be circumvented through the use of any provision of law or regulations (including the consolidated return regulations) and “(2) regulations providing for the coordination of the provisions of this section with the provision of this title relating to foreign corporations and their shareholders.” (8) Treatment of certain liquidations.— (A) In general.— Section 269 (relating to acquisitions made to evade or avoid income tax) is amended by redesignating subsection (b) as subsection (c) and by inserting after subsection (a) the following new subsection: “(b) Certain Liquidations After Qualified Stock Purchases.— “(1) In general.— If— “(A) there is a qualified stock purchase by a corporation of another corporation, “(B) an election is not made under section 338 with respect to such purchase, “(C) the acquired corporation is liquidated pursuant to a plan of liquidation adopted not more than 2 years after the acquisition date, and “(D) the principal purpose for such liquidation is the evasion or avoidance of Federal income tax by securing the benefit of a deduction, credit, or other allowance which the acquiring corporation would not otherwise enjoy, then the Secretary may disallow such deduction, credit, or other allowance. “(2) Meaning of terms.— For purposes of paragraph (1), the terms ‘qualified stock purchase’ and ‘acquisition date’ have the same respective meanings as when used in section 338.” (B) Conforming amendment.— Subsection (c) of section 269 (as redesignated by subparagraph (A)) is amended by striking out “subsection (a)” and inserting in lieu thereof “subsection (a) or (b)”. (C) Effective date.— The amendments made by this paragraph shall apply to liquidations after October 20, 1983, in taxable years ending after such date. (9) Amendments not to apply to acquisitions before September 1, 1982.— (A) In general.— The amendments made by this subsection shall not apply to any qualified stock purchase (as defined in section 338(d)(3) of the Internal Revenue Code of 1954) where the acquisition date (as defined in section 338(h)(2) of such Code) is before September 1, 1982. (B) Extension of time for making election.— In the case of any qualified stock purchase described in subparagraph (A), the time for making an election under section 338 of such Code shall not expire before the close of the 60th day after the date of the enactment of this Act. (10) Special rules for deemed purchases under prior law.— 26 USC 338 note. If, before October 20, 1983, a corporation was treated as making a qualified stock purchase (as defined in section 338(d)(3) of the Internal Revenue Code of 1954), but would not be so treated under the amendments made by paragraphs (5) and (6) of this subsection, the amendments made by such paragraphs shall not apply to such purchase unless such corporation elects (at such time and in such manner as the Secretary of the Treasury or his delegate may by regulations prescribe) to have the amendments made by such paragraphs apply. (l) Amendments Related to Section 226.— (1) Amount constituting dividend.— Paragraph (2) of section 304(b) (relating to amount constituting dividend) is amended to 26 USC 304. read as follows: “(2) Amount constituting dividend.— In the case of any acquisition of stock to which subsection (a) applies, the determination of the amount which is a dividend (and the source thereof) shall be made as if the property were distributed— “(A) by the acquiring corporation to the extent of its earnings and profits, and “(B) then by the issuing corporation to the extent of its earnings and profits.” (2) Coordination with section 35i.— Subparagraph (A) of section 304(b)(3) (relating to coordination with section 351) is amended by striking out “(and not part III)” and inserting in lieu thereof “(and not section 351 and not so much of sections 357 and 358 as relates to section 351)”. (3) Certain assumptions of liability.— (A) The first sentence of clause (i) of section 304(b)(3)(B) (relating to certain assumptions of liability, etc.) is amended by striking out “Subsection (a)” and inserting in lieu thereof “In the case of an acquisition described in section 351, subsection (a)”. (B) Subparagraph (B) of section 304(b)(3) (relating to coordination with section 351) is amended by adding at the end thereof the following new clause: “(iii) Clause (i) does not apply to stock acquired from related person except where complete termination.— Clause (i) shall apply only to stock acquired by the transferor from a person— “(I) none of whose stock is attributable to the transferor under section 318(a) (other than paragraph (4) thereof), or “(II) who satisfies rules similar to the rules of section 302(c)(2) with respect to both the acquiring and the issuing corporations (determined as if such person were a distributee of each such corporation).” (4) Distributions incident to formation of bank holding companies.— Subparagraph (C) of section 304(b)(3) (relating to distributions incident to formation of bank holding companies) is amended by adding at the end thereof the following new sentence: “For purposes of this subparagraph, any assumption of (or acquisition of stock subject to) a liability under subparagraph (B) shall not be treated as a distribution of property.” (5) Constructive ownership.— (A) Paragraph (3) of section 304(c) (relating to constructive ownership) is amended to read as follows: “(3) Constructive ownership.— “(A) In general.— Section 318(a) (relating to constructive ownership of stock) shall apply for purposes of determining control under this section. “(B) Modification of 50-percent limitations in section 318.— For purposes of subparagraph (A)— “(i) paragraph (2)(C) of section 318(a) shall be applied by substituting ‘5 percent’ for ‘50 percent’, and “(ii) paragraph (3)(C) of section 318(a) shall be applied— “(I) by substituting ‘5 percent’ for ‘50 percent’, and “(II) in any case where such paragraph would not apply but for subclause (I), by considering a corporation as owning the stock (other than stock in such corporation) owned by or for any shareholder of such corporation in that proportion which the value of the stock which such shareholder owned in such corporation bears to the value of all stock in such corporation.” (B) Paragraph (4) of section 306(c) is amended by striking out the last sentence and inserting in lieu thereof the following: “For purposes of applying the preceding sentence Supra. to paragraph (3), the rules of section 304(c)(3)(B) shall apply.” (6) Certain stock acquired in section 351 exchange.— Paragraph (3) of section 306(c) (relating to certain stock acquired in section 351 exchange) is amended by striking out the last sentence and inserting in lieu thereof the following: “Rules similar Ante, p. 953. to the rules of section 304(b)(2) shall apply— “(A) for purposes of the preceding sentence, and “(B) for purposes of determining the application of this section to any subsequent disposition of stock which is section 306 stock by reason of an exchange described in the preceding sentence.” (7) Effective dates for amendments made by paragraphs (1) and (3).— (A) In general.— Except as otherwise provided in this paragraph, the amendments made by paragraphs (1) and (3) shall apply to stock acquired after June 18, 1984, in taxable years ending after such date. (B) Election by taxpayer to have amendments apply earlier.— Any taxpayer may elect, at such time and in such manner as the Secretary of the Treasury or his delegate may prescribe, to have the amendments made by paragraphs (1) and (3) apply as if included in section 226 of the Tax Equity and Fiscal Responsibility Act of 1982. (C) Special pule for certain transfers to form bank holding company.— Except as provided in subparagraph (D), the amendments made by paragraphs (1) and (3) shall not apply to transfers pursuant to an application to form a BHC (as defined in section 304(b)(3)(D)(ii) of the Internal Revenue Code of 1954) filed with the Federal Reserve Board before June 18, 1984, if— (i) such BHC was formed not later than the 90th day after the date of the last required approval of any regulatory authority to form such BHC, and (ii) such BHC did not elect (at such time and in such manner as the Secretary of the Treasury or his delegate shall prescribe) not to have the provisions of this subparagraph apply. (D) Amendments to apply to certain liabilities incurred before October 20, 1983.— The amendment made by paragraph (3)(A) shall apply to the acquisition of any stock to the extent the liability assumed, or to which such stock is subject, was incurred by the transferor after October 20, 1983. (m) Amendment Related to Section 229.— Subsection (c) of section 229 of the Tax Equity and Fiscal Responsibility Act of 1982 26 USC 451 note. (relating to modification of regulations on the completed contract method of accounting) is amended by adding at the end thereof the following new paragraph: “(4) Underpayments of estimated tax for 1982.— To the extent provided in regulations, no addition to tax shall be made under section 6654 or 6655 of the Internal Revenue Code of 1954 Ante, p. 788. for the taxpayer’s first taxable year ending after December 31, 1982, by reason of a long-term contract, but only with respect to installments required to be paid before April 13, 1983.” (n) Amendment Related to Section 233.— Paragraph (11) of section 51(d) (defining members of economically disadvantaged families) 26 USC 51. is amended by adding at the end thereof the following new sentence: “Any such determination with respect to an individual who is a qualified summer youth employee or youth participating in a qualified cooperative education program with respect to any employer shall also apply for purposes of determining whether such individual is a member of another targeted group with respect to such employer.”

7. 1984

   Tax Reform Act of 1984

   Pub. L. 98–369 § 712 · 98 Stat. 494

   Substituted · 26 U.S.C. § 304(b)(3)(A)

   Pub. L. 98–369, § 712(l)(2), substituted “section 351 and not so much of sections 357 and 358 as relates to section 351” for “part III”

   Source evidence

   Code amendment note
   Subsec. (b)(3)(A). Pub. L. 98–369, § 712(l)(2), substituted “section 351 and not so much of sections 357 and 358 as relates to section 351” for “part III”.

   Enacted provision · exact public law section
   SEC. 712. TECHNICAL CORRECTIONS OF PROVISIONS PRIMARILY RELATING TO BUSINESSES. (a) Amendments Related to Section 204.— (1) Clarification of additional amount treated as ordinary income under section 1250.— (A) Paragraph (1) of section 291(a) (relating to section 1250 capital gain treatment) is amended— (i) by striking out “under section 1250” in subparagraph (B) and inserting in lieu thereof “under section 1250 (determined without regard to this paragraph)”, and (ii) by striking out “which is ordinary income” and inserting in lieu thereof “which is ordinary income under section 1250”. (B) Subsection (a) of section 1250 is amended by adding at the end thereof the following new paragraph: “(4) Cross reference.— “For reduction in the case of corporations on capital gain treatment under this section, see section 291(a)(1).” (2) Investment tax credit allowed only for mineral exploration and development costs for deposits located in the united states.— Clause (ii) of section 291(b)(2)(B) is amended by inserting “in the case of a deposit located in the United States,” after “(ii)”. (3) Clarification of coordination with cost depletion.— Paragraph (6) of section 291(b) (relating to coordination with cost depletion) is amended to read as follows: “(6) Coordination with cost depletion.— The portion of the adjusted basis of any property which is attributable to amounts to which paragraph (1) applied shall not be taken into account for purposes of determining depletion under section 611.” (4) Clarification of definition of interest.— Subparagraph (B) of section 291(e)(1) (relating to interest on debt to carry taxexempt obligations acquired after December 31, 1982) is amended by adding at the end thereof the following new clause: “(iii) Interest.— For purposes of this subparagraph, the term ‘interest’ includes amounts (whether or not designated as interest) paid in respect of deposits, investment certificates, or withdrawable or repurchasable shares.” (b) Amendment Related to Section 205.— Subsection (q) of section 48 (relating to basis adjustment to section 38 property) is amended by adding at the end thereof the following new paragraph: “(6) Adjustment in basis of interest in partnership or s corporation.— The adjusted basis of— “(A) a partner’s interest in a partnership, and “(B) stock in an S corporation, shall be appropriately adjusted to take into account adjustments made under this subsection in the basis of property held by the partnership or S corporation (as the case may be).” (c) Amendment Related to Section 207.— Paragraph (4) of section 189(e) (defining residential real property) is amended by striking 26 USC 189. out “or” at the end of subparagraph (A), by striking out the period at the end of subparagraph (B) and inserting in lieu thereof “, or”, and by adding at the end thereof the following new subparagraph: “(C) real property held by a cooperative housing corporation (as defined in section 216(b)) and used for dwelling purposes.” (d) Amendments Related to Section 210.— (1) Special rule where dealer-lessee required to purchase vehicle.— Paragraph (2) of section 210(b) of the Tax Equity and Fiscal Responsibility Act of 1982 (defining terminal rental adjustment clause) is amended by adding 26 USC 168 note. at the end thereof the following new sentence: “Such term also includes a provision of an agreement which requires a lessee who is a dealer in motor vehicles to purchase the motor vehicle for a predetermined price and then resell such vehicle where such provision achieves substantially the same results as a provision described in the preceding sentence.” (2) Exception where lessee took position on return that he was owner.— Section 210 of the Tax Equity and Fiscal Responsibility Act of 1982 is amended by adding at the end thereof the following new subsection: “(c) Exception Where Lessee Took Position on Return.— Subsection (a) shall not apply to deny a deduction for interest paid or accrued claimed by a lessee with respect to a qualified motor vehicle agreement on a return of tax imposed by chapter 1 of the Internal Revenue Code of 1954 which was filed before the date of the enactment 26 USC 1 et seq of this Act or to deny a credit for investment in depreciable property claimed by the lessee on such a return pursuant to an agreement with the lessor that the lessor would not claim the credit.” (e) Amendment Related to Section 211.— Subparagraph (A) of section 211(e)(2) of the Tax Equity and Fiscal Responsibility Act of 1982 (relating to retention of old sections 907(b) and 904(f)(4) where 26 USC 907 note. taxpayer had separate basket foreign loss) is amended by striking out “the 8-year period” and inserting in lieu thereof “the 8-year period (or such shorter period as the taxpayer may select)”. (f) Amendment Related to Section 212.— Paragraph (1) of section 954(h) (defining foreign base company oil-related income) is 26 USC 954. amended by striking out “section 907(c)(2)” and inserting in lieu thereof “paragraphs (2) and (3) of section 907(c)”. (g) Amendment Related to Section 213.— The table contained in subparagraph (C) of section 936(a)(2) is amended by striking 26 USC 936. out “The percentage tax is:” and inserting in lieu thereof “The percentage is:”. (h) Amendment Related to Section 217.— Subsection (e) of section 217 of the Tax Equity and Fiscal Responsibility Act of 1982 (relating to effective date) is amended by adding at the end thereof 26 USC 103 note. the following new sentence: “For purposes of applying section 168(f)(8)(D)(v) of the Internal Revenue Code of 1954, the amendments made by subsection (c) shall apply to agreements entered into after the date of the enactment of this Act.” (i) Amendments Related to Section 222.— (1) Sections 301(e)(2) and 302(f)(3) are each amended by striking out “partial or complete liquidation” and inserting in lieu thereof “complete liquidation”. (2) The paragraph heading of paragraph (1) of section 306(b) (relating to exceptions) is amended by striking out “interest.” and inserting in lieu thereof “interest, etc.”. (3) Paragraph (1) of section 543(a) (defining personal holding company income) is amended by striking out subparagraph (C), by adding “and” at the end of subparagraph (A), and by striking out “, and” at the end of subparagraph (B) and inserting in lieu thereof a period. (j) Amendment Related to Section 223.— Paragraph (1) of section (e) ( 26 USC 311. defining qualified stock) is amended by adding at the end thereof the following new subparagraph: “(C) Rules for passthru entities.— In the case of an S corporation, partnership, trust, or estate— “(i) the determination of whether subparagraph (A) is satisfied shall be made at the shareholder, partner, or beneficiary level (rather than at the entity level), and “(ii) the distribution shall be treated as made directly to the shareholders, partners, or beneficiaries in proportion to their respective interests in the entity. (k) Amendments Related to Section 224.— (1) Assets treated as sold at fair market value.— (A) In general.— Paragraph (1) of section 338(a) (relating to general rule) is amended by inserting “at fair market value” after “acquisition date”. (B) Basis of assets after deemed purchase.— Subsection (b) of section 338 (relating to price at which deemed sale made) is amended to read as follows: “(b) Basis of Assets After Deemed Purchase.— “(1) In general.— For purposes of subsection (a), the assets of the target corporation shall be treated as purchased for an amount equal to the sum of— “(A) the grossed-up basis of the purchasing corporation’s recently purchased stock, and “(B) the basis of the purchasing corporation’s nonrecently purchased stock. “(2) Adjustment for liabilities and other relevant items.— The amount described in paragraph (1) shall be adjusted under regulations prescribed by the Secretary for liabilities of the target corporation and other relevant items. “(3) Election to step-up the basis of certain target stock.— “(A) In general.— Under regulations prescribed by the Secretary, the basis of the purchasing corporation’s nonrecently purchased stock shall be the basis amount determined under subparagraph (B) of this paragraph if the purchasing corporation makes an election to recognize gain as if such stock were sold on the acquisition date for an amount equal to the basis amount determined under subparagraph (B). “(B) Determination of basis amount.— For purposes of subparagraph (A), the basis amount determined under this subparagraph shall be an amount equal to the grossed-up basis determined under subparagraph (A) of paragraph (1) multiplied by a fraction— “(i) the numerator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock, and “(ii) the denominator of which is 100 percent minus the percentage referred to in clause (i). “(4) Grossed-up basis.— For purposes of paragraph (1), the grossed-up basis shall be an amount equal to the basis of the corporation’s recently purchased stock, multiplied by a fraction— “(A) the numerator of which is 100 percent, minus the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock, and “(B) the denominator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s recently purchased stock. “(5) Allocation among assets.— The amount determined under paragraphs (1) and (2) shall be allocated among the assets of the target corporation under regulations prescribed by the Secretary. “(6) Definitions of recently purchased stock and nonrecently purchased stock.— For purposes of this subsection— “(A) Recently purchased stock.— The term ‘recently purchased stock’ means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which was purchased by such corporation during the 12-month acquisition period. “(B) Nonrecently purchased stock.— The term ‘nonrecently purchased stock’ means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which is not recently purchased stock.” (2) Coordination with section 333.— The last sentence of paragraph (1) of section 338(c) (relating to coordination with 26 USC 338. section 337 where purchasing corporation holds less than 100 percent of stock) is amended by striking out “such 1-year period” and inserting in lieu thereof “such 1-year period and section 333 does not apply to such liquidation”. (3) Exceptions to deemed election rule.— Paragraph (2) of section 338(e) (relating to exceptions) is amended— (A) by striking out “(in whole or in part)” in subparagraph i B) and inserting in lieu thereof “wholly”, (B) by inserting “or” at the end of subparagraph (C), and (C) by striking out subparagraphs (D) and (E) and inserting in lieu thereof the following: “(D) such acquisition is described in regulations prescribed by the Secretary and meets such conditions as such regulations may provide.” (4) Time for making election.— Paragraph (1) of section 338(g) (relating to election) is amended to read as follows: “(1) When made.— Except as otherwise provided in regulations, an election under this section shall be made not later than the 15th day of the 9th month beginning after the month in which the acquisition date occurs.” (5) Definition of purchase.— (A) Subparagraph (B) of section 338(h)(3) (defining purchase) is amended to read as follows: “(B) Deemed purchase under subsection (a).— The term ‘purchase’ includes any deemed purchase under subsection (a)(2). The acquisition date for a corporation which is deemed purchased under subsection (a)(2) shall be determined under regulations prescribed by the Secretary.” (B) Paragraph (3) of section 338(h) is amended by adding at the end thereof the following new subparagraph: “(C) Certain stock acquisitions from related corporations.— “(i) In general.— Clause (iii) of subparagraph (A) shall not apply to an acquisition of stock from a related corporation if at least 50 percent in value of the stock of such related corporation was acquired by purchase (within the meaning of subparagraph (A) and (B)). “(ii) Certain distributions.— Clause (i) of subparagraph (A) shall not apply to an acquisition of stock described in clause (i) of this subparagraph if the corporation acquiring such stock— “(I) made a qualified stock purchase of stock of the related corporation, and “(II) made an election under this section (or is treated under subsection (e) as having made such an election) with respect to such qualified stock purchase. “(iii) Related corporation defined.— For purposes of this subparagraph, a corporation is a related corporation if stock owned by such corporation is treated (under section 318(a) other than paragraph (4) thereof) as owned by the corporation acquiring the stock.” (C) Paragraph (1) of section 338(h) (defining 12-month acquisition period) is amended by inserting before the period at the end thereof the following: “(or, if any of such stock was acquired in an acquisition which is a purchase by reason of subparagraph (C) of paragraph (3), the date on which the acquiring corporation is first considered under section 318(a) (other than paragraph (4) thereof) as owning stock owned by the corporation from which such acquisition was made).” (D) Clause (ii) of section 338(h)(3)(A) (defining purchase) is amended to read as follows: “(ii) the stock is not acquired in an exchange to which section 351, 354, 355, or 356 applies and is not acquired in any other transaction described in regulations in which the transferor does not recognize the entire amount of the gain or loss realized on the transaction, and”. (E) Paragraph (4) of section 318(b) (relating to cross references) is amended to read as follows: “(4) section 338(h)(3) (defining purchase);”. (6) Special rules for applying section 338.— (A) Subsection (h) of section 338 (relating to definitions 26 USC 338. and special rules) is amended by striking out paragraph (7), by redesignating paragraphs (8) and (9) as paragraphs (9) and (10), respectively, and by inserting after paragraph (6) the following new paragraphs: “(7) Additional percentage must be attributable to purchase, etc.— For purposes of subsection (c)(1), any increase in the maximum percentage of stock taken into account over the percentage of stock (by value) of the target corporation held by the purchasing corporation on the acquisition date shall be taken into account only to the extent such increase is attributable to— “(A) purchase, or “(B) a redemption of stock of the target corporation— “(i) to which section 302(a) applies, or “(ii) in the case of a shareholder who is not a corporation, to which section 301 applies. “(8) Acquisitions by affiliated group treated as made by i corporation.— Except as provided in regulations prescribed by the Secretary, stock and asset acquisitions made by members of the same affiliated group shall be treated as made by 1 corporation.” (B) Paragraph (9) of section 338(h), as redesignated by subparagraph (A), is amended by striking out “paragraph (9)” and inserting in lieu thereof “paragraph (10)”. (C) Subsection (h) of section 338 is amended by adding at the end thereof the following new paragraphs: “(11) Elective formula for determining fair market value.— For purposes of subsection (a)(1), fair market value may be determined on the basis of a formula provided in regulations prescribed by the Secretary which takes into account liabilities and other relevant items. “(12) Section 337 to apply where target had adopted plan for complete liquidation.— If— “(A) during the 12-month period ending on the acquisition date the target corporation adopted a plan of complete liquidation, “(B) such plan was not rescinded before the close of the acquisition date, and “(C) the purchasing corporation makes an election under this section (or is treated under subsection (e) as having made such an election) with respect to the target corporation, then, subject to rules similar to the rules of subsection (c)(1), for purposes of section 337 (and other provisions which relate to section 337), the target corporation shall be treated as having distributed all of its assets as of the close of the acquisition date. “(13) Tax on deemed sale not taken into account for estimated tax purposes.— For purposes of section 6655, tax attributable to the sale described in subsection (a)(1) shall not be taken into account. “(14) Coordination with section 341.— For purposes of determining whether section 341 applies to a disposition within 1 year after the acquisition date of stock by a shareholder (other than the acquiring corporation) who held stock in the target corporation on the acquisition date, section 341 shall be applied without regard to this section. “(15) Combined deemed sale return.— Under regulations prescribed by the Secretary, a combined deemed sale return may be filed by all target corporations acquired by a purchasing corporation on the same acquisition date if such target corporations were members of the same selling consolidated group (as defined in subparagraph (B) of paragraph (10)).” (7) Subsection (i) of section 338 (relating to regulations) is amended to read as follows: “(i) Regulations.— The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including— “(1) regulations to ensure that the purpose of this section to require consistency of treatment of stock and asset sales and purchases may not be circumvented through the use of any provision of law or regulations (including the consolidated return regulations) and “(2) regulations providing for the coordination of the provisions of this section with the provision of this title relating to foreign corporations and their shareholders.” (8) Treatment of certain liquidations.— (A) In general.— Section 269 (relating to acquisitions made to evade or avoid income tax) is amended by redesignating subsection (b) as subsection (c) and by inserting after subsection (a) the following new subsection: “(b) Certain Liquidations After Qualified Stock Purchases.— “(1) In general.— If— “(A) there is a qualified stock purchase by a corporation of another corporation, “(B) an election is not made under section 338 with respect to such purchase, “(C) the acquired corporation is liquidated pursuant to a plan of liquidation adopted not more than 2 years after the acquisition date, and “(D) the principal purpose for such liquidation is the evasion or avoidance of Federal income tax by securing the benefit of a deduction, credit, or other allowance which the acquiring corporation would not otherwise enjoy, then the Secretary may disallow such deduction, credit, or other allowance. “(2) Meaning of terms.— For purposes of paragraph (1), the terms ‘qualified stock purchase’ and ‘acquisition date’ have the same respective meanings as when used in section 338.” (B) Conforming amendment.— Subsection (c) of section 269 (as redesignated by subparagraph (A)) is amended by striking out “subsection (a)” and inserting in lieu thereof “subsection (a) or (b)”. (C) Effective date.— The amendments made by this paragraph shall apply to liquidations after October 20, 1983, in taxable years ending after such date. (9) Amendments not to apply to acquisitions before September 1, 1982.— (A) In general.— The amendments made by this subsection shall not apply to any qualified stock purchase (as defined in section 338(d)(3) of the Internal Revenue Code of 1954) where the acquisition date (as defined in section 338(h)(2) of such Code) is before September 1, 1982. (B) Extension of time for making election.— In the case of any qualified stock purchase described in subparagraph (A), the time for making an election under section 338 of such Code shall not expire before the close of the 60th day after the date of the enactment of this Act. (10) Special rules for deemed purchases under prior law.— 26 USC 338 note. If, before October 20, 1983, a corporation was treated as making a qualified stock purchase (as defined in section 338(d)(3) of the Internal Revenue Code of 1954), but would not be so treated under the amendments made by paragraphs (5) and (6) of this subsection, the amendments made by such paragraphs shall not apply to such purchase unless such corporation elects (at such time and in such manner as the Secretary of the Treasury or his delegate may by regulations prescribe) to have the amendments made by such paragraphs apply. (l) Amendments Related to Section 226.— (1) Amount constituting dividend.— Paragraph (2) of section 304(b) (relating to amount constituting dividend) is amended to 26 USC 304. read as follows: “(2) Amount constituting dividend.— In the case of any acquisition of stock to which subsection (a) applies, the determination of the amount which is a dividend (and the source thereof) shall be made as if the property were distributed— “(A) by the acquiring corporation to the extent of its earnings and profits, and “(B) then by the issuing corporation to the extent of its earnings and profits.” (2) Coordination with section 35i.— Subparagraph (A) of section 304(b)(3) (relating to coordination with section 351) is amended by striking out “(and not part III)” and inserting in lieu thereof “(and not section 351 and not so much of sections 357 and 358 as relates to section 351)”. (3) Certain assumptions of liability.— (A) The first sentence of clause (i) of section 304(b)(3)(B) (relating to certain assumptions of liability, etc.) is amended by striking out “Subsection (a)” and inserting in lieu thereof “In the case of an acquisition described in section 351, subsection (a)”. (B) Subparagraph (B) of section 304(b)(3) (relating to coordination with section 351) is amended by adding at the end thereof the following new clause: “(iii) Clause (i) does not apply to stock acquired from related person except where complete termination.— Clause (i) shall apply only to stock acquired by the transferor from a person— “(I) none of whose stock is attributable to the transferor under section 318(a) (other than paragraph (4) thereof), or “(II) who satisfies rules similar to the rules of section 302(c)(2) with respect to both the acquiring and the issuing corporations (determined as if such person were a distributee of each such corporation).” (4) Distributions incident to formation of bank holding companies.— Subparagraph (C) of section 304(b)(3) (relating to distributions incident to formation of bank holding companies) is amended by adding at the end thereof the following new sentence: “For purposes of this subparagraph, any assumption of (or acquisition of stock subject to) a liability under subparagraph (B) shall not be treated as a distribution of property.” (5) Constructive ownership.— (A) Paragraph (3) of section 304(c) (relating to constructive ownership) is amended to read as follows: “(3) Constructive ownership.— “(A) In general.— Section 318(a) (relating to constructive ownership of stock) shall apply for purposes of determining control under this section. “(B) Modification of 50-percent limitations in section 318.— For purposes of subparagraph (A)— “(i) paragraph (2)(C) of section 318(a) shall be applied by substituting ‘5 percent’ for ‘50 percent’, and “(ii) paragraph (3)(C) of section 318(a) shall be applied— “(I) by substituting ‘5 percent’ for ‘50 percent’, and “(II) in any case where such paragraph would not apply but for subclause (I), by considering a corporation as owning the stock (other than stock in such corporation) owned by or for any shareholder of such corporation in that proportion which the value of the stock which such shareholder owned in such corporation bears to the value of all stock in such corporation.” (B) Paragraph (4) of section 306(c) is amended by striking out the last sentence and inserting in lieu thereof the following: “For purposes of applying the preceding sentence Supra. to paragraph (3), the rules of section 304(c)(3)(B) shall apply.” (6) Certain stock acquired in section 351 exchange.— Paragraph (3) of section 306(c) (relating to certain stock acquired in section 351 exchange) is amended by striking out the last sentence and inserting in lieu thereof the following: “Rules similar Ante, p. 953. to the rules of section 304(b)(2) shall apply— “(A) for purposes of the preceding sentence, and “(B) for purposes of determining the application of this section to any subsequent disposition of stock which is section 306 stock by reason of an exchange described in the preceding sentence.” (7) Effective dates for amendments made by paragraphs (1) and (3).— (A) In general.— Except as otherwise provided in this paragraph, the amendments made by paragraphs (1) and (3) shall apply to stock acquired after June 18, 1984, in taxable years ending after such date. (B) Election by taxpayer to have amendments apply earlier.— Any taxpayer may elect, at such time and in such manner as the Secretary of the Treasury or his delegate may prescribe, to have the amendments made by paragraphs (1) and (3) apply as if included in section 226 of the Tax Equity and Fiscal Responsibility Act of 1982. (C) Special pule for certain transfers to form bank holding company.— Except as provided in subparagraph (D), the amendments made by paragraphs (1) and (3) shall not apply to transfers pursuant to an application to form a BHC (as defined in section 304(b)(3)(D)(ii) of the Internal Revenue Code of 1954) filed with the Federal Reserve Board before June 18, 1984, if— (i) such BHC was formed not later than the 90th day after the date of the last required approval of any regulatory authority to form such BHC, and (ii) such BHC did not elect (at such time and in such manner as the Secretary of the Treasury or his delegate shall prescribe) not to have the provisions of this subparagraph apply. (D) Amendments to apply to certain liabilities incurred before October 20, 1983.— The amendment made by paragraph (3)(A) shall apply to the acquisition of any stock to the extent the liability assumed, or to which such stock is subject, was incurred by the transferor after October 20, 1983. (m) Amendment Related to Section 229.— Subsection (c) of section 229 of the Tax Equity and Fiscal Responsibility Act of 1982 26 USC 451 note. (relating to modification of regulations on the completed contract method of accounting) is amended by adding at the end thereof the following new paragraph: “(4) Underpayments of estimated tax for 1982.— To the extent provided in regulations, no addition to tax shall be made under section 6654 or 6655 of the Internal Revenue Code of 1954 Ante, p. 788. for the taxpayer’s first taxable year ending after December 31, 1982, by reason of a long-term contract, but only with respect to installments required to be paid before April 13, 1983.” (n) Amendment Related to Section 233.— Paragraph (11) of section 51(d) (defining members of economically disadvantaged families) 26 USC 51. is amended by adding at the end thereof the following new sentence: “Any such determination with respect to an individual who is a qualified summer youth employee or youth participating in a qualified cooperative education program with respect to any employer shall also apply for purposes of determining whether such individual is a member of another targeted group with respect to such employer.”

8. 1984

   Tax Reform Act of 1984

   Pub. L. 98–369 § 712 · 98 Stat. 494

   Substituted · 26 U.S.C. § 304(b)(3)(B)(i)

   Pub. L. 98–369, § 712(l)(3)(A)(i), substituted “In the case of an acquisition described in section 351, subsection (a)” for “Subsection (a)”

   Source evidence

   Code amendment note
   Subsec. (b)(3)(B)(i). Pub. L. 98–369, § 712(l)(3)(A)(i), substituted “In the case of an acquisition described in section 351, subsection (a)” for “Subsection (a)”.

   Enacted provision · exact public law section
   SEC. 712. TECHNICAL CORRECTIONS OF PROVISIONS PRIMARILY RELATING TO BUSINESSES. (a) Amendments Related to Section 204.— (1) Clarification of additional amount treated as ordinary income under section 1250.— (A) Paragraph (1) of section 291(a) (relating to section 1250 capital gain treatment) is amended— (i) by striking out “under section 1250” in subparagraph (B) and inserting in lieu thereof “under section 1250 (determined without regard to this paragraph)”, and (ii) by striking out “which is ordinary income” and inserting in lieu thereof “which is ordinary income under section 1250”. (B) Subsection (a) of section 1250 is amended by adding at the end thereof the following new paragraph: “(4) Cross reference.— “For reduction in the case of corporations on capital gain treatment under this section, see section 291(a)(1).” (2) Investment tax credit allowed only for mineral exploration and development costs for deposits located in the united states.— Clause (ii) of section 291(b)(2)(B) is amended by inserting “in the case of a deposit located in the United States,” after “(ii)”. (3) Clarification of coordination with cost depletion.— Paragraph (6) of section 291(b) (relating to coordination with cost depletion) is amended to read as follows: “(6) Coordination with cost depletion.— The portion of the adjusted basis of any property which is attributable to amounts to which paragraph (1) applied shall not be taken into account for purposes of determining depletion under section 611.” (4) Clarification of definition of interest.— Subparagraph (B) of section 291(e)(1) (relating to interest on debt to carry taxexempt obligations acquired after December 31, 1982) is amended by adding at the end thereof the following new clause: “(iii) Interest.— For purposes of this subparagraph, the term ‘interest’ includes amounts (whether or not designated as interest) paid in respect of deposits, investment certificates, or withdrawable or repurchasable shares.” (b) Amendment Related to Section 205.— Subsection (q) of section 48 (relating to basis adjustment to section 38 property) is amended by adding at the end thereof the following new paragraph: “(6) Adjustment in basis of interest in partnership or s corporation.— The adjusted basis of— “(A) a partner’s interest in a partnership, and “(B) stock in an S corporation, shall be appropriately adjusted to take into account adjustments made under this subsection in the basis of property held by the partnership or S corporation (as the case may be).” (c) Amendment Related to Section 207.— Paragraph (4) of section 189(e) (defining residential real property) is amended by striking 26 USC 189. out “or” at the end of subparagraph (A), by striking out the period at the end of subparagraph (B) and inserting in lieu thereof “, or”, and by adding at the end thereof the following new subparagraph: “(C) real property held by a cooperative housing corporation (as defined in section 216(b)) and used for dwelling purposes.” (d) Amendments Related to Section 210.— (1) Special rule where dealer-lessee required to purchase vehicle.— Paragraph (2) of section 210(b) of the Tax Equity and Fiscal Responsibility Act of 1982 (defining terminal rental adjustment clause) is amended by adding 26 USC 168 note. at the end thereof the following new sentence: “Such term also includes a provision of an agreement which requires a lessee who is a dealer in motor vehicles to purchase the motor vehicle for a predetermined price and then resell such vehicle where such provision achieves substantially the same results as a provision described in the preceding sentence.” (2) Exception where lessee took position on return that he was owner.— Section 210 of the Tax Equity and Fiscal Responsibility Act of 1982 is amended by adding at the end thereof the following new subsection: “(c) Exception Where Lessee Took Position on Return.— Subsection (a) shall not apply to deny a deduction for interest paid or accrued claimed by a lessee with respect to a qualified motor vehicle agreement on a return of tax imposed by chapter 1 of the Internal Revenue Code of 1954 which was filed before the date of the enactment 26 USC 1 et seq of this Act or to deny a credit for investment in depreciable property claimed by the lessee on such a return pursuant to an agreement with the lessor that the lessor would not claim the credit.” (e) Amendment Related to Section 211.— Subparagraph (A) of section 211(e)(2) of the Tax Equity and Fiscal Responsibility Act of 1982 (relating to retention of old sections 907(b) and 904(f)(4) where 26 USC 907 note. taxpayer had separate basket foreign loss) is amended by striking out “the 8-year period” and inserting in lieu thereof “the 8-year period (or such shorter period as the taxpayer may select)”. (f) Amendment Related to Section 212.— Paragraph (1) of section 954(h) (defining foreign base company oil-related income) is 26 USC 954. amended by striking out “section 907(c)(2)” and inserting in lieu thereof “paragraphs (2) and (3) of section 907(c)”. (g) Amendment Related to Section 213.— The table contained in subparagraph (C) of section 936(a)(2) is amended by striking 26 USC 936. out “The percentage tax is:” and inserting in lieu thereof “The percentage is:”. (h) Amendment Related to Section 217.— Subsection (e) of section 217 of the Tax Equity and Fiscal Responsibility Act of 1982 (relating to effective date) is amended by adding at the end thereof 26 USC 103 note. the following new sentence: “For purposes of applying section 168(f)(8)(D)(v) of the Internal Revenue Code of 1954, the amendments made by subsection (c) shall apply to agreements entered into after the date of the enactment of this Act.” (i) Amendments Related to Section 222.— (1) Sections 301(e)(2) and 302(f)(3) are each amended by striking out “partial or complete liquidation” and inserting in lieu thereof “complete liquidation”. (2) The paragraph heading of paragraph (1) of section 306(b) (relating to exceptions) is amended by striking out “interest.” and inserting in lieu thereof “interest, etc.”. (3) Paragraph (1) of section 543(a) (defining personal holding company income) is amended by striking out subparagraph (C), by adding “and” at the end of subparagraph (A), and by striking out “, and” at the end of subparagraph (B) and inserting in lieu thereof a period. (j) Amendment Related to Section 223.— Paragraph (1) of section (e) ( 26 USC 311. defining qualified stock) is amended by adding at the end thereof the following new subparagraph: “(C) Rules for passthru entities.— In the case of an S corporation, partnership, trust, or estate— “(i) the determination of whether subparagraph (A) is satisfied shall be made at the shareholder, partner, or beneficiary level (rather than at the entity level), and “(ii) the distribution shall be treated as made directly to the shareholders, partners, or beneficiaries in proportion to their respective interests in the entity. (k) Amendments Related to Section 224.— (1) Assets treated as sold at fair market value.— (A) In general.— Paragraph (1) of section 338(a) (relating to general rule) is amended by inserting “at fair market value” after “acquisition date”. (B) Basis of assets after deemed purchase.— Subsection (b) of section 338 (relating to price at which deemed sale made) is amended to read as follows: “(b) Basis of Assets After Deemed Purchase.— “(1) In general.— For purposes of subsection (a), the assets of the target corporation shall be treated as purchased for an amount equal to the sum of— “(A) the grossed-up basis of the purchasing corporation’s recently purchased stock, and “(B) the basis of the purchasing corporation’s nonrecently purchased stock. “(2) Adjustment for liabilities and other relevant items.— The amount described in paragraph (1) shall be adjusted under regulations prescribed by the Secretary for liabilities of the target corporation and other relevant items. “(3) Election to step-up the basis of certain target stock.— “(A) In general.— Under regulations prescribed by the Secretary, the basis of the purchasing corporation’s nonrecently purchased stock shall be the basis amount determined under subparagraph (B) of this paragraph if the purchasing corporation makes an election to recognize gain as if such stock were sold on the acquisition date for an amount equal to the basis amount determined under subparagraph (B). “(B) Determination of basis amount.— For purposes of subparagraph (A), the basis amount determined under this subparagraph shall be an amount equal to the grossed-up basis determined under subparagraph (A) of paragraph (1) multiplied by a fraction— “(i) the numerator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock, and “(ii) the denominator of which is 100 percent minus the percentage referred to in clause (i). “(4) Grossed-up basis.— For purposes of paragraph (1), the grossed-up basis shall be an amount equal to the basis of the corporation’s recently purchased stock, multiplied by a fraction— “(A) the numerator of which is 100 percent, minus the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock, and “(B) the denominator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s recently purchased stock. “(5) Allocation among assets.— The amount determined under paragraphs (1) and (2) shall be allocated among the assets of the target corporation under regulations prescribed by the Secretary. “(6) Definitions of recently purchased stock and nonrecently purchased stock.— For purposes of this subsection— “(A) Recently purchased stock.— The term ‘recently purchased stock’ means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which was purchased by such corporation during the 12-month acquisition period. “(B) Nonrecently purchased stock.— The term ‘nonrecently purchased stock’ means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which is not recently purchased stock.” (2) Coordination with section 333.— The last sentence of paragraph (1) of section 338(c) (relating to coordination with 26 USC 338. section 337 where purchasing corporation holds less than 100 percent of stock) is amended by striking out “such 1-year period” and inserting in lieu thereof “such 1-year period and section 333 does not apply to such liquidation”. (3) Exceptions to deemed election rule.— Paragraph (2) of section 338(e) (relating to exceptions) is amended— (A) by striking out “(in whole or in part)” in subparagraph i B) and inserting in lieu thereof “wholly”, (B) by inserting “or” at the end of subparagraph (C), and (C) by striking out subparagraphs (D) and (E) and inserting in lieu thereof the following: “(D) such acquisition is described in regulations prescribed by the Secretary and meets such conditions as such regulations may provide.” (4) Time for making election.— Paragraph (1) of section 338(g) (relating to election) is amended to read as follows: “(1) When made.— Except as otherwise provided in regulations, an election under this section shall be made not later than the 15th day of the 9th month beginning after the month in which the acquisition date occurs.” (5) Definition of purchase.— (A) Subparagraph (B) of section 338(h)(3) (defining purchase) is amended to read as follows: “(B) Deemed purchase under subsection (a).— The term ‘purchase’ includes any deemed purchase under subsection (a)(2). The acquisition date for a corporation which is deemed purchased under subsection (a)(2) shall be determined under regulations prescribed by the Secretary.” (B) Paragraph (3) of section 338(h) is amended by adding at the end thereof the following new subparagraph: “(C) Certain stock acquisitions from related corporations.— “(i) In general.— Clause (iii) of subparagraph (A) shall not apply to an acquisition of stock from a related corporation if at least 50 percent in value of the stock of such related corporation was acquired by purchase (within the meaning of subparagraph (A) and (B)). “(ii) Certain distributions.— Clause (i) of subparagraph (A) shall not apply to an acquisition of stock described in clause (i) of this subparagraph if the corporation acquiring such stock— “(I) made a qualified stock purchase of stock of the related corporation, and “(II) made an election under this section (or is treated under subsection (e) as having made such an election) with respect to such qualified stock purchase. “(iii) Related corporation defined.— For purposes of this subparagraph, a corporation is a related corporation if stock owned by such corporation is treated (under section 318(a) other than paragraph (4) thereof) as owned by the corporation acquiring the stock.” (C) Paragraph (1) of section 338(h) (defining 12-month acquisition period) is amended by inserting before the period at the end thereof the following: “(or, if any of such stock was acquired in an acquisition which is a purchase by reason of subparagraph (C) of paragraph (3), the date on which the acquiring corporation is first considered under section 318(a) (other than paragraph (4) thereof) as owning stock owned by the corporation from which such acquisition was made).” (D) Clause (ii) of section 338(h)(3)(A) (defining purchase) is amended to read as follows: “(ii) the stock is not acquired in an exchange to which section 351, 354, 355, or 356 applies and is not acquired in any other transaction described in regulations in which the transferor does not recognize the entire amount of the gain or loss realized on the transaction, and”. (E) Paragraph (4) of section 318(b) (relating to cross references) is amended to read as follows: “(4) section 338(h)(3) (defining purchase);”. (6) Special rules for applying section 338.— (A) Subsection (h) of section 338 (relating to definitions 26 USC 338. and special rules) is amended by striking out paragraph (7), by redesignating paragraphs (8) and (9) as paragraphs (9) and (10), respectively, and by inserting after paragraph (6) the following new paragraphs: “(7) Additional percentage must be attributable to purchase, etc.— For purposes of subsection (c)(1), any increase in the maximum percentage of stock taken into account over the percentage of stock (by value) of the target corporation held by the purchasing corporation on the acquisition date shall be taken into account only to the extent such increase is attributable to— “(A) purchase, or “(B) a redemption of stock of the target corporation— “(i) to which section 302(a) applies, or “(ii) in the case of a shareholder who is not a corporation, to which section 301 applies. “(8) Acquisitions by affiliated group treated as made by i corporation.— Except as provided in regulations prescribed by the Secretary, stock and asset acquisitions made by members of the same affiliated group shall be treated as made by 1 corporation.” (B) Paragraph (9) of section 338(h), as redesignated by subparagraph (A), is amended by striking out “paragraph (9)” and inserting in lieu thereof “paragraph (10)”. (C) Subsection (h) of section 338 is amended by adding at the end thereof the following new paragraphs: “(11) Elective formula for determining fair market value.— For purposes of subsection (a)(1), fair market value may be determined on the basis of a formula provided in regulations prescribed by the Secretary which takes into account liabilities and other relevant items. “(12) Section 337 to apply where target had adopted plan for complete liquidation.— If— “(A) during the 12-month period ending on the acquisition date the target corporation adopted a plan of complete liquidation, “(B) such plan was not rescinded before the close of the acquisition date, and “(C) the purchasing corporation makes an election under this section (or is treated under subsection (e) as having made such an election) with respect to the target corporation, then, subject to rules similar to the rules of subsection (c)(1), for purposes of section 337 (and other provisions which relate to section 337), the target corporation shall be treated as having distributed all of its assets as of the close of the acquisition date. “(13) Tax on deemed sale not taken into account for estimated tax purposes.— For purposes of section 6655, tax attributable to the sale described in subsection (a)(1) shall not be taken into account. “(14) Coordination with section 341.— For purposes of determining whether section 341 applies to a disposition within 1 year after the acquisition date of stock by a shareholder (other than the acquiring corporation) who held stock in the target corporation on the acquisition date, section 341 shall be applied without regard to this section. “(15) Combined deemed sale return.— Under regulations prescribed by the Secretary, a combined deemed sale return may be filed by all target corporations acquired by a purchasing corporation on the same acquisition date if such target corporations were members of the same selling consolidated group (as defined in subparagraph (B) of paragraph (10)).” (7) Subsection (i) of section 338 (relating to regulations) is amended to read as follows: “(i) Regulations.— The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including— “(1) regulations to ensure that the purpose of this section to require consistency of treatment of stock and asset sales and purchases may not be circumvented through the use of any provision of law or regulations (including the consolidated return regulations) and “(2) regulations providing for the coordination of the provisions of this section with the provision of this title relating to foreign corporations and their shareholders.” (8) Treatment of certain liquidations.— (A) In general.— Section 269 (relating to acquisitions made to evade or avoid income tax) is amended by redesignating subsection (b) as subsection (c) and by inserting after subsection (a) the following new subsection: “(b) Certain Liquidations After Qualified Stock Purchases.— “(1) In general.— If— “(A) there is a qualified stock purchase by a corporation of another corporation, “(B) an election is not made under section 338 with respect to such purchase, “(C) the acquired corporation is liquidated pursuant to a plan of liquidation adopted not more than 2 years after the acquisition date, and “(D) the principal purpose for such liquidation is the evasion or avoidance of Federal income tax by securing the benefit of a deduction, credit, or other allowance which the acquiring corporation would not otherwise enjoy, then the Secretary may disallow such deduction, credit, or other allowance. “(2) Meaning of terms.— For purposes of paragraph (1), the terms ‘qualified stock purchase’ and ‘acquisition date’ have the same respective meanings as when used in section 338.” (B) Conforming amendment.— Subsection (c) of section 269 (as redesignated by subparagraph (A)) is amended by striking out “subsection (a)” and inserting in lieu thereof “subsection (a) or (b)”. (C) Effective date.— The amendments made by this paragraph shall apply to liquidations after October 20, 1983, in taxable years ending after such date. (9) Amendments not to apply to acquisitions before September 1, 1982.— (A) In general.— The amendments made by this subsection shall not apply to any qualified stock purchase (as defined in section 338(d)(3) of the Internal Revenue Code of 1954) where the acquisition date (as defined in section 338(h)(2) of such Code) is before September 1, 1982. (B) Extension of time for making election.— In the case of any qualified stock purchase described in subparagraph (A), the time for making an election under section 338 of such Code shall not expire before the close of the 60th day after the date of the enactment of this Act. (10) Special rules for deemed purchases under prior law.— 26 USC 338 note. If, before October 20, 1983, a corporation was treated as making a qualified stock purchase (as defined in section 338(d)(3) of the Internal Revenue Code of 1954), but would not be so treated under the amendments made by paragraphs (5) and (6) of this subsection, the amendments made by such paragraphs shall not apply to such purchase unless such corporation elects (at such time and in such manner as the Secretary of the Treasury or his delegate may by regulations prescribe) to have the amendments made by such paragraphs apply. (l) Amendments Related to Section 226.— (1) Amount constituting dividend.— Paragraph (2) of section 304(b) (relating to amount constituting dividend) is amended to 26 USC 304. read as follows: “(2) Amount constituting dividend.— In the case of any acquisition of stock to which subsection (a) applies, the determination of the amount which is a dividend (and the source thereof) shall be made as if the property were distributed— “(A) by the acquiring corporation to the extent of its earnings and profits, and “(B) then by the issuing corporation to the extent of its earnings and profits.” (2) Coordination with section 35i.— Subparagraph (A) of section 304(b)(3) (relating to coordination with section 351) is amended by striking out “(and not part III)” and inserting in lieu thereof “(and not section 351 and not so much of sections 357 and 358 as relates to section 351)”. (3) Certain assumptions of liability.— (A) The first sentence of clause (i) of section 304(b)(3)(B) (relating to certain assumptions of liability, etc.) is amended by striking out “Subsection (a)” and inserting in lieu thereof “In the case of an acquisition described in section 351, subsection (a)”. (B) Subparagraph (B) of section 304(b)(3) (relating to coordination with section 351) is amended by adding at the end thereof the following new clause: “(iii) Clause (i) does not apply to stock acquired from related person except where complete termination.— Clause (i) shall apply only to stock acquired by the transferor from a person— “(I) none of whose stock is attributable to the transferor under section 318(a) (other than paragraph (4) thereof), or “(II) who satisfies rules similar to the rules of section 302(c)(2) with respect to both the acquiring and the issuing corporations (determined as if such person were a distributee of each such corporation).” (4) Distributions incident to formation of bank holding companies.— Subparagraph (C) of section 304(b)(3) (relating to distributions incident to formation of bank holding companies) is amended by adding at the end thereof the following new sentence: “For purposes of this subparagraph, any assumption of (or acquisition of stock subject to) a liability under subparagraph (B) shall not be treated as a distribution of property.” (5) Constructive ownership.— (A) Paragraph (3) of section 304(c) (relating to constructive ownership) is amended to read as follows: “(3) Constructive ownership.— “(A) In general.— Section 318(a) (relating to constructive ownership of stock) shall apply for purposes of determining control under this section. “(B) Modification of 50-percent limitations in section 318.— For purposes of subparagraph (A)— “(i) paragraph (2)(C) of section 318(a) shall be applied by substituting ‘5 percent’ for ‘50 percent’, and “(ii) paragraph (3)(C) of section 318(a) shall be applied— “(I) by substituting ‘5 percent’ for ‘50 percent’, and “(II) in any case where such paragraph would not apply but for subclause (I), by considering a corporation as owning the stock (other than stock in such corporation) owned by or for any shareholder of such corporation in that proportion which the value of the stock which such shareholder owned in such corporation bears to the value of all stock in such corporation.” (B) Paragraph (4) of section 306(c) is amended by striking out the last sentence and inserting in lieu thereof the following: “For purposes of applying the preceding sentence Supra. to paragraph (3), the rules of section 304(c)(3)(B) shall apply.” (6) Certain stock acquired in section 351 exchange.— Paragraph (3) of section 306(c) (relating to certain stock acquired in section 351 exchange) is amended by striking out the last sentence and inserting in lieu thereof the following: “Rules similar Ante, p. 953. to the rules of section 304(b)(2) shall apply— “(A) for purposes of the preceding sentence, and “(B) for purposes of determining the application of this section to any subsequent disposition of stock which is section 306 stock by reason of an exchange described in the preceding sentence.” (7) Effective dates for amendments made by paragraphs (1) and (3).— (A) In general.— Except as otherwise provided in this paragraph, the amendments made by paragraphs (1) and (3) shall apply to stock acquired after June 18, 1984, in taxable years ending after such date. (B) Election by taxpayer to have amendments apply earlier.— Any taxpayer may elect, at such time and in such manner as the Secretary of the Treasury or his delegate may prescribe, to have the amendments made by paragraphs (1) and (3) apply as if included in section 226 of the Tax Equity and Fiscal Responsibility Act of 1982. (C) Special pule for certain transfers to form bank holding company.— Except as provided in subparagraph (D), the amendments made by paragraphs (1) and (3) shall not apply to transfers pursuant to an application to form a BHC (as defined in section 304(b)(3)(D)(ii) of the Internal Revenue Code of 1954) filed with the Federal Reserve Board before June 18, 1984, if— (i) such BHC was formed not later than the 90th day after the date of the last required approval of any regulatory authority to form such BHC, and (ii) such BHC did not elect (at such time and in such manner as the Secretary of the Treasury or his delegate shall prescribe) not to have the provisions of this subparagraph apply. (D) Amendments to apply to certain liabilities incurred before October 20, 1983.— The amendment made by paragraph (3)(A) shall apply to the acquisition of any stock to the extent the liability assumed, or to which such stock is subject, was incurred by the transferor after October 20, 1983. (m) Amendment Related to Section 229.— Subsection (c) of section 229 of the Tax Equity and Fiscal Responsibility Act of 1982 26 USC 451 note. (relating to modification of regulations on the completed contract method of accounting) is amended by adding at the end thereof the following new paragraph: “(4) Underpayments of estimated tax for 1982.— To the extent provided in regulations, no addition to tax shall be made under section 6654 or 6655 of the Internal Revenue Code of 1954 Ante, p. 788. for the taxpayer’s first taxable year ending after December 31, 1982, by reason of a long-term contract, but only with respect to installments required to be paid before April 13, 1983.” (n) Amendment Related to Section 233.— Paragraph (11) of section 51(d) (defining members of economically disadvantaged families) 26 USC 51. is amended by adding at the end thereof the following new sentence: “Any such determination with respect to an individual who is a qualified summer youth employee or youth participating in a qualified cooperative education program with respect to any employer shall also apply for purposes of determining whether such individual is a member of another targeted group with respect to such employer.”

9. 1984

   Tax Reform Act of 1984

   Pub. L. 98–369 § 712 · 98 Stat. 494

   Added · 26 U.S.C. § 304(b)(3)(B)(iii)

   Pub. L. 98–369, § 712(l)(3)(B), added cl. (iii)

   Source evidence

   Code amendment note
   Subsec. (b)(3)(B)(iii). Pub. L. 98–369, § 712(l)(3)(B), added cl. (iii).

   Enacted provision · exact public law section
   SEC. 712. TECHNICAL CORRECTIONS OF PROVISIONS PRIMARILY RELATING TO BUSINESSES. (a) Amendments Related to Section 204.— (1) Clarification of additional amount treated as ordinary income under section 1250.— (A) Paragraph (1) of section 291(a) (relating to section 1250 capital gain treatment) is amended— (i) by striking out “under section 1250” in subparagraph (B) and inserting in lieu thereof “under section 1250 (determined without regard to this paragraph)”, and (ii) by striking out “which is ordinary income” and inserting in lieu thereof “which is ordinary income under section 1250”. (B) Subsection (a) of section 1250 is amended by adding at the end thereof the following new paragraph: “(4) Cross reference.— “For reduction in the case of corporations on capital gain treatment under this section, see section 291(a)(1).” (2) Investment tax credit allowed only for mineral exploration and development costs for deposits located in the united states.— Clause (ii) of section 291(b)(2)(B) is amended by inserting “in the case of a deposit located in the United States,” after “(ii)”. (3) Clarification of coordination with cost depletion.— Paragraph (6) of section 291(b) (relating to coordination with cost depletion) is amended to read as follows: “(6) Coordination with cost depletion.— The portion of the adjusted basis of any property which is attributable to amounts to which paragraph (1) applied shall not be taken into account for purposes of determining depletion under section 611.” (4) Clarification of definition of interest.— Subparagraph (B) of section 291(e)(1) (relating to interest on debt to carry taxexempt obligations acquired after December 31, 1982) is amended by adding at the end thereof the following new clause: “(iii) Interest.— For purposes of this subparagraph, the term ‘interest’ includes amounts (whether or not designated as interest) paid in respect of deposits, investment certificates, or withdrawable or repurchasable shares.” (b) Amendment Related to Section 205.— Subsection (q) of section 48 (relating to basis adjustment to section 38 property) is amended by adding at the end thereof the following new paragraph: “(6) Adjustment in basis of interest in partnership or s corporation.— The adjusted basis of— “(A) a partner’s interest in a partnership, and “(B) stock in an S corporation, shall be appropriately adjusted to take into account adjustments made under this subsection in the basis of property held by the partnership or S corporation (as the case may be).” (c) Amendment Related to Section 207.— Paragraph (4) of section 189(e) (defining residential real property) is amended by striking 26 USC 189. out “or” at the end of subparagraph (A), by striking out the period at the end of subparagraph (B) and inserting in lieu thereof “, or”, and by adding at the end thereof the following new subparagraph: “(C) real property held by a cooperative housing corporation (as defined in section 216(b)) and used for dwelling purposes.” (d) Amendments Related to Section 210.— (1) Special rule where dealer-lessee required to purchase vehicle.— Paragraph (2) of section 210(b) of the Tax Equity and Fiscal Responsibility Act of 1982 (defining terminal rental adjustment clause) is amended by adding 26 USC 168 note. at the end thereof the following new sentence: “Such term also includes a provision of an agreement which requires a lessee who is a dealer in motor vehicles to purchase the motor vehicle for a predetermined price and then resell such vehicle where such provision achieves substantially the same results as a provision described in the preceding sentence.” (2) Exception where lessee took position on return that he was owner.— Section 210 of the Tax Equity and Fiscal Responsibility Act of 1982 is amended by adding at the end thereof the following new subsection: “(c) Exception Where Lessee Took Position on Return.— Subsection (a) shall not apply to deny a deduction for interest paid or accrued claimed by a lessee with respect to a qualified motor vehicle agreement on a return of tax imposed by chapter 1 of the Internal Revenue Code of 1954 which was filed before the date of the enactment 26 USC 1 et seq of this Act or to deny a credit for investment in depreciable property claimed by the lessee on such a return pursuant to an agreement with the lessor that the lessor would not claim the credit.” (e) Amendment Related to Section 211.— Subparagraph (A) of section 211(e)(2) of the Tax Equity and Fiscal Responsibility Act of 1982 (relating to retention of old sections 907(b) and 904(f)(4) where 26 USC 907 note. taxpayer had separate basket foreign loss) is amended by striking out “the 8-year period” and inserting in lieu thereof “the 8-year period (or such shorter period as the taxpayer may select)”. (f) Amendment Related to Section 212.— Paragraph (1) of section 954(h) (defining foreign base company oil-related income) is 26 USC 954. amended by striking out “section 907(c)(2)” and inserting in lieu thereof “paragraphs (2) and (3) of section 907(c)”. (g) Amendment Related to Section 213.— The table contained in subparagraph (C) of section 936(a)(2) is amended by striking 26 USC 936. out “The percentage tax is:” and inserting in lieu thereof “The percentage is:”. (h) Amendment Related to Section 217.— Subsection (e) of section 217 of the Tax Equity and Fiscal Responsibility Act of 1982 (relating to effective date) is amended by adding at the end thereof 26 USC 103 note. the following new sentence: “For purposes of applying section 168(f)(8)(D)(v) of the Internal Revenue Code of 1954, the amendments made by subsection (c) shall apply to agreements entered into after the date of the enactment of this Act.” (i) Amendments Related to Section 222.— (1) Sections 301(e)(2) and 302(f)(3) are each amended by striking out “partial or complete liquidation” and inserting in lieu thereof “complete liquidation”. (2) The paragraph heading of paragraph (1) of section 306(b) (relating to exceptions) is amended by striking out “interest.” and inserting in lieu thereof “interest, etc.”. (3) Paragraph (1) of section 543(a) (defining personal holding company income) is amended by striking out subparagraph (C), by adding “and” at the end of subparagraph (A), and by striking out “, and” at the end of subparagraph (B) and inserting in lieu thereof a period. (j) Amendment Related to Section 223.— Paragraph (1) of section (e) ( 26 USC 311. defining qualified stock) is amended by adding at the end thereof the following new subparagraph: “(C) Rules for passthru entities.— In the case of an S corporation, partnership, trust, or estate— “(i) the determination of whether subparagraph (A) is satisfied shall be made at the shareholder, partner, or beneficiary level (rather than at the entity level), and “(ii) the distribution shall be treated as made directly to the shareholders, partners, or beneficiaries in proportion to their respective interests in the entity. (k) Amendments Related to Section 224.— (1) Assets treated as sold at fair market value.— (A) In general.— Paragraph (1) of section 338(a) (relating to general rule) is amended by inserting “at fair market value” after “acquisition date”. (B) Basis of assets after deemed purchase.— Subsection (b) of section 338 (relating to price at which deemed sale made) is amended to read as follows: “(b) Basis of Assets After Deemed Purchase.— “(1) In general.— For purposes of subsection (a), the assets of the target corporation shall be treated as purchased for an amount equal to the sum of— “(A) the grossed-up basis of the purchasing corporation’s recently purchased stock, and “(B) the basis of the purchasing corporation’s nonrecently purchased stock. “(2) Adjustment for liabilities and other relevant items.— The amount described in paragraph (1) shall be adjusted under regulations prescribed by the Secretary for liabilities of the target corporation and other relevant items. “(3) Election to step-up the basis of certain target stock.— “(A) In general.— Under regulations prescribed by the Secretary, the basis of the purchasing corporation’s nonrecently purchased stock shall be the basis amount determined under subparagraph (B) of this paragraph if the purchasing corporation makes an election to recognize gain as if such stock were sold on the acquisition date for an amount equal to the basis amount determined under subparagraph (B). “(B) Determination of basis amount.— For purposes of subparagraph (A), the basis amount determined under this subparagraph shall be an amount equal to the grossed-up basis determined under subparagraph (A) of paragraph (1) multiplied by a fraction— “(i) the numerator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock, and “(ii) the denominator of which is 100 percent minus the percentage referred to in clause (i). “(4) Grossed-up basis.— For purposes of paragraph (1), the grossed-up basis shall be an amount equal to the basis of the corporation’s recently purchased stock, multiplied by a fraction— “(A) the numerator of which is 100 percent, minus the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock, and “(B) the denominator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s recently purchased stock. “(5) Allocation among assets.— The amount determined under paragraphs (1) and (2) shall be allocated among the assets of the target corporation under regulations prescribed by the Secretary. “(6) Definitions of recently purchased stock and nonrecently purchased stock.— For purposes of this subsection— “(A) Recently purchased stock.— The term ‘recently purchased stock’ means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which was purchased by such corporation during the 12-month acquisition period. “(B) Nonrecently purchased stock.— The term ‘nonrecently purchased stock’ means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which is not recently purchased stock.” (2) Coordination with section 333.— The last sentence of paragraph (1) of section 338(c) (relating to coordination with 26 USC 338. section 337 where purchasing corporation holds less than 100 percent of stock) is amended by striking out “such 1-year period” and inserting in lieu thereof “such 1-year period and section 333 does not apply to such liquidation”. (3) Exceptions to deemed election rule.— Paragraph (2) of section 338(e) (relating to exceptions) is amended— (A) by striking out “(in whole or in part)” in subparagraph i B) and inserting in lieu thereof “wholly”, (B) by inserting “or” at the end of subparagraph (C), and (C) by striking out subparagraphs (D) and (E) and inserting in lieu thereof the following: “(D) such acquisition is described in regulations prescribed by the Secretary and meets such conditions as such regulations may provide.” (4) Time for making election.— Paragraph (1) of section 338(g) (relating to election) is amended to read as follows: “(1) When made.— Except as otherwise provided in regulations, an election under this section shall be made not later than the 15th day of the 9th month beginning after the month in which the acquisition date occurs.” (5) Definition of purchase.— (A) Subparagraph (B) of section 338(h)(3) (defining purchase) is amended to read as follows: “(B) Deemed purchase under subsection (a).— The term ‘purchase’ includes any deemed purchase under subsection (a)(2). The acquisition date for a corporation which is deemed purchased under subsection (a)(2) shall be determined under regulations prescribed by the Secretary.” (B) Paragraph (3) of section 338(h) is amended by adding at the end thereof the following new subparagraph: “(C) Certain stock acquisitions from related corporations.— “(i) In general.— Clause (iii) of subparagraph (A) shall not apply to an acquisition of stock from a related corporation if at least 50 percent in value of the stock of such related corporation was acquired by purchase (within the meaning of subparagraph (A) and (B)). “(ii) Certain distributions.— Clause (i) of subparagraph (A) shall not apply to an acquisition of stock described in clause (i) of this subparagraph if the corporation acquiring such stock— “(I) made a qualified stock purchase of stock of the related corporation, and “(II) made an election under this section (or is treated under subsection (e) as having made such an election) with respect to such qualified stock purchase. “(iii) Related corporation defined.— For purposes of this subparagraph, a corporation is a related corporation if stock owned by such corporation is treated (under section 318(a) other than paragraph (4) thereof) as owned by the corporation acquiring the stock.” (C) Paragraph (1) of section 338(h) (defining 12-month acquisition period) is amended by inserting before the period at the end thereof the following: “(or, if any of such stock was acquired in an acquisition which is a purchase by reason of subparagraph (C) of paragraph (3), the date on which the acquiring corporation is first considered under section 318(a) (other than paragraph (4) thereof) as owning stock owned by the corporation from which such acquisition was made).” (D) Clause (ii) of section 338(h)(3)(A) (defining purchase) is amended to read as follows: “(ii) the stock is not acquired in an exchange to which section 351, 354, 355, or 356 applies and is not acquired in any other transaction described in regulations in which the transferor does not recognize the entire amount of the gain or loss realized on the transaction, and”. (E) Paragraph (4) of section 318(b) (relating to cross references) is amended to read as follows: “(4) section 338(h)(3) (defining purchase);”. (6) Special rules for applying section 338.— (A) Subsection (h) of section 338 (relating to definitions 26 USC 338. and special rules) is amended by striking out paragraph (7), by redesignating paragraphs (8) and (9) as paragraphs (9) and (10), respectively, and by inserting after paragraph (6) the following new paragraphs: “(7) Additional percentage must be attributable to purchase, etc.— For purposes of subsection (c)(1), any increase in the maximum percentage of stock taken into account over the percentage of stock (by value) of the target corporation held by the purchasing corporation on the acquisition date shall be taken into account only to the extent such increase is attributable to— “(A) purchase, or “(B) a redemption of stock of the target corporation— “(i) to which section 302(a) applies, or “(ii) in the case of a shareholder who is not a corporation, to which section 301 applies. “(8) Acquisitions by affiliated group treated as made by i corporation.— Except as provided in regulations prescribed by the Secretary, stock and asset acquisitions made by members of the same affiliated group shall be treated as made by 1 corporation.” (B) Paragraph (9) of section 338(h), as redesignated by subparagraph (A), is amended by striking out “paragraph (9)” and inserting in lieu thereof “paragraph (10)”. (C) Subsection (h) of section 338 is amended by adding at the end thereof the following new paragraphs: “(11) Elective formula for determining fair market value.— For purposes of subsection (a)(1), fair market value may be determined on the basis of a formula provided in regulations prescribed by the Secretary which takes into account liabilities and other relevant items. “(12) Section 337 to apply where target had adopted plan for complete liquidation.— If— “(A) during the 12-month period ending on the acquisition date the target corporation adopted a plan of complete liquidation, “(B) such plan was not rescinded before the close of the acquisition date, and “(C) the purchasing corporation makes an election under this section (or is treated under subsection (e) as having made such an election) with respect to the target corporation, then, subject to rules similar to the rules of subsection (c)(1), for purposes of section 337 (and other provisions which relate to section 337), the target corporation shall be treated as having distributed all of its assets as of the close of the acquisition date. “(13) Tax on deemed sale not taken into account for estimated tax purposes.— For purposes of section 6655, tax attributable to the sale described in subsection (a)(1) shall not be taken into account. “(14) Coordination with section 341.— For purposes of determining whether section 341 applies to a disposition within 1 year after the acquisition date of stock by a shareholder (other than the acquiring corporation) who held stock in the target corporation on the acquisition date, section 341 shall be applied without regard to this section. “(15) Combined deemed sale return.— Under regulations prescribed by the Secretary, a combined deemed sale return may be filed by all target corporations acquired by a purchasing corporation on the same acquisition date if such target corporations were members of the same selling consolidated group (as defined in subparagraph (B) of paragraph (10)).” (7) Subsection (i) of section 338 (relating to regulations) is amended to read as follows: “(i) Regulations.— The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including— “(1) regulations to ensure that the purpose of this section to require consistency of treatment of stock and asset sales and purchases may not be circumvented through the use of any provision of law or regulations (including the consolidated return regulations) and “(2) regulations providing for the coordination of the provisions of this section with the provision of this title relating to foreign corporations and their shareholders.” (8) Treatment of certain liquidations.— (A) In general.— Section 269 (relating to acquisitions made to evade or avoid income tax) is amended by redesignating subsection (b) as subsection (c) and by inserting after subsection (a) the following new subsection: “(b) Certain Liquidations After Qualified Stock Purchases.— “(1) In general.— If— “(A) there is a qualified stock purchase by a corporation of another corporation, “(B) an election is not made under section 338 with respect to such purchase, “(C) the acquired corporation is liquidated pursuant to a plan of liquidation adopted not more than 2 years after the acquisition date, and “(D) the principal purpose for such liquidation is the evasion or avoidance of Federal income tax by securing the benefit of a deduction, credit, or other allowance which the acquiring corporation would not otherwise enjoy, then the Secretary may disallow such deduction, credit, or other allowance. “(2) Meaning of terms.— For purposes of paragraph (1), the terms ‘qualified stock purchase’ and ‘acquisition date’ have the same respective meanings as when used in section 338.” (B) Conforming amendment.— Subsection (c) of section 269 (as redesignated by subparagraph (A)) is amended by striking out “subsection (a)” and inserting in lieu thereof “subsection (a) or (b)”. (C) Effective date.— The amendments made by this paragraph shall apply to liquidations after October 20, 1983, in taxable years ending after such date. (9) Amendments not to apply to acquisitions before September 1, 1982.— (A) In general.— The amendments made by this subsection shall not apply to any qualified stock purchase (as defined in section 338(d)(3) of the Internal Revenue Code of 1954) where the acquisition date (as defined in section 338(h)(2) of such Code) is before September 1, 1982. (B) Extension of time for making election.— In the case of any qualified stock purchase described in subparagraph (A), the time for making an election under section 338 of such Code shall not expire before the close of the 60th day after the date of the enactment of this Act. (10) Special rules for deemed purchases under prior law.— 26 USC 338 note. If, before October 20, 1983, a corporation was treated as making a qualified stock purchase (as defined in section 338(d)(3) of the Internal Revenue Code of 1954), but would not be so treated under the amendments made by paragraphs (5) and (6) of this subsection, the amendments made by such paragraphs shall not apply to such purchase unless such corporation elects (at such time and in such manner as the Secretary of the Treasury or his delegate may by regulations prescribe) to have the amendments made by such paragraphs apply. (l) Amendments Related to Section 226.— (1) Amount constituting dividend.— Paragraph (2) of section 304(b) (relating to amount constituting dividend) is amended to 26 USC 304. read as follows: “(2) Amount constituting dividend.— In the case of any acquisition of stock to which subsection (a) applies, the determination of the amount which is a dividend (and the source thereof) shall be made as if the property were distributed— “(A) by the acquiring corporation to the extent of its earnings and profits, and “(B) then by the issuing corporation to the extent of its earnings and profits.” (2) Coordination with section 35i.— Subparagraph (A) of section 304(b)(3) (relating to coordination with section 351) is amended by striking out “(and not part III)” and inserting in lieu thereof “(and not section 351 and not so much of sections 357 and 358 as relates to section 351)”. (3) Certain assumptions of liability.— (A) The first sentence of clause (i) of section 304(b)(3)(B) (relating to certain assumptions of liability, etc.) is amended by striking out “Subsection (a)” and inserting in lieu thereof “In the case of an acquisition described in section 351, subsection (a)”. (B) Subparagraph (B) of section 304(b)(3) (relating to coordination with section 351) is amended by adding at the end thereof the following new clause: “(iii) Clause (i) does not apply to stock acquired from related person except where complete termination.— Clause (i) shall apply only to stock acquired by the transferor from a person— “(I) none of whose stock is attributable to the transferor under section 318(a) (other than paragraph (4) thereof), or “(II) who satisfies rules similar to the rules of section 302(c)(2) with respect to both the acquiring and the issuing corporations (determined as if such person were a distributee of each such corporation).” (4) Distributions incident to formation of bank holding companies.— Subparagraph (C) of section 304(b)(3) (relating to distributions incident to formation of bank holding companies) is amended by adding at the end thereof the following new sentence: “For purposes of this subparagraph, any assumption of (or acquisition of stock subject to) a liability under subparagraph (B) shall not be treated as a distribution of property.” (5) Constructive ownership.— (A) Paragraph (3) of section 304(c) (relating to constructive ownership) is amended to read as follows: “(3) Constructive ownership.— “(A) In general.— Section 318(a) (relating to constructive ownership of stock) shall apply for purposes of determining control under this section. “(B) Modification of 50-percent limitations in section 318.— For purposes of subparagraph (A)— “(i) paragraph (2)(C) of section 318(a) shall be applied by substituting ‘5 percent’ for ‘50 percent’, and “(ii) paragraph (3)(C) of section 318(a) shall be applied— “(I) by substituting ‘5 percent’ for ‘50 percent’, and “(II) in any case where such paragraph would not apply but for subclause (I), by considering a corporation as owning the stock (other than stock in such corporation) owned by or for any shareholder of such corporation in that proportion which the value of the stock which such shareholder owned in such corporation bears to the value of all stock in such corporation.” (B) Paragraph (4) of section 306(c) is amended by striking out the last sentence and inserting in lieu thereof the following: “For purposes of applying the preceding sentence Supra. to paragraph (3), the rules of section 304(c)(3)(B) shall apply.” (6) Certain stock acquired in section 351 exchange.— Paragraph (3) of section 306(c) (relating to certain stock acquired in section 351 exchange) is amended by striking out the last sentence and inserting in lieu thereof the following: “Rules similar Ante, p. 953. to the rules of section 304(b)(2) shall apply— “(A) for purposes of the preceding sentence, and “(B) for purposes of determining the application of this section to any subsequent disposition of stock which is section 306 stock by reason of an exchange described in the preceding sentence.” (7) Effective dates for amendments made by paragraphs (1) and (3).— (A) In general.— Except as otherwise provided in this paragraph, the amendments made by paragraphs (1) and (3) shall apply to stock acquired after June 18, 1984, in taxable years ending after such date. (B) Election by taxpayer to have amendments apply earlier.— Any taxpayer may elect, at such time and in such manner as the Secretary of the Treasury or his delegate may prescribe, to have the amendments made by paragraphs (1) and (3) apply as if included in section 226 of the Tax Equity and Fiscal Responsibility Act of 1982. (C) Special pule for certain transfers to form bank holding company.— Except as provided in subparagraph (D), the amendments made by paragraphs (1) and (3) shall not apply to transfers pursuant to an application to form a BHC (as defined in section 304(b)(3)(D)(ii) of the Internal Revenue Code of 1954) filed with the Federal Reserve Board before June 18, 1984, if— (i) such BHC was formed not later than the 90th day after the date of the last required approval of any regulatory authority to form such BHC, and (ii) such BHC did not elect (at such time and in such manner as the Secretary of the Treasury or his delegate shall prescribe) not to have the provisions of this subparagraph apply. (D) Amendments to apply to certain liabilities incurred before October 20, 1983.— The amendment made by paragraph (3)(A) shall apply to the acquisition of any stock to the extent the liability assumed, or to which such stock is subject, was incurred by the transferor after October 20, 1983. (m) Amendment Related to Section 229.— Subsection (c) of section 229 of the Tax Equity and Fiscal Responsibility Act of 1982 26 USC 451 note. (relating to modification of regulations on the completed contract method of accounting) is amended by adding at the end thereof the following new paragraph: “(4) Underpayments of estimated tax for 1982.— To the extent provided in regulations, no addition to tax shall be made under section 6654 or 6655 of the Internal Revenue Code of 1954 Ante, p. 788. for the taxpayer’s first taxable year ending after December 31, 1982, by reason of a long-term contract, but only with respect to installments required to be paid before April 13, 1983.” (n) Amendment Related to Section 233.— Paragraph (11) of section 51(d) (defining members of economically disadvantaged families) 26 USC 51. is amended by adding at the end thereof the following new sentence: “Any such determination with respect to an individual who is a qualified summer youth employee or youth participating in a qualified cooperative education program with respect to any employer shall also apply for purposes of determining whether such individual is a member of another targeted group with respect to such employer.”

10. 1984

    Tax Reform Act of 1984

    Pub. L. 98–369 § 712 · 98 Stat. 494

    Inserted · 26 U.S.C. § 304(b)(3)(C)

    Pub. L. 98–369, § 712(l)(4), inserted following cl. (iii) “For purposes of this subparagraph, any assumption of (or acquisition of stock subject to) a liability under subparagraph (B) shall not be treated as a distribution of property.”

    Source evidence

    Code amendment note
    Subsec. (b)(3)(C). Pub. L. 98–369, § 712(l)(4), inserted following cl. (iii) “For purposes of this subparagraph, any assumption of (or acquisition of stock subject to) a liability under subparagraph (B) shall not be treated as a distribution of property.”

    Enacted provision · exact public law section
    SEC. 712. TECHNICAL CORRECTIONS OF PROVISIONS PRIMARILY RELATING TO BUSINESSES. (a) Amendments Related to Section 204.— (1) Clarification of additional amount treated as ordinary income under section 1250.— (A) Paragraph (1) of section 291(a) (relating to section 1250 capital gain treatment) is amended— (i) by striking out “under section 1250” in subparagraph (B) and inserting in lieu thereof “under section 1250 (determined without regard to this paragraph)”, and (ii) by striking out “which is ordinary income” and inserting in lieu thereof “which is ordinary income under section 1250”. (B) Subsection (a) of section 1250 is amended by adding at the end thereof the following new paragraph: “(4) Cross reference.— “For reduction in the case of corporations on capital gain treatment under this section, see section 291(a)(1).” (2) Investment tax credit allowed only for mineral exploration and development costs for deposits located in the united states.— Clause (ii) of section 291(b)(2)(B) is amended by inserting “in the case of a deposit located in the United States,” after “(ii)”. (3) Clarification of coordination with cost depletion.— Paragraph (6) of section 291(b) (relating to coordination with cost depletion) is amended to read as follows: “(6) Coordination with cost depletion.— The portion of the adjusted basis of any property which is attributable to amounts to which paragraph (1) applied shall not be taken into account for purposes of determining depletion under section 611.” (4) Clarification of definition of interest.— Subparagraph (B) of section 291(e)(1) (relating to interest on debt to carry taxexempt obligations acquired after December 31, 1982) is amended by adding at the end thereof the following new clause: “(iii) Interest.— For purposes of this subparagraph, the term ‘interest’ includes amounts (whether or not designated as interest) paid in respect of deposits, investment certificates, or withdrawable or repurchasable shares.” (b) Amendment Related to Section 205.— Subsection (q) of section 48 (relating to basis adjustment to section 38 property) is amended by adding at the end thereof the following new paragraph: “(6) Adjustment in basis of interest in partnership or s corporation.— The adjusted basis of— “(A) a partner’s interest in a partnership, and “(B) stock in an S corporation, shall be appropriately adjusted to take into account adjustments made under this subsection in the basis of property held by the partnership or S corporation (as the case may be).” (c) Amendment Related to Section 207.— Paragraph (4) of section 189(e) (defining residential real property) is amended by striking 26 USC 189. out “or” at the end of subparagraph (A), by striking out the period at the end of subparagraph (B) and inserting in lieu thereof “, or”, and by adding at the end thereof the following new subparagraph: “(C) real property held by a cooperative housing corporation (as defined in section 216(b)) and used for dwelling purposes.” (d) Amendments Related to Section 210.— (1) Special rule where dealer-lessee required to purchase vehicle.— Paragraph (2) of section 210(b) of the Tax Equity and Fiscal Responsibility Act of 1982 (defining terminal rental adjustment clause) is amended by adding 26 USC 168 note. at the end thereof the following new sentence: “Such term also includes a provision of an agreement which requires a lessee who is a dealer in motor vehicles to purchase the motor vehicle for a predetermined price and then resell such vehicle where such provision achieves substantially the same results as a provision described in the preceding sentence.” (2) Exception where lessee took position on return that he was owner.— Section 210 of the Tax Equity and Fiscal Responsibility Act of 1982 is amended by adding at the end thereof the following new subsection: “(c) Exception Where Lessee Took Position on Return.— Subsection (a) shall not apply to deny a deduction for interest paid or accrued claimed by a lessee with respect to a qualified motor vehicle agreement on a return of tax imposed by chapter 1 of the Internal Revenue Code of 1954 which was filed before the date of the enactment 26 USC 1 et seq of this Act or to deny a credit for investment in depreciable property claimed by the lessee on such a return pursuant to an agreement with the lessor that the lessor would not claim the credit.” (e) Amendment Related to Section 211.— Subparagraph (A) of section 211(e)(2) of the Tax Equity and Fiscal Responsibility Act of 1982 (relating to retention of old sections 907(b) and 904(f)(4) where 26 USC 907 note. taxpayer had separate basket foreign loss) is amended by striking out “the 8-year period” and inserting in lieu thereof “the 8-year period (or such shorter period as the taxpayer may select)”. (f) Amendment Related to Section 212.— Paragraph (1) of section 954(h) (defining foreign base company oil-related income) is 26 USC 954. amended by striking out “section 907(c)(2)” and inserting in lieu thereof “paragraphs (2) and (3) of section 907(c)”. (g) Amendment Related to Section 213.— The table contained in subparagraph (C) of section 936(a)(2) is amended by striking 26 USC 936. out “The percentage tax is:” and inserting in lieu thereof “The percentage is:”. (h) Amendment Related to Section 217.— Subsection (e) of section 217 of the Tax Equity and Fiscal Responsibility Act of 1982 (relating to effective date) is amended by adding at the end thereof 26 USC 103 note. the following new sentence: “For purposes of applying section 168(f)(8)(D)(v) of the Internal Revenue Code of 1954, the amendments made by subsection (c) shall apply to agreements entered into after the date of the enactment of this Act.” (i) Amendments Related to Section 222.— (1) Sections 301(e)(2) and 302(f)(3) are each amended by striking out “partial or complete liquidation” and inserting in lieu thereof “complete liquidation”. (2) The paragraph heading of paragraph (1) of section 306(b) (relating to exceptions) is amended by striking out “interest.” and inserting in lieu thereof “interest, etc.”. (3) Paragraph (1) of section 543(a) (defining personal holding company income) is amended by striking out subparagraph (C), by adding “and” at the end of subparagraph (A), and by striking out “, and” at the end of subparagraph (B) and inserting in lieu thereof a period. (j) Amendment Related to Section 223.— Paragraph (1) of section (e) ( 26 USC 311. defining qualified stock) is amended by adding at the end thereof the following new subparagraph: “(C) Rules for passthru entities.— In the case of an S corporation, partnership, trust, or estate— “(i) the determination of whether subparagraph (A) is satisfied shall be made at the shareholder, partner, or beneficiary level (rather than at the entity level), and “(ii) the distribution shall be treated as made directly to the shareholders, partners, or beneficiaries in proportion to their respective interests in the entity. (k) Amendments Related to Section 224.— (1) Assets treated as sold at fair market value.— (A) In general.— Paragraph (1) of section 338(a) (relating to general rule) is amended by inserting “at fair market value” after “acquisition date”. (B) Basis of assets after deemed purchase.— Subsection (b) of section 338 (relating to price at which deemed sale made) is amended to read as follows: “(b) Basis of Assets After Deemed Purchase.— “(1) In general.— For purposes of subsection (a), the assets of the target corporation shall be treated as purchased for an amount equal to the sum of— “(A) the grossed-up basis of the purchasing corporation’s recently purchased stock, and “(B) the basis of the purchasing corporation’s nonrecently purchased stock. “(2) Adjustment for liabilities and other relevant items.— The amount described in paragraph (1) shall be adjusted under regulations prescribed by the Secretary for liabilities of the target corporation and other relevant items. “(3) Election to step-up the basis of certain target stock.— “(A) In general.— Under regulations prescribed by the Secretary, the basis of the purchasing corporation’s nonrecently purchased stock shall be the basis amount determined under subparagraph (B) of this paragraph if the purchasing corporation makes an election to recognize gain as if such stock were sold on the acquisition date for an amount equal to the basis amount determined under subparagraph (B). “(B) Determination of basis amount.— For purposes of subparagraph (A), the basis amount determined under this subparagraph shall be an amount equal to the grossed-up basis determined under subparagraph (A) of paragraph (1) multiplied by a fraction— “(i) the numerator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock, and “(ii) the denominator of which is 100 percent minus the percentage referred to in clause (i). “(4) Grossed-up basis.— For purposes of paragraph (1), the grossed-up basis shall be an amount equal to the basis of the corporation’s recently purchased stock, multiplied by a fraction— “(A) the numerator of which is 100 percent, minus the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock, and “(B) the denominator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s recently purchased stock. “(5) Allocation among assets.— The amount determined under paragraphs (1) and (2) shall be allocated among the assets of the target corporation under regulations prescribed by the Secretary. “(6) Definitions of recently purchased stock and nonrecently purchased stock.— For purposes of this subsection— “(A) Recently purchased stock.— The term ‘recently purchased stock’ means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which was purchased by such corporation during the 12-month acquisition period. “(B) Nonrecently purchased stock.— The term ‘nonrecently purchased stock’ means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which is not recently purchased stock.” (2) Coordination with section 333.— The last sentence of paragraph (1) of section 338(c) (relating to coordination with 26 USC 338. section 337 where purchasing corporation holds less than 100 percent of stock) is amended by striking out “such 1-year period” and inserting in lieu thereof “such 1-year period and section 333 does not apply to such liquidation”. (3) Exceptions to deemed election rule.— Paragraph (2) of section 338(e) (relating to exceptions) is amended— (A) by striking out “(in whole or in part)” in subparagraph i B) and inserting in lieu thereof “wholly”, (B) by inserting “or” at the end of subparagraph (C), and (C) by striking out subparagraphs (D) and (E) and inserting in lieu thereof the following: “(D) such acquisition is described in regulations prescribed by the Secretary and meets such conditions as such regulations may provide.” (4) Time for making election.— Paragraph (1) of section 338(g) (relating to election) is amended to read as follows: “(1) When made.— Except as otherwise provided in regulations, an election under this section shall be made not later than the 15th day of the 9th month beginning after the month in which the acquisition date occurs.” (5) Definition of purchase.— (A) Subparagraph (B) of section 338(h)(3) (defining purchase) is amended to read as follows: “(B) Deemed purchase under subsection (a).— The term ‘purchase’ includes any deemed purchase under subsection (a)(2). The acquisition date for a corporation which is deemed purchased under subsection (a)(2) shall be determined under regulations prescribed by the Secretary.” (B) Paragraph (3) of section 338(h) is amended by adding at the end thereof the following new subparagraph: “(C) Certain stock acquisitions from related corporations.— “(i) In general.— Clause (iii) of subparagraph (A) shall not apply to an acquisition of stock from a related corporation if at least 50 percent in value of the stock of such related corporation was acquired by purchase (within the meaning of subparagraph (A) and (B)). “(ii) Certain distributions.— Clause (i) of subparagraph (A) shall not apply to an acquisition of stock described in clause (i) of this subparagraph if the corporation acquiring such stock— “(I) made a qualified stock purchase of stock of the related corporation, and “(II) made an election under this section (or is treated under subsection (e) as having made such an election) with respect to such qualified stock purchase. “(iii) Related corporation defined.— For purposes of this subparagraph, a corporation is a related corporation if stock owned by such corporation is treated (under section 318(a) other than paragraph (4) thereof) as owned by the corporation acquiring the stock.” (C) Paragraph (1) of section 338(h) (defining 12-month acquisition period) is amended by inserting before the period at the end thereof the following: “(or, if any of such stock was acquired in an acquisition which is a purchase by reason of subparagraph (C) of paragraph (3), the date on which the acquiring corporation is first considered under section 318(a) (other than paragraph (4) thereof) as owning stock owned by the corporation from which such acquisition was made).” (D) Clause (ii) of section 338(h)(3)(A) (defining purchase) is amended to read as follows: “(ii) the stock is not acquired in an exchange to which section 351, 354, 355, or 356 applies and is not acquired in any other transaction described in regulations in which the transferor does not recognize the entire amount of the gain or loss realized on the transaction, and”. (E) Paragraph (4) of section 318(b) (relating to cross references) is amended to read as follows: “(4) section 338(h)(3) (defining purchase);”. (6) Special rules for applying section 338.— (A) Subsection (h) of section 338 (relating to definitions 26 USC 338. and special rules) is amended by striking out paragraph (7), by redesignating paragraphs (8) and (9) as paragraphs (9) and (10), respectively, and by inserting after paragraph (6) the following new paragraphs: “(7) Additional percentage must be attributable to purchase, etc.— For purposes of subsection (c)(1), any increase in the maximum percentage of stock taken into account over the percentage of stock (by value) of the target corporation held by the purchasing corporation on the acquisition date shall be taken into account only to the extent such increase is attributable to— “(A) purchase, or “(B) a redemption of stock of the target corporation— “(i) to which section 302(a) applies, or “(ii) in the case of a shareholder who is not a corporation, to which section 301 applies. “(8) Acquisitions by affiliated group treated as made by i corporation.— Except as provided in regulations prescribed by the Secretary, stock and asset acquisitions made by members of the same affiliated group shall be treated as made by 1 corporation.” (B) Paragraph (9) of section 338(h), as redesignated by subparagraph (A), is amended by striking out “paragraph (9)” and inserting in lieu thereof “paragraph (10)”. (C) Subsection (h) of section 338 is amended by adding at the end thereof the following new paragraphs: “(11) Elective formula for determining fair market value.— For purposes of subsection (a)(1), fair market value may be determined on the basis of a formula provided in regulations prescribed by the Secretary which takes into account liabilities and other relevant items. “(12) Section 337 to apply where target had adopted plan for complete liquidation.— If— “(A) during the 12-month period ending on the acquisition date the target corporation adopted a plan of complete liquidation, “(B) such plan was not rescinded before the close of the acquisition date, and “(C) the purchasing corporation makes an election under this section (or is treated under subsection (e) as having made such an election) with respect to the target corporation, then, subject to rules similar to the rules of subsection (c)(1), for purposes of section 337 (and other provisions which relate to section 337), the target corporation shall be treated as having distributed all of its assets as of the close of the acquisition date. “(13) Tax on deemed sale not taken into account for estimated tax purposes.— For purposes of section 6655, tax attributable to the sale described in subsection (a)(1) shall not be taken into account. “(14) Coordination with section 341.— For purposes of determining whether section 341 applies to a disposition within 1 year after the acquisition date of stock by a shareholder (other than the acquiring corporation) who held stock in the target corporation on the acquisition date, section 341 shall be applied without regard to this section. “(15) Combined deemed sale return.— Under regulations prescribed by the Secretary, a combined deemed sale return may be filed by all target corporations acquired by a purchasing corporation on the same acquisition date if such target corporations were members of the same selling consolidated group (as defined in subparagraph (B) of paragraph (10)).” (7) Subsection (i) of section 338 (relating to regulations) is amended to read as follows: “(i) Regulations.— The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including— “(1) regulations to ensure that the purpose of this section to require consistency of treatment of stock and asset sales and purchases may not be circumvented through the use of any provision of law or regulations (including the consolidated return regulations) and “(2) regulations providing for the coordination of the provisions of this section with the provision of this title relating to foreign corporations and their shareholders.” (8) Treatment of certain liquidations.— (A) In general.— Section 269 (relating to acquisitions made to evade or avoid income tax) is amended by redesignating subsection (b) as subsection (c) and by inserting after subsection (a) the following new subsection: “(b) Certain Liquidations After Qualified Stock Purchases.— “(1) In general.— If— “(A) there is a qualified stock purchase by a corporation of another corporation, “(B) an election is not made under section 338 with respect to such purchase, “(C) the acquired corporation is liquidated pursuant to a plan of liquidation adopted not more than 2 years after the acquisition date, and “(D) the principal purpose for such liquidation is the evasion or avoidance of Federal income tax by securing the benefit of a deduction, credit, or other allowance which the acquiring corporation would not otherwise enjoy, then the Secretary may disallow such deduction, credit, or other allowance. “(2) Meaning of terms.— For purposes of paragraph (1), the terms ‘qualified stock purchase’ and ‘acquisition date’ have the same respective meanings as when used in section 338.” (B) Conforming amendment.— Subsection (c) of section 269 (as redesignated by subparagraph (A)) is amended by striking out “subsection (a)” and inserting in lieu thereof “subsection (a) or (b)”. (C) Effective date.— The amendments made by this paragraph shall apply to liquidations after October 20, 1983, in taxable years ending after such date. (9) Amendments not to apply to acquisitions before September 1, 1982.— (A) In general.— The amendments made by this subsection shall not apply to any qualified stock purchase (as defined in section 338(d)(3) of the Internal Revenue Code of 1954) where the acquisition date (as defined in section 338(h)(2) of such Code) is before September 1, 1982. (B) Extension of time for making election.— In the case of any qualified stock purchase described in subparagraph (A), the time for making an election under section 338 of such Code shall not expire before the close of the 60th day after the date of the enactment of this Act. (10) Special rules for deemed purchases under prior law.— 26 USC 338 note. If, before October 20, 1983, a corporation was treated as making a qualified stock purchase (as defined in section 338(d)(3) of the Internal Revenue Code of 1954), but would not be so treated under the amendments made by paragraphs (5) and (6) of this subsection, the amendments made by such paragraphs shall not apply to such purchase unless such corporation elects (at such time and in such manner as the Secretary of the Treasury or his delegate may by regulations prescribe) to have the amendments made by such paragraphs apply. (l) Amendments Related to Section 226.— (1) Amount constituting dividend.— Paragraph (2) of section 304(b) (relating to amount constituting dividend) is amended to 26 USC 304. read as follows: “(2) Amount constituting dividend.— In the case of any acquisition of stock to which subsection (a) applies, the determination of the amount which is a dividend (and the source thereof) shall be made as if the property were distributed— “(A) by the acquiring corporation to the extent of its earnings and profits, and “(B) then by the issuing corporation to the extent of its earnings and profits.” (2) Coordination with section 35i.— Subparagraph (A) of section 304(b)(3) (relating to coordination with section 351) is amended by striking out “(and not part III)” and inserting in lieu thereof “(and not section 351 and not so much of sections 357 and 358 as relates to section 351)”. (3) Certain assumptions of liability.— (A) The first sentence of clause (i) of section 304(b)(3)(B) (relating to certain assumptions of liability, etc.) is amended by striking out “Subsection (a)” and inserting in lieu thereof “In the case of an acquisition described in section 351, subsection (a)”. (B) Subparagraph (B) of section 304(b)(3) (relating to coordination with section 351) is amended by adding at the end thereof the following new clause: “(iii) Clause (i) does not apply to stock acquired from related person except where complete termination.— Clause (i) shall apply only to stock acquired by the transferor from a person— “(I) none of whose stock is attributable to the transferor under section 318(a) (other than paragraph (4) thereof), or “(II) who satisfies rules similar to the rules of section 302(c)(2) with respect to both the acquiring and the issuing corporations (determined as if such person were a distributee of each such corporation).” (4) Distributions incident to formation of bank holding companies.— Subparagraph (C) of section 304(b)(3) (relating to distributions incident to formation of bank holding companies) is amended by adding at the end thereof the following new sentence: “For purposes of this subparagraph, any assumption of (or acquisition of stock subject to) a liability under subparagraph (B) shall not be treated as a distribution of property.” (5) Constructive ownership.— (A) Paragraph (3) of section 304(c) (relating to constructive ownership) is amended to read as follows: “(3) Constructive ownership.— “(A) In general.— Section 318(a) (relating to constructive ownership of stock) shall apply for purposes of determining control under this section. “(B) Modification of 50-percent limitations in section 318.— For purposes of subparagraph (A)— “(i) paragraph (2)(C) of section 318(a) shall be applied by substituting ‘5 percent’ for ‘50 percent’, and “(ii) paragraph (3)(C) of section 318(a) shall be applied— “(I) by substituting ‘5 percent’ for ‘50 percent’, and “(II) in any case where such paragraph would not apply but for subclause (I), by considering a corporation as owning the stock (other than stock in such corporation) owned by or for any shareholder of such corporation in that proportion which the value of the stock which such shareholder owned in such corporation bears to the value of all stock in such corporation.” (B) Paragraph (4) of section 306(c) is amended by striking out the last sentence and inserting in lieu thereof the following: “For purposes of applying the preceding sentence Supra. to paragraph (3), the rules of section 304(c)(3)(B) shall apply.” (6) Certain stock acquired in section 351 exchange.— Paragraph (3) of section 306(c) (relating to certain stock acquired in section 351 exchange) is amended by striking out the last sentence and inserting in lieu thereof the following: “Rules similar Ante, p. 953. to the rules of section 304(b)(2) shall apply— “(A) for purposes of the preceding sentence, and “(B) for purposes of determining the application of this section to any subsequent disposition of stock which is section 306 stock by reason of an exchange described in the preceding sentence.” (7) Effective dates for amendments made by paragraphs (1) and (3).— (A) In general.— Except as otherwise provided in this paragraph, the amendments made by paragraphs (1) and (3) shall apply to stock acquired after June 18, 1984, in taxable years ending after such date. (B) Election by taxpayer to have amendments apply earlier.— Any taxpayer may elect, at such time and in such manner as the Secretary of the Treasury or his delegate may prescribe, to have the amendments made by paragraphs (1) and (3) apply as if included in section 226 of the Tax Equity and Fiscal Responsibility Act of 1982. (C) Special pule for certain transfers to form bank holding company.— Except as provided in subparagraph (D), the amendments made by paragraphs (1) and (3) shall not apply to transfers pursuant to an application to form a BHC (as defined in section 304(b)(3)(D)(ii) of the Internal Revenue Code of 1954) filed with the Federal Reserve Board before June 18, 1984, if— (i) such BHC was formed not later than the 90th day after the date of the last required approval of any regulatory authority to form such BHC, and (ii) such BHC did not elect (at such time and in such manner as the Secretary of the Treasury or his delegate shall prescribe) not to have the provisions of this subparagraph apply. (D) Amendments to apply to certain liabilities incurred before October 20, 1983.— The amendment made by paragraph (3)(A) shall apply to the acquisition of any stock to the extent the liability assumed, or to which such stock is subject, was incurred by the transferor after October 20, 1983. (m) Amendment Related to Section 229.— Subsection (c) of section 229 of the Tax Equity and Fiscal Responsibility Act of 1982 26 USC 451 note. (relating to modification of regulations on the completed contract method of accounting) is amended by adding at the end thereof the following new paragraph: “(4) Underpayments of estimated tax for 1982.— To the extent provided in regulations, no addition to tax shall be made under section 6654 or 6655 of the Internal Revenue Code of 1954 Ante, p. 788. for the taxpayer’s first taxable year ending after December 31, 1982, by reason of a long-term contract, but only with respect to installments required to be paid before April 13, 1983.” (n) Amendment Related to Section 233.— Paragraph (11) of section 51(d) (defining members of economically disadvantaged families) 26 USC 51. is amended by adding at the end thereof the following new sentence: “Any such determination with respect to an individual who is a qualified summer youth employee or youth participating in a qualified cooperative education program with respect to any employer shall also apply for purposes of determining whether such individual is a member of another targeted group with respect to such employer.”

11. 1984

    Tax Reform Act of 1984

    Pub. L. 98–369 § 712 · 98 Stat. 494

    1. Amended · 26 U.S.C. § 304(c)(3)

       Pub. L. 98–369, § 712(l)(5)(A), designated existing first sentence as subpar. “(A) In general”

    2. Substituted · 26 U.S.C. § 304(c)(3)

       Pub. L. 98–369, § 712(l)(5)(A), substituted subpar. (B) for former second sentence which read “For purposes of the preceding sentence, sections 318(a)(2)(C) and 318(a)(3)(C) shall be applied without regard to the 50 percent limitation contained therein.”

    Source evidence

    Code amendment note
    Subsec. (c)(3). Pub. L. 98–369, § 712(l)(5)(A), designated existing first sentence as subpar. “(A) In general” and substituted subpar. (B) for former second sentence which read “For purposes of the preceding sentence, sections 318(a)(2)(C) and 318(a)(3)(C) shall be applied without regard to the 50 percent limitation contained therein.”

    Enacted provision · exact public law section
    SEC. 712. TECHNICAL CORRECTIONS OF PROVISIONS PRIMARILY RELATING TO BUSINESSES. (a) Amendments Related to Section 204.— (1) Clarification of additional amount treated as ordinary income under section 1250.— (A) Paragraph (1) of section 291(a) (relating to section 1250 capital gain treatment) is amended— (i) by striking out “under section 1250” in subparagraph (B) and inserting in lieu thereof “under section 1250 (determined without regard to this paragraph)”, and (ii) by striking out “which is ordinary income” and inserting in lieu thereof “which is ordinary income under section 1250”. (B) Subsection (a) of section 1250 is amended by adding at the end thereof the following new paragraph: “(4) Cross reference.— “For reduction in the case of corporations on capital gain treatment under this section, see section 291(a)(1).” (2) Investment tax credit allowed only for mineral exploration and development costs for deposits located in the united states.— Clause (ii) of section 291(b)(2)(B) is amended by inserting “in the case of a deposit located in the United States,” after “(ii)”. (3) Clarification of coordination with cost depletion.— Paragraph (6) of section 291(b) (relating to coordination with cost depletion) is amended to read as follows: “(6) Coordination with cost depletion.— The portion of the adjusted basis of any property which is attributable to amounts to which paragraph (1) applied shall not be taken into account for purposes of determining depletion under section 611.” (4) Clarification of definition of interest.— Subparagraph (B) of section 291(e)(1) (relating to interest on debt to carry taxexempt obligations acquired after December 31, 1982) is amended by adding at the end thereof the following new clause: “(iii) Interest.— For purposes of this subparagraph, the term ‘interest’ includes amounts (whether or not designated as interest) paid in respect of deposits, investment certificates, or withdrawable or repurchasable shares.” (b) Amendment Related to Section 205.— Subsection (q) of section 48 (relating to basis adjustment to section 38 property) is amended by adding at the end thereof the following new paragraph: “(6) Adjustment in basis of interest in partnership or s corporation.— The adjusted basis of— “(A) a partner’s interest in a partnership, and “(B) stock in an S corporation, shall be appropriately adjusted to take into account adjustments made under this subsection in the basis of property held by the partnership or S corporation (as the case may be).” (c) Amendment Related to Section 207.— Paragraph (4) of section 189(e) (defining residential real property) is amended by striking 26 USC 189. out “or” at the end of subparagraph (A), by striking out the period at the end of subparagraph (B) and inserting in lieu thereof “, or”, and by adding at the end thereof the following new subparagraph: “(C) real property held by a cooperative housing corporation (as defined in section 216(b)) and used for dwelling purposes.” (d) Amendments Related to Section 210.— (1) Special rule where dealer-lessee required to purchase vehicle.— Paragraph (2) of section 210(b) of the Tax Equity and Fiscal Responsibility Act of 1982 (defining terminal rental adjustment clause) is amended by adding 26 USC 168 note. at the end thereof the following new sentence: “Such term also includes a provision of an agreement which requires a lessee who is a dealer in motor vehicles to purchase the motor vehicle for a predetermined price and then resell such vehicle where such provision achieves substantially the same results as a provision described in the preceding sentence.” (2) Exception where lessee took position on return that he was owner.— Section 210 of the Tax Equity and Fiscal Responsibility Act of 1982 is amended by adding at the end thereof the following new subsection: “(c) Exception Where Lessee Took Position on Return.— Subsection (a) shall not apply to deny a deduction for interest paid or accrued claimed by a lessee with respect to a qualified motor vehicle agreement on a return of tax imposed by chapter 1 of the Internal Revenue Code of 1954 which was filed before the date of the enactment 26 USC 1 et seq of this Act or to deny a credit for investment in depreciable property claimed by the lessee on such a return pursuant to an agreement with the lessor that the lessor would not claim the credit.” (e) Amendment Related to Section 211.— Subparagraph (A) of section 211(e)(2) of the Tax Equity and Fiscal Responsibility Act of 1982 (relating to retention of old sections 907(b) and 904(f)(4) where 26 USC 907 note. taxpayer had separate basket foreign loss) is amended by striking out “the 8-year period” and inserting in lieu thereof “the 8-year period (or such shorter period as the taxpayer may select)”. (f) Amendment Related to Section 212.— Paragraph (1) of section 954(h) (defining foreign base company oil-related income) is 26 USC 954. amended by striking out “section 907(c)(2)” and inserting in lieu thereof “paragraphs (2) and (3) of section 907(c)”. (g) Amendment Related to Section 213.— The table contained in subparagraph (C) of section 936(a)(2) is amended by striking 26 USC 936. out “The percentage tax is:” and inserting in lieu thereof “The percentage is:”. (h) Amendment Related to Section 217.— Subsection (e) of section 217 of the Tax Equity and Fiscal Responsibility Act of 1982 (relating to effective date) is amended by adding at the end thereof 26 USC 103 note. the following new sentence: “For purposes of applying section 168(f)(8)(D)(v) of the Internal Revenue Code of 1954, the amendments made by subsection (c) shall apply to agreements entered into after the date of the enactment of this Act.” (i) Amendments Related to Section 222.— (1) Sections 301(e)(2) and 302(f)(3) are each amended by striking out “partial or complete liquidation” and inserting in lieu thereof “complete liquidation”. (2) The paragraph heading of paragraph (1) of section 306(b) (relating to exceptions) is amended by striking out “interest.” and inserting in lieu thereof “interest, etc.”. (3) Paragraph (1) of section 543(a) (defining personal holding company income) is amended by striking out subparagraph (C), by adding “and” at the end of subparagraph (A), and by striking out “, and” at the end of subparagraph (B) and inserting in lieu thereof a period. (j) Amendment Related to Section 223.— Paragraph (1) of section (e) ( 26 USC 311. defining qualified stock) is amended by adding at the end thereof the following new subparagraph: “(C) Rules for passthru entities.— In the case of an S corporation, partnership, trust, or estate— “(i) the determination of whether subparagraph (A) is satisfied shall be made at the shareholder, partner, or beneficiary level (rather than at the entity level), and “(ii) the distribution shall be treated as made directly to the shareholders, partners, or beneficiaries in proportion to their respective interests in the entity. (k) Amendments Related to Section 224.— (1) Assets treated as sold at fair market value.— (A) In general.— Paragraph (1) of section 338(a) (relating to general rule) is amended by inserting “at fair market value” after “acquisition date”. (B) Basis of assets after deemed purchase.— Subsection (b) of section 338 (relating to price at which deemed sale made) is amended to read as follows: “(b) Basis of Assets After Deemed Purchase.— “(1) In general.— For purposes of subsection (a), the assets of the target corporation shall be treated as purchased for an amount equal to the sum of— “(A) the grossed-up basis of the purchasing corporation’s recently purchased stock, and “(B) the basis of the purchasing corporation’s nonrecently purchased stock. “(2) Adjustment for liabilities and other relevant items.— The amount described in paragraph (1) shall be adjusted under regulations prescribed by the Secretary for liabilities of the target corporation and other relevant items. “(3) Election to step-up the basis of certain target stock.— “(A) In general.— Under regulations prescribed by the Secretary, the basis of the purchasing corporation’s nonrecently purchased stock shall be the basis amount determined under subparagraph (B) of this paragraph if the purchasing corporation makes an election to recognize gain as if such stock were sold on the acquisition date for an amount equal to the basis amount determined under subparagraph (B). “(B) Determination of basis amount.— For purposes of subparagraph (A), the basis amount determined under this subparagraph shall be an amount equal to the grossed-up basis determined under subparagraph (A) of paragraph (1) multiplied by a fraction— “(i) the numerator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock, and “(ii) the denominator of which is 100 percent minus the percentage referred to in clause (i). “(4) Grossed-up basis.— For purposes of paragraph (1), the grossed-up basis shall be an amount equal to the basis of the corporation’s recently purchased stock, multiplied by a fraction— “(A) the numerator of which is 100 percent, minus the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock, and “(B) the denominator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s recently purchased stock. “(5) Allocation among assets.— The amount determined under paragraphs (1) and (2) shall be allocated among the assets of the target corporation under regulations prescribed by the Secretary. “(6) Definitions of recently purchased stock and nonrecently purchased stock.— For purposes of this subsection— “(A) Recently purchased stock.— The term ‘recently purchased stock’ means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which was purchased by such corporation during the 12-month acquisition period. “(B) Nonrecently purchased stock.— The term ‘nonrecently purchased stock’ means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which is not recently purchased stock.” (2) Coordination with section 333.— The last sentence of paragraph (1) of section 338(c) (relating to coordination with 26 USC 338. section 337 where purchasing corporation holds less than 100 percent of stock) is amended by striking out “such 1-year period” and inserting in lieu thereof “such 1-year period and section 333 does not apply to such liquidation”. (3) Exceptions to deemed election rule.— Paragraph (2) of section 338(e) (relating to exceptions) is amended— (A) by striking out “(in whole or in part)” in subparagraph i B) and inserting in lieu thereof “wholly”, (B) by inserting “or” at the end of subparagraph (C), and (C) by striking out subparagraphs (D) and (E) and inserting in lieu thereof the following: “(D) such acquisition is described in regulations prescribed by the Secretary and meets such conditions as such regulations may provide.” (4) Time for making election.— Paragraph (1) of section 338(g) (relating to election) is amended to read as follows: “(1) When made.— Except as otherwise provided in regulations, an election under this section shall be made not later than the 15th day of the 9th month beginning after the month in which the acquisition date occurs.” (5) Definition of purchase.— (A) Subparagraph (B) of section 338(h)(3) (defining purchase) is amended to read as follows: “(B) Deemed purchase under subsection (a).— The term ‘purchase’ includes any deemed purchase under subsection (a)(2). The acquisition date for a corporation which is deemed purchased under subsection (a)(2) shall be determined under regulations prescribed by the Secretary.” (B) Paragraph (3) of section 338(h) is amended by adding at the end thereof the following new subparagraph: “(C) Certain stock acquisitions from related corporations.— “(i) In general.— Clause (iii) of subparagraph (A) shall not apply to an acquisition of stock from a related corporation if at least 50 percent in value of the stock of such related corporation was acquired by purchase (within the meaning of subparagraph (A) and (B)). “(ii) Certain distributions.— Clause (i) of subparagraph (A) shall not apply to an acquisition of stock described in clause (i) of this subparagraph if the corporation acquiring such stock— “(I) made a qualified stock purchase of stock of the related corporation, and “(II) made an election under this section (or is treated under subsection (e) as having made such an election) with respect to such qualified stock purchase. “(iii) Related corporation defined.— For purposes of this subparagraph, a corporation is a related corporation if stock owned by such corporation is treated (under section 318(a) other than paragraph (4) thereof) as owned by the corporation acquiring the stock.” (C) Paragraph (1) of section 338(h) (defining 12-month acquisition period) is amended by inserting before the period at the end thereof the following: “(or, if any of such stock was acquired in an acquisition which is a purchase by reason of subparagraph (C) of paragraph (3), the date on which the acquiring corporation is first considered under section 318(a) (other than paragraph (4) thereof) as owning stock owned by the corporation from which such acquisition was made).” (D) Clause (ii) of section 338(h)(3)(A) (defining purchase) is amended to read as follows: “(ii) the stock is not acquired in an exchange to which section 351, 354, 355, or 356 applies and is not acquired in any other transaction described in regulations in which the transferor does not recognize the entire amount of the gain or loss realized on the transaction, and”. (E) Paragraph (4) of section 318(b) (relating to cross references) is amended to read as follows: “(4) section 338(h)(3) (defining purchase);”. (6) Special rules for applying section 338.— (A) Subsection (h) of section 338 (relating to definitions 26 USC 338. and special rules) is amended by striking out paragraph (7), by redesignating paragraphs (8) and (9) as paragraphs (9) and (10), respectively, and by inserting after paragraph (6) the following new paragraphs: “(7) Additional percentage must be attributable to purchase, etc.— For purposes of subsection (c)(1), any increase in the maximum percentage of stock taken into account over the percentage of stock (by value) of the target corporation held by the purchasing corporation on the acquisition date shall be taken into account only to the extent such increase is attributable to— “(A) purchase, or “(B) a redemption of stock of the target corporation— “(i) to which section 302(a) applies, or “(ii) in the case of a shareholder who is not a corporation, to which section 301 applies. “(8) Acquisitions by affiliated group treated as made by i corporation.— Except as provided in regulations prescribed by the Secretary, stock and asset acquisitions made by members of the same affiliated group shall be treated as made by 1 corporation.” (B) Paragraph (9) of section 338(h), as redesignated by subparagraph (A), is amended by striking out “paragraph (9)” and inserting in lieu thereof “paragraph (10)”. (C) Subsection (h) of section 338 is amended by adding at the end thereof the following new paragraphs: “(11) Elective formula for determining fair market value.— For purposes of subsection (a)(1), fair market value may be determined on the basis of a formula provided in regulations prescribed by the Secretary which takes into account liabilities and other relevant items. “(12) Section 337 to apply where target had adopted plan for complete liquidation.— If— “(A) during the 12-month period ending on the acquisition date the target corporation adopted a plan of complete liquidation, “(B) such plan was not rescinded before the close of the acquisition date, and “(C) the purchasing corporation makes an election under this section (or is treated under subsection (e) as having made such an election) with respect to the target corporation, then, subject to rules similar to the rules of subsection (c)(1), for purposes of section 337 (and other provisions which relate to section 337), the target corporation shall be treated as having distributed all of its assets as of the close of the acquisition date. “(13) Tax on deemed sale not taken into account for estimated tax purposes.— For purposes of section 6655, tax attributable to the sale described in subsection (a)(1) shall not be taken into account. “(14) Coordination with section 341.— For purposes of determining whether section 341 applies to a disposition within 1 year after the acquisition date of stock by a shareholder (other than the acquiring corporation) who held stock in the target corporation on the acquisition date, section 341 shall be applied without regard to this section. “(15) Combined deemed sale return.— Under regulations prescribed by the Secretary, a combined deemed sale return may be filed by all target corporations acquired by a purchasing corporation on the same acquisition date if such target corporations were members of the same selling consolidated group (as defined in subparagraph (B) of paragraph (10)).” (7) Subsection (i) of section 338 (relating to regulations) is amended to read as follows: “(i) Regulations.— The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including— “(1) regulations to ensure that the purpose of this section to require consistency of treatment of stock and asset sales and purchases may not be circumvented through the use of any provision of law or regulations (including the consolidated return regulations) and “(2) regulations providing for the coordination of the provisions of this section with the provision of this title relating to foreign corporations and their shareholders.” (8) Treatment of certain liquidations.— (A) In general.— Section 269 (relating to acquisitions made to evade or avoid income tax) is amended by redesignating subsection (b) as subsection (c) and by inserting after subsection (a) the following new subsection: “(b) Certain Liquidations After Qualified Stock Purchases.— “(1) In general.— If— “(A) there is a qualified stock purchase by a corporation of another corporation, “(B) an election is not made under section 338 with respect to such purchase, “(C) the acquired corporation is liquidated pursuant to a plan of liquidation adopted not more than 2 years after the acquisition date, and “(D) the principal purpose for such liquidation is the evasion or avoidance of Federal income tax by securing the benefit of a deduction, credit, or other allowance which the acquiring corporation would not otherwise enjoy, then the Secretary may disallow such deduction, credit, or other allowance. “(2) Meaning of terms.— For purposes of paragraph (1), the terms ‘qualified stock purchase’ and ‘acquisition date’ have the same respective meanings as when used in section 338.” (B) Conforming amendment.— Subsection (c) of section 269 (as redesignated by subparagraph (A)) is amended by striking out “subsection (a)” and inserting in lieu thereof “subsection (a) or (b)”. (C) Effective date.— The amendments made by this paragraph shall apply to liquidations after October 20, 1983, in taxable years ending after such date. (9) Amendments not to apply to acquisitions before September 1, 1982.— (A) In general.— The amendments made by this subsection shall not apply to any qualified stock purchase (as defined in section 338(d)(3) of the Internal Revenue Code of 1954) where the acquisition date (as defined in section 338(h)(2) of such Code) is before September 1, 1982. (B) Extension of time for making election.— In the case of any qualified stock purchase described in subparagraph (A), the time for making an election under section 338 of such Code shall not expire before the close of the 60th day after the date of the enactment of this Act. (10) Special rules for deemed purchases under prior law.— 26 USC 338 note. If, before October 20, 1983, a corporation was treated as making a qualified stock purchase (as defined in section 338(d)(3) of the Internal Revenue Code of 1954), but would not be so treated under the amendments made by paragraphs (5) and (6) of this subsection, the amendments made by such paragraphs shall not apply to such purchase unless such corporation elects (at such time and in such manner as the Secretary of the Treasury or his delegate may by regulations prescribe) to have the amendments made by such paragraphs apply. (l) Amendments Related to Section 226.— (1) Amount constituting dividend.— Paragraph (2) of section 304(b) (relating to amount constituting dividend) is amended to 26 USC 304. read as follows: “(2) Amount constituting dividend.— In the case of any acquisition of stock to which subsection (a) applies, the determination of the amount which is a dividend (and the source thereof) shall be made as if the property were distributed— “(A) by the acquiring corporation to the extent of its earnings and profits, and “(B) then by the issuing corporation to the extent of its earnings and profits.” (2) Coordination with section 35i.— Subparagraph (A) of section 304(b)(3) (relating to coordination with section 351) is amended by striking out “(and not part III)” and inserting in lieu thereof “(and not section 351 and not so much of sections 357 and 358 as relates to section 351)”. (3) Certain assumptions of liability.— (A) The first sentence of clause (i) of section 304(b)(3)(B) (relating to certain assumptions of liability, etc.) is amended by striking out “Subsection (a)” and inserting in lieu thereof “In the case of an acquisition described in section 351, subsection (a)”. (B) Subparagraph (B) of section 304(b)(3) (relating to coordination with section 351) is amended by adding at the end thereof the following new clause: “(iii) Clause (i) does not apply to stock acquired from related person except where complete termination.— Clause (i) shall apply only to stock acquired by the transferor from a person— “(I) none of whose stock is attributable to the transferor under section 318(a) (other than paragraph (4) thereof), or “(II) who satisfies rules similar to the rules of section 302(c)(2) with respect to both the acquiring and the issuing corporations (determined as if such person were a distributee of each such corporation).” (4) Distributions incident to formation of bank holding companies.— Subparagraph (C) of section 304(b)(3) (relating to distributions incident to formation of bank holding companies) is amended by adding at the end thereof the following new sentence: “For purposes of this subparagraph, any assumption of (or acquisition of stock subject to) a liability under subparagraph (B) shall not be treated as a distribution of property.” (5) Constructive ownership.— (A) Paragraph (3) of section 304(c) (relating to constructive ownership) is amended to read as follows: “(3) Constructive ownership.— “(A) In general.— Section 318(a) (relating to constructive ownership of stock) shall apply for purposes of determining control under this section. “(B) Modification of 50-percent limitations in section 318.— For purposes of subparagraph (A)— “(i) paragraph (2)(C) of section 318(a) shall be applied by substituting ‘5 percent’ for ‘50 percent’, and “(ii) paragraph (3)(C) of section 318(a) shall be applied— “(I) by substituting ‘5 percent’ for ‘50 percent’, and “(II) in any case where such paragraph would not apply but for subclause (I), by considering a corporation as owning the stock (other than stock in such corporation) owned by or for any shareholder of such corporation in that proportion which the value of the stock which such shareholder owned in such corporation bears to the value of all stock in such corporation.” (B) Paragraph (4) of section 306(c) is amended by striking out the last sentence and inserting in lieu thereof the following: “For purposes of applying the preceding sentence Supra. to paragraph (3), the rules of section 304(c)(3)(B) shall apply.” (6) Certain stock acquired in section 351 exchange.— Paragraph (3) of section 306(c) (relating to certain stock acquired in section 351 exchange) is amended by striking out the last sentence and inserting in lieu thereof the following: “Rules similar Ante, p. 953. to the rules of section 304(b)(2) shall apply— “(A) for purposes of the preceding sentence, and “(B) for purposes of determining the application of this section to any subsequent disposition of stock which is section 306 stock by reason of an exchange described in the preceding sentence.” (7) Effective dates for amendments made by paragraphs (1) and (3).— (A) In general.— Except as otherwise provided in this paragraph, the amendments made by paragraphs (1) and (3) shall apply to stock acquired after June 18, 1984, in taxable years ending after such date. (B) Election by taxpayer to have amendments apply earlier.— Any taxpayer may elect, at such time and in such manner as the Secretary of the Treasury or his delegate may prescribe, to have the amendments made by paragraphs (1) and (3) apply as if included in section 226 of the Tax Equity and Fiscal Responsibility Act of 1982. (C) Special pule for certain transfers to form bank holding company.— Except as provided in subparagraph (D), the amendments made by paragraphs (1) and (3) shall not apply to transfers pursuant to an application to form a BHC (as defined in section 304(b)(3)(D)(ii) of the Internal Revenue Code of 1954) filed with the Federal Reserve Board before June 18, 1984, if— (i) such BHC was formed not later than the 90th day after the date of the last required approval of any regulatory authority to form such BHC, and (ii) such BHC did not elect (at such time and in such manner as the Secretary of the Treasury or his delegate shall prescribe) not to have the provisions of this subparagraph apply. (D) Amendments to apply to certain liabilities incurred before October 20, 1983.— The amendment made by paragraph (3)(A) shall apply to the acquisition of any stock to the extent the liability assumed, or to which such stock is subject, was incurred by the transferor after October 20, 1983. (m) Amendment Related to Section 229.— Subsection (c) of section 229 of the Tax Equity and Fiscal Responsibility Act of 1982 26 USC 451 note. (relating to modification of regulations on the completed contract method of accounting) is amended by adding at the end thereof the following new paragraph: “(4) Underpayments of estimated tax for 1982.— To the extent provided in regulations, no addition to tax shall be made under section 6654 or 6655 of the Internal Revenue Code of 1954 Ante, p. 788. for the taxpayer’s first taxable year ending after December 31, 1982, by reason of a long-term contract, but only with respect to installments required to be paid before April 13, 1983.” (n) Amendment Related to Section 233.— Paragraph (11) of section 51(d) (defining members of economically disadvantaged families) 26 USC 51. is amended by adding at the end thereof the following new sentence: “Any such determination with respect to an individual who is a qualified summer youth employee or youth participating in a qualified cooperative education program with respect to any employer shall also apply for purposes of determining whether such individual is a member of another targeted group with respect to such employer.”

12. 1986

    Tax Reform Act of 1986

    Pub. L. 99–514 title XVIII § 1875(b) · 100 Stat. 2085

    Substituted · 26 U.S.C. § 304(a)(1)

    Pub. L. 99–514 substituted “To the extent that such distribution is treated as a distribution to which section 301 applies” for “In any such case” in last sentence

    Source evidence

    Code amendment note
    Subsec. (a)(1). Pub. L. 99–514 substituted “To the extent that such distribution is treated as a distribution to which section 301 applies” for “In any such case” in last sentence.

    Enacted provision · exact public law section
    (b) Amendment Related to Section 712(1).— Paragraph (1) of section 304(a) (relating to treatment of certain stock purchases) is amended by striking out “In any such case” and inserting in lieu thereof “To the extent that such distribution is treated as a distribution to which section 301 applies”.

13. 1987

    Pub. L. 100–203 title X § 10223(c) · 101 Stat. 1330

    Added · 26 U.S.C. § 304(b)(4)

    Pub. L. 100–203 added par. (4)

    Source evidence

    Code amendment note
    Subsec. (b)(4). Pub. L. 100–203 added par. (4).

    Enacted provision · exact public law section
    (c) Amendment to Section 304.— Subsection (b) of section 304 (relating to redemption through use of related corporations) is amended by adding at the end thereof the following new paragraph: “(4) Treatment of certain intragroup transactions.— “(A) In general.— In the case of any transfer described in subsection (a) of stock of 1 member of an affiliated group to another member of such group, proper adjustments shall be made to— “(i) the adjusted basis of any intragroup stock, and “(ii) the earnings and profits of any member of such group, to the extent necessary to carry out the purposes of this section. “(B) Definitions.— For purposes of this paragraph— “(i) Affiliated group.— The term ‘affiliated group’ has the meaning given such term by section 1504(a). “(ii) Intragroup stock.— The term ‘intragroup stock’ means any stock which— “(I) is in a corporation which is a member of an affiliated group, and “(II) is held by another member of such group.”

14. 1988

    Technical and Miscellaneous Revenue Act of 1988

    Pub. L. 100–647 title II § 2004(k)(2) · 102 Stat. 3342

    Substituted · 26 U.S.C. § 304(b)(4)(A)

    Pub. L. 100–647 substituted “stock from 1 member” for “stock of 1 member”

    Source evidence

    Code amendment note
    Subsec. (b)(4)(A). Pub. L. 100–647 substituted “stock from 1 member” for “stock of 1 member”.

    Enacted provision · exact public law section
    (2) Subparagraph (A) of section 304(b)(4) of the 1986 Code is amended by striking out “stock of 1 member” and Inserting in lieu thereof “stock from 1 member”.

15. 1997

    Pub. L. 105–34 § 1013(a) · 111 Stat. 788

    Amended · 26 U.S.C. § 304(a)(1)

    Pub. L. 105–34, § 1013(a), amended last sentence generally. Prior to amendment, last sentence read as follows: “To the extent that such distribution is treated as a distribution to which section 301 applies, the stock so acquired shall be treated as having been transferred by the person from whom acquired, and as having been received by the corporation acquiring it, as a contribution to the capital of such corporation.”

    Source evidence

    Code amendment note
    Subsec. (a)(1). Pub. L. 105–34, § 1013(a), amended last sentence generally. Prior to amendment, last sentence read as follows: “To the extent that such distribution is treated as a distribution to which section 301 applies, the stock so acquired shall be treated as having been transferred by the person from whom acquired, and as having been received by the corporation acquiring it, as a contribution to the capital of such corporation.”

    Enacted provision · exact public law section
    (a) Stock Purchases by Related Corporations.— The last sentence of section 304(a)(1) (relating to acquisition by related corporation other than subsidiary) is amended to read as follows: “To the extent that such distribution is treated as a distribution to which section 301 applies, the transferor and the acquiring corporation shall be treated in the same manner as if the transferor had transferred the stock so acquired to the acquiring corporation in exchange for stock of the acquiring corporation in a transaction to which section 351(a) applies, and then the acquiring corporation had redeemed the stock it was treated as issuing in such transaction.”.

16. 1997

    Pub. L. 105–34 § 1013(c) · 111 Stat. 788

    Added · 26 U.S.C. § 304(b)(5)

    Pub. L. 105–34, § 1013(c), added par. (5)

    Source evidence

    Code amendment note
    Subsec. (b)(5). Pub. L. 105–34, § 1013(c), added par. (5).

    Enacted provision · exact public law section
    (c) Special Rule for Acquisitions by Foreign Corporations.— Section 304(b) (relating to special rules for application of subsection (a)) is amended by adding at the end the following new paragraph: “(5) Acquisitions by foreign corporations.— “(A) In general.— In the case of any acquisition to which subsection (a) applies in which the acquiring corporation is a foreign corporation, the only earnings and profits taken into account under paragraph (2)(A) shall be those earnings and profits— “(i) which are attributable (under regulations prescribed by the Secretary) to stock of the acquiring corporation owned (within the meaning of section 958(a)) by a corporation or individual which is— “(I) a United States shareholder (within the meaning of section 951(b)) of the acquiring corporation, and “(II) the transferor or a person who bears a relationship to the transferor described in section 267(b) or 707(b), and “(ii) which were accumulated during the period or periods such stock was owned by such person while the acquiring corporation was a controlled foreign corporation. “(B) Application of section 1248.— For purposes of subparagraph (A), the rules of section 1248(d) shall apply except to the extent otherwise provided by the Secretary. “(C) Regulations.— The Secretary shall prescribe such regulations as are appropriate to carry out the purposes of this paragraph.”.

17. 1998

    Internal Revenue Service Restructuring and Reform Act of 1998

    Pub. L. 105–206 § 6010(d)(1) · 112 Stat. 685

    1. Redesignated · 26 U.S.C. § 304(b)(5)(B); 26 U.S.C. § 304(b)(5)(C)

       Pub. L. 105–206, § 6010(d)(1), redesignated subpar. (C) as (B)

    2. Struck · 26 U.S.C. § 304(b)(5)(B); 26 U.S.C. § 304(b)(5)(C)

       Pub. L. 105–206, § 6010(d)(1), struck out heading and text of former subpar. (B). Text read as follows: “For purposes of subparagraph (A), the rules of section 1248(d) shall apply except to the extent otherwise provided by the Secretary.”

    Source evidence

    Code amendment note
    Subsec. (b)(5)(B), (C). Pub. L. 105–206, § 6010(d)(1), redesignated subpar. (C) as (B) and struck out heading and text of former subpar. (B). Text read as follows: “For purposes of subparagraph (A), the rules of section 1248(d) shall apply except to the extent otherwise provided by the Secretary.”

    Enacted provision · exact public law section
    (1) Paragraph (5) of section 304(b) of the 1986 Code is amended by striking subparagraph (B) and by redesignating subparagraph (C) as subparagraph (B).

18. 1998

    Internal Revenue Service Restructuring and Reform Act of 1998

    Pub. L. 105–206 § 6010(d)(2) · 112 Stat. 685

    Added · 26 U.S.C. § 304(b)(6)

    Pub. L. 105–206, § 6010(d)(2), added par. (6)

    Source evidence

    Code amendment note
    Subsec. (b)(6). Pub. L. 105–206, § 6010(d)(2), added par. (6).

    Enacted provision · exact public law section
    (2) Subsection (b) of section 304 of the 1986 Code is amended by adding at the end the following new paragraph: “(6) Regulations. Avoidance of multiple inclusions, etc.— In the case of any acquisition to which subsection (a) applies in which the acquiring corporation or the issuing corporation is a foreign corporation, the Secretary shall prescribe such regulations as are appropriate in order to eliminate a multiple inclusion of any item in income by reason of this subpart and to provide appropriate basis adjustments (including modifications to the application of sections 959 and 961).”.

19. 2010

    Pub. L. 111–226 title II § 215(a) · 124 Stat. 2389

    1. Added · 26 U.S.C. § 304(b)(5)(B); 26 U.S.C. § 304(b)(5)(C)

       Pub. L. 111–226 added subpar. (B)

    2. Redesignated · 26 U.S.C. § 304(b)(5)(B); 26 U.S.C. § 304(b)(5)(C)

       Pub. L. 111–226 redesignated former subpar. (B) as (C)

    Source evidence

    Code amendment note
    Subsec. (b)(5)(B), (C). Pub. L. 111–226 added subpar. (B) and redesignated former subpar. (B) as (C).

    Enacted provision · exact public law section
    (a) In General.— Paragraph (5) of section 304(b) of the Internal Revenue Code of 1986 26 USC 304. is amended by redesignating subparagraph (B) as subparagraph (C) and by inserting after subparagraph (A) the following new subparagraph: “(B) Special rule in case of foreign acquiring corporation.— In the case of any acquisition to which subsection (a) applies in which the acquiring corporation is a foreign corporation, no earnings and profits shall be taken into account under paragraph (2)(A) (and subparagraph (A) shall not apply) if more than 50 percent of the dividends arising from such acquisition (determined without regard to this subparagraph) would neither— “(i) be subject to tax under this chapter for the taxable year in which the dividends arise, nor “(ii) be includible in the earnings and profits of a controlled foreign corporation (as defined in section 957 and without regard to section 953(c)).” .

20. 2014

    Tax Technical Corrections Act of 2014

    Pub. L. 113–295 § 221(a)(48)(B) · 128 Stat. 4010

    Struck · 26 U.S.C. § 304(b)(3)(D)

    Pub. L. 113–295, § 221(a)(48)(B), struck out “and special rule” after “Definitions” in heading

    Source evidence

    Code amendment note
    Subsec. (b)(3)(D). Pub. L. 113–295, § 221(a)(48)(B), struck out “and special rule” after “Definitions” in heading.

    Enacted provision · exact public law section
    (B) The heading of subparagraph (D) of section 304(b)(3) is amended by striking “and special rule”.

    Effective date note
    Amendment by Pub. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title.

21. 2014

    Tax Technical Corrections Act of 2014

    Pub. L. 113–295 § 221(a)(48)(A) · 128 Stat. 4010

    Struck · 26 U.S.C. § 304(b)(3)(D)(iii)

    Pub. L. 113–295, § 221(a)(48)(A), struck out cl. (iii). Text read as follows: “In the case of a BHC which is formed before 1985, clause (i) of subparagraph (C) shall not apply.”

    Source evidence

    Code amendment note
    Subsec. (b)(3)(D)(iii). Pub. L. 113–295, § 221(a)(48)(A), struck out cl. (iii). Text read as follows: “In the case of a BHC which is formed before 1985, clause (i) of subparagraph (C) shall not apply.”

    Enacted provision · exact public law section
    (A) Clause (iii) of section 304(b)(3)(D) is repealed.

    Effective date note
    Amendment by Pub. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title.

25 of 26 references resolved to an enrolled provision · 1 partial