SEC. 318-Continued (a)(amended 1964)—Continued (b) (6) (added) others treated as substantial owners) shall be considered as owned by the trust. "(C) TO CORPORATIONS.-If 50 percent or more in value of the stock in a corporation is owned, directly or indirectly, by or for any person, such corporation shall be considered as owning the stock owned, directly or indirectly, by or for such person. "(4) OPTIONS.-If any person has an option to acquire stock, such stock shall be considered as owned by such person. purposes of this paragraph, an option to acquire such an option, and each one of a series of such options, shall be considered as an option to acquire such stock. "(5) OPERATING RULES. For "(A) IN GENERAL.-Except as provided in subparagraphs (B) and (C), stock constructively owned by a person by reason of the application of paragraph (1), (2), (3), or (4), shall, for purposes of applying paragraphs (1), (2), (3), and (4), be considered as actually owned by such person. "(B) MEMBERS OF FAMILY.-Stock constructively owned by an individual by reason of the application of paragraph (1) shall not be considered as owned by him for purposes of again applying paragraph (1) in order to make another the constructive owner of such stock. "(C) PARTNERSHIPS, ESTATES, TRUSTS, AND CORPORATIONS.— Stock constructively owned by a partnership, estate, trust, or corporation by reason of the application of paragraph (3) shall not be considered as owned by it for purposes of applying paragraph (2) in order to make another the constructive owner of such stock. "(D) OPTION RULE IN LIEU OF FAMILY RULE.-For purposes of this paragraph, if stock may be considered as owned by an individual under paragraph (1) or (4), it shall be considered as owned by him under paragraph (4).” Effective Date and Applicability: "The amendments made by this section [section 4 of P.L. 88-554] shall take effect on the date of the enactment of this Act, except that, for purposes of sections 302 and 304 of the Internal Revenue Code of 1954, such amendments shall not apply with respect to distributions in payment for stock acquisitions or redemptions, if such acquisitions or redemptions occurred before the date of the enactment of this Act." (Id., § 4(c), 78 Stat. 764.) The date of enactment of "this Act" (P.L. 88-554) is August 31, 1964. For a list of the amendments made by section 4 of P.L. 88-554, see n. 86, p. 160 above. Sept. 14, 1960, H.R. 10960, P.L. 86-779, § 10 (h), 74 Stat. 1009: (1) by striking out the word "and" at the end of paragraph (4); (2) by striking out the period at the end of paragraph (5) and inserting in lieu thereof "; and"; and 91 Subsection (b) of section 318 originally read as follows (68A Stat. 101): "CROSS REFERENCES. "For provisions to which the rules contained in subsection (a) apply, see "(i) section 302 (relating to redemption of stock); “(2) section 304 (relating to redemption by related corporations); "(3) section 306 (b) (1) (A) (relating to disposition of section 306 stock); "(4) section 334 (b) (3) (C) (relating to basis of property received in certain liquidations of subsidiaries); and "(5) section 382 (a) (3) (relating to special limitations on net operating loss carryovers)." SEC. 318-Continued (b) (6) (added 1960)—Continued (b) (7) (b) (7), (8) (redesignated, added) (3) by adding at the end thereof, after paragraph (5), the following new paragraph (6): "(6) section 856(d) (relating to definition of rents from real property in the case of real estate investment trusts)." Applicability: Taxable years of real estate investment trusts beginning after December 31, 1960. (Id., § 10(k), 74 Stat. 1009.) Oct. 16, 1962, H.R. 10650, P.L. 87-834, § 20 (d) (1), 76 Stat. 1063: (1) by striking out "and" at the end of paragraph (5); (2) by striking out the period at the end of paragraph (6) and inserting in lieu thereof "; and"; and (3) by adding at the end thereof, after paragraph (6), the following new paragraph (7): "(7) section 6038(d) (1) (relating to information with respect to certain foreign corporations." Effective Date: October 16, 1962-the date of enactment. Aug. 31, 1964, H.R. 10467, P.L. 88-554, § 4(b) (2), 78 Stat. 763: Amended Sec. 318(b) (as amended by P.L. 86-779, § 10(h) and by P.L. 87-834, § 20(d) (1)) by striking out "and" at the end of paragraph (6), by renumbering paragraph (7) as paragraph (8), and by inserting after paragraph (6) the following new paragraph (7): "(7) section 958(b) (relating to constructive ownership rules with respect to controlled foreign corporations); and" Effective Date and Applicability: The date of enactment (August 31, 1964), with certain exceptions with respect to applicability. (Id., § 4(c), 78 Stat. 764.) See "Effective Date and Applicability" under amendment to Sec. 318(a) at page 166 above. CH. 1, SUBCH. C, PART II-CORPORATE LIQUIDATIONS (68A Stat. 101-111): NOTE: The table of subparts for Part II of Subchapter C of Chapter 1 reads as follows (68A Stat. 101): Subpart A. Effects on recipients. Subpart B. Effects on corporation. Subpart C. Collapsible corporations; foreign personal holding companies. This table has not been amended. CH. 1, SUBCH. C, PART II, SUBPART A-EFFECT ON RECIPIENTS (68A Stat. 101-106): NOTE: The table of sections for Subpart A of Part II of Subchapter C of Chapter 1 reads as follows (68A Stat. 101): "Sec. 331. Gain or loss to shareholder in corporate liquidations. "Sec. 332. Complete liquidations of subsidiaries. "Sec. 333. Election as to recognition of gain in certain liquidations. This table has not been amended. SEC. 331. GAIN OR LOSS TO SHAREHOLDERS IN CORPORATE (b). LIQUIDATIONS (68A Stat. 101-102): Feb. 26, 1964, H.R. 8363, P.L. 88-272, § 225(f) (2), 78 Stat. 88: Amended Sec. 331(b) 92 by inserting after "any distribution of property" the following: "(other than a distribution referred to in paragraph (2) (B) of section 316(b))”. Applicability: Distributions made in any taxable year of the distributing corporation beginning after December 31, 1963. (Id., § 225(1)(3), 78 Stat. 94.) For exception in the case of certain corporations, see n. 93, p. 170 below. SEC. 332. COMPLETE LIQUIDATIONS OF SUBSIDIARIES (68A Stat. 102-103): ANCILLARY PROVISIONS: Feb. 26, 1964, H.R. 8363, P.L. 88-272, § 225 (h), 78 Stat. 90: Provided for certain exceptions with respect to the applicability of amendments made by section 225 of P.L. 88-272 in the case of any liquidation to which section 332 of the Internal Revenue Code of 1954 applies. See n. 93, p. 170 below. SEC. 333. ELECTION AS TO RECOGNITION OF GAIN IN CERTAIN (g). (added) LIQUIDATIONS (68A Stat. 103-104): Feb. 26, 1964, H.R. 8363, P.L. 88-272, § 225 (g), 78 Stat. 89-90: Amended Sec. 333 by adding at the end thereof, after subsection (f) (corporate shareholders), the following new subsection (g): (g) SPECIAL RULE. "(1) LIQUIDATIONS BEFORE JANUARY 1, 1967.-In the case of a liquidation occurring before January 1, 1967, of a corporation referred to in paragraph (3) "(A) the date 'December 31, 1953' referred to in subsections (e) (2) and (f) (1) shall be treated as if such date were 'December 31, 1962', and "(B) in the case of stock in such corporation held for more than 6 months, the term 'a dividend' as used in subsection (e) (1) shall be treated as if such term were 'long-term capital gain'. Subparagraph (B) shall not apply to any earnings and profits to which the corporation succeeds after December 31, 1963, pursuant to any corporate reorganization or pursuant to any liquidation to which section 332 applies, except earnings and profits which on December 31, 1963, constituted earnings and profits of a corporation referred to in paragraph (3), and except earnings and profits which were earned after such date by a corporation referred to in paragraph (3). "(2) LIQUIDATIONS AFTER DECEMBER 31, 1966. "(A) IN GENERAL.-In the case of a liquidation occurring after December 31, 1966, of a corporation to which this subparagraph applies 92 Subsection (b) of section 331 originally read as follows (68A Stat. 101): "(b) NONAPPLICATION OF SECTION 301.-Section 301 (relating to effects on shareholder of distributions of property) shall not apply to any distribution of property in partial or complete liquidation." SEC. 333-Continued (g) (added 1964)-Continued "(i) the date 'December 31, 1953' referred to in subsections (e) (2) and (f) (1) shall be treated as if such date were 'December 31, 1962', and "(ii) so much of the gain recognized under subsection (e) (1) as is attributable to the earnings and profits accumulated after February 28, 1913, and before January 1, 1967, shall, in the case of stock in such corporation held for more than 6 months, be treated as long-term capital gain, and only the remainder of such gain shall be treated as a dividend. Clause (ii) shall not apply to any earnings and profits to which the corporation succeeds after December 31, 1963, pursuant to any corporate reorganization or pursuant to any liquidation to which section 332 applies, except earnings and profits which on December 31, 1963, constituted earnings and profits of a corporation referred to in paragraph (3), and except earnings and profits which were earned after such date by a corporation referred to in paragraph (3). "(B) CORPORATIONS TO WHICH APPLICABLE.-Subparagraph (A) shall apply only with respect to a corporation which is referred to in paragraph (3) and which "(i) on January 1, 1964, owes qualified indebtedness (as defined in section 545(c)), "(ii) before January 1, 1968, notifies the Secretary or his delegate that it may wish to have subparagraph (A) apply to it and submits such information as may be required by regulations prescribed by the Secretary or his delegate, and "(iii) liquidates before the close of the taxable year in which such corporation ceases to owe such qualified indebtedness or (if earlier) the taxable year referred to in subparagraph (C). "(C) ADJUSTED POST-1963 EARNINGS AND PROFITS EXCEED QUALIFIED INDEBTEDNESS.-In the case of any corporation, the taxable year referred to in this subparagraph is the first taxable year at the close of which its adjusted post-1963 earnings and profits equal or exceed the amount of such corporation's qualified indebtedness on January 1, 1964. For purposes of the preceding sentence, the term 'adjusted post-1963 earnings and profits' means the sum of "(i) the earnings and profits of such corporation for taxable years beginning after December 31, 1963, without diminution by reason of any distributions made out of such earnings and profits, and "(ii) the deductions allowed for taxable years beginning after December 31, 1963, for exhaustion, wear and tear, obsolescence, amortization, or depletion. "(3) CORPORATIONS REFERRED TO. For purposes of paragraphs (1) and (2), a corporation referred to in this paragraph is a corporation which for at least one of the two most recent taxable years ending before the date of the enactment of this subsection was not a personal holding company under section 542, but would have been a personal holding company under section 542 for such taxable year if the law applicable for the first taxable year beginning after December 31, 1963, had been applicable to such taxable year. SEC. 333-Continued (g) (added 1964)-Continued "(4) MISTAKE AS TO APPLICABILITY OF SUBSECTION.-An election made under this section by a qualified electing shareholder of a corporation in which such shareholder states that such election is made on the assumption that such corporation is a corporation referred to in paragraph (3) shall have no force or effect if it is determined that the corporation is not a corporation referred to in paragraph (3)." Applicability Distributions made in any taxable year of the distributing corporation beginning after December 31, 1963.93 (Id., § 225(1)(3), 78 Stat. 94.) CH. 1, SUBCH. C, PART II, SUBPART B-EFFECTS ON CORPORATION (68A Stat. 106-107): NOTE: The table of sections for Subpart B of Part II of Subchapter C of Chapter 1 reads as follows (68A Stat. 106): "Sec. 336. General rule. "Sec. 337. Gain or loss on sales or exchanges in connection with certain liquidations. This table has not been amended. SEC. 337. GAIN OR LOSS ON SALES OR EXCHANGES IN CONNECTION WITH CERTAIN LIQUIDATIONS (68A Stat. 106-107): (d).... Sept. 2, 1958, H.R. 8381, P.L. 85-866, § 19, 72 Stat. 1615: "(d) SPECIAL RULE FOR CERTAIN MINORITY SHAREHOLDERS.-If a corporation adopts a plan of complete liquidation on or after January 1, 1958, and if subsection (a) does not apply to sales or exchanges of property by such corporation, solely by reason of the application of subsection (c) (2) (A), then for the first taxable year of any shareholder (other than a corporation which meets the 80 percent stock ownership requirement specified in section 332(b)(1)) in which he receives a distribution in complete liquidation "(1) the amount realized by such shareholder on the distribution shall be increased by his proportionate share of the amount by which the tax imposed by this subtitle on such corporation would have been reduced if subsection (c) (2) (A) had not been applicable, and "(2) for purposes of this title, such shareholder shall be deemed to have paid, on the last day prescribed by law for the payment of the tax imposed by this subtitle on such shareholder for such 93 Subsection (h) of section 225 of P.L. 88-272 provided as follows: "(h) EXCEPTION FOR CERTAIN CORPORATIONS. "(1) GENERAL RULE.-Except as provided in paragraph (2), in the case of a corporation refered to in section 333(g)(3) of the Internal Revenue Code of 1954 (as added by subsection (g) of this section), the amendments made by this section (other than subsections (f) and (g)) [see n. § 9, p.-above] shall not apply if there is a complete liquidation of such corporation and if the distribution of all the property under such liquidation occurs before January 1, 1966. "(2) EXCEPTION.-Paragraph (1) shall not apply to any liquidation to which section 332 of the Internal Revenue Code of 1954 applies unless "(A) the corporate distributee (referred to in subsection (b) (1) of such section 332) in such quilidation is liquidated in a complete liquidation to which such section 332 does not apply, and "(B) the distribution of all the property under such liquidation occurs before the 91st day after the last distribution referred to in paragraph (1) and before January 1, 1966." |