INCOME TAX 99 (2) At least 95 per centum of its gross income is derived from dividends, interest, and gains from sales or other disposition of stock or securities; and (3) Less than 30 per centum of its gross income is derived from the sale or other disposition of stock or securities held for less than six months; and (4) An amount not less than 90 per centum of its net income is distributed to its shareholders as taxable dividends during the taxable year; and (5) Its shareholders are, upon reasonable notice, entitled to redemption of their stock for their proportionate interests in the corporation's properties, or the cash equivalent thereof less a dis- count not in excess of 3 per centum thereof. (b) LIMITATIONs. -Despite the provisions of paragraph (1) a cor- poration shall not be considered as a mutual investment company if at any time during the taxable year- (1) More than 5 per centum of the gross assets of the corpo- ration, taken at cost, was invested in stock or securities, or both, of any one corporation, government, or political subdivision there- of, but this limitation shall not apply to investments in obligations of the United States or in obligations of any corporation organized under general Act of Congress if such corporation is an instru- mentality of the United States; or (2) It owned more than 10 per centum of the outstanding stock or securities, or both, of any one corporation; or (3) It had any outstanding bonds or indebtedness in excess of 10 per centum of its gross assets taken at cost; or (4) It fails to comply with any rule or regulation prescribed by the Commissioner, with the approval of the Secretary, for the purpose of ascertaining the actual ownership of its outstanding stock. SEC. 362. TAX ON MUTUAL INVESTMENT COMPANIES. (a) SUPPLEMENT Q NET INCOME. - For the purposes of this chapter the term "Supplement Q net income" means the adjusted net income minus the basic surtax credit computed under section 27 (b) without the application of paragraphs (2) and (3). (b) IMPOSITION OF TAX. -T here shall be levied, collected, and paid for each taxable year upon the Supplement Q net income of every mutual investment company a tax equal to 16/2 per centum of the amount thereof. Supplement R-Exchanges and Distributions in Obedience to Orders of Securities and Exchange Commission SEC. 371. NONRECOGNITION OF GAIN OR LOSS. (a) EXCHANGES OF STOCK OR SECURITIES ONLY.- No gain or loss shall be recognized to the transferor if stock or securities in a cor- poration which is a registered holding company or a majority-owned subsidiary company are transferred to such corporation or to an associate company thereof which is a registered holding company or a majority-owned subsidiary company solely in exchange for stock or securities (other than stock or securities which are nonexempt property), and the exchange is made by the transferee corporation in obedience to an order of the Securities and Exchange Commission. (b) EXCHANGES OF PROPERTY FOR PROPERTY BY CPOPORATIONS.- No gain or loss shall be recognized to a transferor corporation which is a registeredholding companya registered hodin company or an associate company of a registered holding company, if such corporation, in obedience to an order of the Securities and Exchange Commission transfers property solely in exchange for property (otherproperty (other than nonexempt property), and such order recites that such exchange by the transferor corpora- tion is necessary or appropriate to the integration or simplification
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