53 STAT.] 76TH CONG. , 1S T SESS.-CH. 247-JUNE 29, 1939 constitute income to the shareholder within the meaning of the Sixteenth Amendment to the Constitution; then the basis of the new stock and of the old stock, respectively, shall, in the shareholder's hands, be determined by allocating between the old stock and the new stock the adjusted basis of the old stock; such allocation to be made under regulations which shall be prescribed by the Commissioner with the approval of the Secretary. "(B) Where the new stock consisted of rights to acquire stock and such rights were sold in a taxable year beginning before January 1, 1939, and there was included in the gross income for such year the entire amount of the proceeds of such sale, then, if before the date of the enactment of the Revenue Act of 1939 the taxpayer has not asserted (by claim for a refund or credit or otherwise) that any part of the proceeds of the sale of such new stock should be excluded from gross income for the year of its sale, the basis of the old stock shall be determined without regard to subparagraph (A); and no part of the pro- ceeds of the sale of such new stock shall ever be excluded from the gross income of the year of such sale. "(C) Subparagraph (A) shall not apply if the new stock was acquired in a taxable year beginning before January 1, 1936, and there was included, as a dividend, in gross income for such year an amount on account of such stock, and after such inclu- sion such amount was not (before the date of the enactment of the Revenue Act of 1939) excluded from gross income for such year. "(D) Subparagraph (A) shall not apply if the new stock or the old stock was sold or otherwise disposed of in a taxable year beginning prior to January 1, 1936, and the basis (determined by a decision of a court or the Board of Tax Appeals, or a closing agreement, and the decision or agreement became final before the ninetieth day after the date of the enactment of the Revenue Act of 1939) for determining gain or loss on such sale or other disposition was ascertained by a method other than that of allocation of the basis of the old stock." (h) DISTRaIUTIONs NOT TR-EATED AS DIVIDENDS.- Section 115 (d) of the Internal Revenue Code (relating to distributions applied in reduction of basis) is amended to read as follows: "(d) OTHER DISTRIBUTIONS FROM CAPITAL.- If any distribution made by a corporation to its shareholders is not out of increase in value of property accrued before March 1, 1913, and is not a divi- dend, then the amount of such distribution shall be applied against and reduce the adjusted basis of the stock provided in section 113, and if in excess of such basis, such excess shall be taxable in the same manner as a gain from the sale or exchange of property. This subsection shall not apply to a distribution in partial or complete liquidation or to a distribution which, under subsection (f) (1), is not treated as a dividend, whether or not otherwise a dividend." (c) DErERMINATION OF PERIOD FOR WHICH HELD.- Section 117 (h) of the Internal Revenue Code (relating to determination of period for which property is held) is amended by adding at the end thereof the following new paragraph: "(5) In determining the period for which the taxpayer has held stock or rights to acquire stock received upon a distribution, if the basis of such stock or rights is determined under section 113 (a) (19) (A), there shall (under regulations prescribed by the Commissioner with the approval of the Secretary) be included the period for which he held the stock in the distributing corporation prior to the receipt of such stock or rights upon such distribution." 873 Basis. Where proceeds of acquired stock, etc., were included in gross income before January 1, 1939. Claim for refund, etc., not asserted. Allocation inappli- cable in certain cases. I)istrihiitiorls not treated is dividends. Ante, p. 47. I. It. C. § 115' (.1). Other distributions from capital. Ante, pp. 40, S71. I. R. C. §113. Distribution in liquidation, etc. Determination of period for which held. Ante, p. 52. I..R. C. 117 (h). Ante, p. 872 .
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