PUBLIC LAW 99-514—OCT. 22, 1986
100 STAT. 2275
investment company to which this part applies, if such distribution is in redemption of its stock upon the demand of the shareholder." (12) Subsection (d) of section 897 is amended— (A) by striking out paragraph (2), (B) by striking out the heading for paragraph (1), (C) by appropriately redesignating each subparagraph, •> clause, and subclause of paragraph (1) as a paragraph, subparagraph, or clause, as the case may be, (D) by striking out "subparagraph (A)" in paragraph (2) (as so redesignated) and inserting in lieu thereof "paragraph (1)", and (E) by striking out ", ETC.," in the subsection heading. (13) Subsection (a) of section 1056 is amended by striking out the last sentence thereof. (14) Paragraph (2) of section 1255(b) is amended by striking out "453B(d)(2)". (15) Paragraph (3) of section 1276(c) is amended by striking out "334(c),". (16) The table of sections for subpart A of part II of subchapter C of chapter 1 is amended by striking out the item relating to section 333. (17) The table of sections for subpart B of part II of subchapter C of chapter 1 is amended by striking out the items relating to sections 336 and 337 and inserting in lieu thereof the following: "Sec. 336. Gain or loss recognized on property distributed in complete liquidation. "Sec. 337. Nonrecognition for property distributed to parent in complete liquidation of subsidiary."
SEC. 632. TREATMENT OF CORPORATIONS ELECTING SUBCHAPTER S STATUS.
(a) GENERAL RULE.—Section 1374 (relating to tax imposed on certain capital gains) is amended to read as follows: "SEC. 1374. TAX IMPOSED ON CERTAIN BUILT-IN GAINS.
"(a) GENERAL RULE.—If for any taxable year beginning in the recognition period an S corporation has a recognized built-in gain, there is hereby imposed a tax (computed under subsection (b)) on the income of such corporation for such taxable year. "(b) AMOUNT OF TAX.—
"(1) IN GENERAL.—The tax imposed by subsection (a) shall be a tax computed by applying the highest rate of tax specified in section 11(b) to the lesser of— "(A) the recognized built-in gains of the S corporation for the taxable year, or "(B) the amount which would be the taxable income of the corporation for such taxable year if such corporation '^' were not an S corporation. "(2) NET OPERATING LOSS CARRYFORWARDS FROM C YEARS AL-
LOWED.—Notwithstanding section 1371(b)(1), any net operating loss carryforward arising in a taxable year for which the corporation was a C corporation shall be allowed as a deduction against the lesser of the amounts referred to in subparagraph (A) or (B) of paragraph (1). For purposes of determining the amount of any such loss which may be carried to subsequent taxable years, the lesser of the amounts referred to in subpara-
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