PUBLIC LAW 99-514—OCT. 22, 1986
100 STAT. 2279
(2) PARAGRAPH ( D NOT TO APPLY TO CERTAIN ITEMS.—Para-
graph (1) shall not apply to— (A) any gain or loss which is an ordinary gain or loss (determined without regard to section 1239 of the Internal Revenue Code of 1986), (B) any gain or loss on a capital asset held for not more than 6 months, and (C) any gain to the extent section 453B of such Code applies. (3) APPLICABLE PERCENTAGE.—For purposes of this subsection, the term 'applicable percentage' means— (A) 100 percent if the applicable value of the qualified corporation is less than $5,000,000, or (B) 100 percent reduced by an amount which bears the t V same ratio to 100 percent as— H 8v (i) the excess of the applicable value of the corporation over $5,000,000, bears to I 0' (ii) $5,000,000. (4) APPLICABLE VALUE.—For purposes of this subsection, the applicable value is the fair market value of all of the stock of the corporation on the date of the adoption of the plan of complete liquidation (or if greater, on August 1, 1986). (5) QUALIFIED CORPORATION.—For purposes of this subsection, the term "qualified corporation" means any corporation if— (A) on August 1, 1986, and at all times thereafter before the corporation is completely liquidated, more than 50 percent (by value) of the stock in such corporation is held by 10 or fewer qualified persons, and (B) the applicable value of such corporation does not exceed $10,000,000. (6) DEFINITIONS AND SPECIAL RULES.—For purposes of this subsection— (A) QUALIFIED PERSON.—The term "qualified person" ^'^ means— (i) an individual, (ii) an estate, or • (iii) any trust described in clause (ii) or (iii) of section 1361(c)(2)(A) of the Internal Revenue Code of 1986. ^ ^ ^
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(B) ATTRIBUTION RULES.—
(i) ENTITIES.—Any stock held by a corporation, trust, or partnership shall be treated as owned proportionally by its shareholders, beneficiaries, or partners. Stock considered to be owned by a person by reason of the application of the preceding sentence shall, for purposes of applying such sentence, be treated as actually owned by such person. (ii) FAMILY MEMBERS.—Stock owned (or treated as owned under clause (i)) by members of the same family (within the meaning of section 318(a)(1) of the Internal Revenue Code of 1986) shall be treated as owned by 1 person. (C) CONTROLLED GROUP OF CORPORATIONS.—All members
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of the same controlled group (as defined in section 267(f)(1) of such Code) shall be treated as 1 corporation for purposes of this subsection. (7) SECTION 338 TRANSACTIONS.—The provisions of this subsection shall also apply in the case of a transaction described in
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