102 STAT. 3394
PUBLIC LAW 100-647—NOV. 10, 1988 graph (5) and redesignating paragraphs (6) and (7) as paragraphs (5) and (6), respectively. (2) Section 1059(d)(5) of the 1986 Code (defining dividend announcement date), as redesi^ated by paragraph (1), is amended by inserting "amount or before payment". (3) Section 1059(d)(6) of the 1986 Code (relating to exception where stock held during entire existence of corporation), as redesignated by paragraph (1), is amended to read as follows: "(6) EXCEPTION WHERE STOCK HELD DURING ENTIRE EXISTENCE OF CORPORATION.—
"(A) IN GENERAL.—Subsection (a) shall not apply to any extraordinary dividend with respect to any share of stock of a corporation if— "(i) such stock was held by the taxpayer during the entire period such corporation was in existence, and "(ii) except as provided in r^ulations, no earnings and profits of such corporation were attributable to transfers of property from (or earnings and profits of) a corporation which is not a qualified corporation. "(B) QUALIFIED CORPORATION.—For purposes of subparagraph (A), the term 'qualified corporation' means any corporation (including a predecessor corporation)— "(i) with respect to which the taxpayer holds directly or indirectly during the entire period of such corporation's existence at least the same ownership interest as the taxpayer holds in the corporation distributing the extraordinary dividend, and "(ii) which has no earnings and profits— "(I) which were earned by, or "(II) which are attributable to gain on property which accrued during a period the corporation holding the property was, a corporation not described in clause (i). "(C) APPLICATION OF PARAGRAPH.—This paragraph shall not apply to any extraordinary dividend to the extent such application is inconsistent with the purposes of this SGct^ion (4) Paragraph (1) of section 1059(e) of the 1986 Code (relating to treatment of partial liquidation) is amended by striking out "for purposes of this section (without regard to the holding period of the stock)" and inserting in lieu thereof: "to which peu*agraphs (1) and (2) of subsection (a) apply without regard to the period the taxpayer held such stock". (5) Paragraph (2) of section 1059(e) of the 1986 Code (relating to qualif}ring dividends) is amended to read as follows: 'X2) QUALIFYING DIVIDENDS.—
(A) IN GENERAL.—Except as provided in regulations, the term 'extraordinary dividend' does not include any qualifying dividend (within the meaning of section 243). (B) EXCEPTION.—Subparagraph (A) shall not apply to any portion of a dividend which is attributable to earnings and profits which— "(i) were earned by a corporation during a period it was not a member of the affiliated group, or "(ii) are attributable to gain on property which accrued during a period the corporation holding the property was not a member of the affiliated group."
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