108 STAT. 5008 PUBLIC LAW 103-465—DEC. 8, 1994 "(III) notes, bonds, debentures, or other evidences of indebtedness, "(IV) interest rate, currency, or equity notional principal contracts, "(V) foreign currencies, "(VI) interests in or derivative financial instruments (including options, forward or futures contracts, short positions, and similar financial instruments) in any asset described in any other subclause of this clause or in any conmiodity traded on or subject to the rules of a board of trade or conmiodity exchange, "(VII) other assets specified in regulations prescribed by the Secretary, or "(VIII) any combination of the foregoing, "(ii) EXCEPTION FOR CERTAIN ACTIVITIES.— A partnership shall not be treated as engaged in a trade or business by reason of— "(I) any activity undertaken as an investor, trader, or dealer in any asset described in clause (i), or "(II) any other activity specified in regulations prescribed by the Secretary, (iii) ELIGIBLE PARTNER. — "(I) IN GENERAL.—The term 'eligible partner' means any partner who, before the date of the distribution, did not contribute to the partnership any property other than assets described in clause (i). " (II) EXCEPTION FOR CERTAIN NONRECOGNITION TRANSACTIONS.— The term 'eligible partner* shall not include the transferor or transferee in a nonrecognition transaction involving a transfer of any portion of an interest in a partnership with respect to which the transferor was not an eligible partner. "(iv) LOOK-THRU OF PARTNERSHIP TIERS. —Except as otherwise provided in regulations prescribed by the Secretary— "(I) a partnership shall be treated as engaged ia any trade or business engaged in by, and as holding (instead of a partnership interest) a proportionate share of the assets of, any other partnership in which the partnership holds a partnership interest, and "(II) a partner who contributes to a partnership an interest in another partnership shall be treated as contributiag a proportionate share of the assets of the other partnership. If the preceding sentence does not apply under such regulations with respect to any interest held by a partnership in another partnersmp, the interest in such other partnership shall be treated as if it were specified in a subclause of clause (i). " (4) BASIS OF SECURITIES DISTRIBUTED. — "(A) IN GENERAL.—The basis of marketable securities with respect to which gain is recognized by reason of this subsection shall be—
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