110 STAT. 1894
PUBLIC LAW 104-188—AUG. 20, 1996
SEC. 1805. NONRECOGNITION TREATMENT FOR CERTAIN TRANSFERS
BY COMMON TRUST FUNDS TO REGULATED INVESTMENT
COMPANIES.
(a) GENERAL RULE.— Section 584 (relating to common trust
funds) is amended by redesignating subsection (h) as subsection
(i) and by inserting after subsection (g) the following new subsection:
" (H) NONRECOGNITION TREATMENT FOR CERTAIN TRANSFERS TO
REGULATED INVESTMENT COMPANIES.—
" (1) IN GENERAL.— I f—
"(A) a common trust fund transfers substantially all
of its assets to one or more regulated investment companies
in exchange solely for stock in the company or companies
to which such assets are so transferred, and
"(B) such stock is distributed by such common trust
fund to participants in such common trust fund in exchange
solely for their interests in such common trust fund,
no gain or loss shall be recognized by such common trust
fund by reason of such transfer or distribution, and no gain
or loss shall be recognized by any participant in such common
trust fund by reason of such exchange.
"(2) BASIS RULES.—
"(A) REGULATED INVESTMENT COMPANY. —The basis of
any asset received by a regulated investment company
in a transfer referred to in paragraph (1)(A) shall be the
same as it would be in the hands of the common trust
fund.
" (B) PARTICIPANTS.—The basis of the stock which is
received in an exchange referred to in paragraph (1)(B)
shall be the same as that of the property exchanged. If
stock in more than one regulated investment company is
received in such exchange, the basis determined under
the preceding sentence shall be allocated among the stock
in each such company on the basis of respective fair market
values.
" (3) TREATMENT OF ASSUMPTIONS OF LIABILITY.—
"(A) IN GENERAL.—In determining whether the transfer
referred to in paragraph (1)(A) is in exchange solely for
stock in one or more regulated investment companies, the
assumption by any such company of a liability of the common trust fund, and the fact that any property transferred
by the common trust fund is subject to a liability, shall
be disregarded.
" (B) SPECIAL RULE WHERE ASSUMED LIABILITIES EXCEED
BASIS. —
"(i) IN GENERAL. — If, in any transfer referred to
in paragraph (1)(A), the assumed liabilities exceed the
aggregate adjusted bases (in the hands of the common
trust fund) of the assets trsinsferred to the regulated
investment company or companies—
"(I) notwithstanding paragraph (1), gain shall
be recognized to the common trust fund on such
transfer in an amount equal to such excess,
"(II) the basis of the assets received by the
regulated investment company or companies in
such transfer shall be increased by the amount
so recognized, and
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