PUBLIC LAW 105-34—AUG. 5, 1997 111 STAT. 1065 (2) Paragraph (2) of section 409(h), as in effect before the amendment made by paragraph (1), is amended— (A) by striking "A plan which" in the first sentence and inserting the following: "(A) IN GENERAL. — A plan which", and (B) by striking the last sentence. (b) CERTAIN SHAREHOLDER-EMPLOYEES NOT TREATED AS OWNER-EMPLOYEES.— (1) AMENDMENT TO 1986 CODE. — (A) IN GENERAL.— Section 4975(f) is amended by adding at the end the following new paragraph: "(6) EXEMPTIONS NOT TO APPLY TO CERTAIN TRANS- ACTIONS. — "(A) IN GENERAL.— In the case of a trust described in section 401(a) which is part of a plan providing contributions or benefits for employees some or all of whom are owner-employees (as defined in section 401(c)(3)), the exemptions provided by subsection (d) (other than paragraphs (9) and (12)) shall not apply to a transaction in which the plan directly or indirectly— "(i) lends any part of the corpus or income of the plan to, "(ii) pays any compensation for personal services rendered to the plan to, or "(iii) acquires for the plan any property from, or sells any property to, any such owner-employee, a member of the family (as defined in section 267(c)(4)) of any such owner-employee, or any corporation in which any such owner-employee owns, directly or indirectly, 50 percent or more of the total combined voting power of all classes of stock entitled to vote or 50 percent or more of the total value of shares of all classes of stock of the corporation. "(B) SPECIAL RULES FOR SHAREHOLDER-EMPLOYEES, ETC.- "(i) IN GENERAL.— For purposes of subparagraph (A), the following shall be treated as owner-employees: "(I) A shareholder-employee. "(II) A participant or beneficiary of an individual retirement plan (as defined in section 7701(a)(37)). "(Ill) An employer or association of employees which establishes such an individual retirement plan under section 408(c). ^'(ii) EXCEPTION FOR CERTAIN TRANSACTIONS INVOLVING SHAREHOLDER-EMPLOYEES.— Subparagraph (A)(iii) shall not apply to a transaction which consists of a sale of employer securities to an employee stock ownership plan (as defined in subsection (e)(7)) by a shareholder-employee, a member of the family (as defined in section 267(c)(4)) of such shareholderemployee, or a corporation in which such a shareholderemployee owns stock representing a 50 percent or greater interest described in subparagraph (A). "(C) SHAREHOLDER-EMPLOYEE.— For purposes of subparagraph (B), the term 'shareholder-employee' means an employee or officer of an S corporation who owns (or
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