Page:United States Statutes at Large Volume 113 Part 3.djvu/421

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PUBLIC LAW 106-170—DEC. 17, 1999 113 STAT. 1939 (3) REPORTING. —Clause (iii) of such section 170(f)(10)(F) shall apply to premiums paid after February 8, 1999 (determined as if the tax imposed by such section applies to premiums paid after such date). SEC. 538. DISTRIBUTIONS BY A PARTNERSHIP TO A CORPORATE PARTNER OF STOCK IN ANOTHER CORPORATION. (a) IN GENERAL.— Section 732 of the Internal Revenue Code of 1986 (relating to basis of distributed property other than money) 26 USC 732. is amended by adding at the end the following new subsection: " (f) CORRESPONDING ADJUSTMENT TO BASIS OF ASSETS OF A DISTRIBUTED CORPORATION CONTROLLED BY A CORPORATE PARTNER.— " (1) IN GENERAL.—I f— "(A) a corporation (hereafter in this subsection referred to as the 'corporate partner') receivers a distribution from a partnership of stock in another corporation (hereafter in this subsection referred to as th(j 'distributed corporation'), "(B) the corporate partner has control of the distributed corporation immediately after the distribution or at any time thereafter, and "(C) the partnership's adjusted basis in such stock immediately before the distribution tjxceeded the corporate partner's adjusted basis in such stock immediately after the distribution, then an amount equal to such excess shall be applied to reduce (in accordance with subsection (c)) the basis of property held by the distributed corporation at such time (or, if the corporate partner does not control the distributed corporation at such time, at the time the corporate partner first has such control). " (2) EXCEPTION FOR CERTAIN DISTRIBUTIONS BEFORE CON- TROL ACQUIRED.— Paragraph (1) shall not apply to any distribution of stock in the distributed corporation if— "(A) the corporate partner does not have control of such corporation immediately after such distribution, and "(B) the corporate partner establishes to the satisfaction of the Secretary that such distribution was not part of a plan or arrangement to acquire control of the distributed corporation. " (3) LIMITATIONS ON BASIS REDUCTION.— "(A) IN GENERAL.—The amount of the reduction under paragraph (1) shall not exceed the amount by which the sum of the aggregate adjusted bases of the property and the amount of money of the distributed corporation exceeds the corporate partner's adjusted basis in the stock of the distributed corporation. "(B) REDUCTION NOT TO EXCEED ADJUSTED BASIS OF PROPERTY.—No reduction under paragraph (1) in the basis of any property shall exceed the adjusted basis of such property (determined without regard to such reduction). " (4) GAIN RECOGNITION WHERE REDUCTION LIMITED.—I f the amount of any reduction under paragraph (1) (determined after the application of paragraph (3)(A)) exceeds the aggregate adjusted bases of the property of the distributed corporation— "(A) such excess shall be recognized by the corporate partner as long-term capital gain, and