PUBLIC LAWS-CH. 247-JUNE 29, 1939 SEC. 213. ASSUMPTION OF INDEBTEDNESS. orecognition of gain (a) ASSUMPnOON OF LABLTrrY NOT RECOGNIZED. -Section 112 of the Ante, p. 37. Internal Revenue Code (relating to recognition of gain or loss) is I.R. C. 112. amended by adding at the end thereof the following new subsection: Assumption of lia- "(k) AssUmrTON OF LIABILITY NOT RECOGNIZED. -Where upon an bility. exchange the taxpayer receives as part of the consideration property Ante, p.37. which would be permitted by subsection (b) (4) or (5) of this section to be received without the recognition of gain if it were the sole consideration, and as part of the consideration another party to the exchange assumes a liability of the taxpayer or acquires from the taxpayer property subject to a liability, such assumption or ac- quisition shall not be considered as 'other property or money' received Ante, p. 39. by the taxpayer within the meaning of subsection (c), (d), or (e) of this section and shall not prevent the exchange from being within If purpose was to th provisions of subsection () (4) or (5);except that if, taking into avoid Federal income rovis t consideration the nature of the lability and the circumstances in the light of which the arrangement for the assumption or acquisition was made, it appears that the principal purpose of the taxpayer with respect to the assumption or acquisition was a purpose to avoid Fed- Not a bona fide eral income tax on the exchange, or, if not such purpose, was not a transaction. bona fide business purpose, such assumption or acquisition (in the amount of the liability) shall, for the purposes of this section, be considered as money received by the taxpayer upon the exchange. Burden of proof. In any suit or proceeding where the burden is on the taxpayer to prove that such assumption or acquisition is not to be considered as money received by the taxpayer, such burden shall not be considered as sustained unless the taxpayer sustains such burden by the clear preponderance of the evidence." amendment to defini- ,eorgsni at ion, (]) AMENDMENT TO DEFINITION OF REORGANIZATION.-Section 112 tion. (g) (1) of the Internal Revenue Code (relating to definition of re- I. R . C. 112 (g) (1). organization) is amended to read as follows: "(1) The term 'reorganization' means (A) a statutory merger or consolidation, or (B) the acquisition by one corporation, in exchange solely for all or a part of its voting stock, of at least 80 per centum of the voting stock and at least 80 per centum of the total number of shares of all other classes of stock of another corporation, or (C) the acquisition by one corporation, in exchange solely for all or a part of its voting stock, of sub- stantially all the properties of another corporation, but in deter- mining whether the exchange is solely for voting stock the assumption by the acquiring corporation of a liability of the other, or the fact that property acquired is subject to a liability, shall be disregarded, or (D) a transfer by a corporation of all or a part of its assets to another corporation if immediately after the transfer the transferor or its shareholders or both are in con- trol of the corporation to which the assets are transferred, or (E) a recapitalization, or (F) a mere change in identity, form, or place of organization, however effected." Rtauirementrosub- (C) REQUIREMENT OF SUBSTANTIALLY PROPORTIONATE INTERESTS.- ate interests. Section 112 (b) (5) of the Internal Revenue Code (relating to t.R.C .1 12(b)(5). requirement of substantially proportionate interests) is amended by Where transferee as- adding at the end thereof the following new sentence: "Where transferor. the transferee assumes a liability of a transferor, or where the property of a transferor is transferred subject to a liability, then for the purpose only of determining whether the amount of stock or securities received by each of the transferors is in the proportion required by this paragraph, the amount of such liability (if under subsection (k) it is not to be considered as 'other property or money') shall be considered as stock or securities received by such transferor. 870 [53 STAT.
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