PUBLIC LAWS-CH. 619-OCT. 21, 1942 Infra. Expenditure for other than nonexempt property. Liability of trans- feror. Infra. 53 Stat. 101. 26U.S.C.i371(f). 53 Stat. 101. 26U. S. C . 1372(a). 53 Stat. 99. 26U. .C. 371(a). Ante, p. 881. 53 Stat. 14. 26U.S. C. 23(0. Ante, p. 819. 54 Stat. 998 . 2sU. S. C. 23 (t). 372 (a) (2) shall be recognized. For the purposes of this subsection, a distribution in cancellation or redemption (except a distribution having the effect of a dividend) of the whole or a part of the trans- feror's own stock (not acquired on the transfer) and a payment in complete or partial retirement or cancellation of securities repre- senting indebtedness of the transferor or a complete or partial retirement or cancellation of such securities which is a part of the consideration for the transfer, shall be considered an expenditure for property other than nonexempt property, and if, on the transfer, a liability of the transferor is assumed, or property of the transferor is transferred subject to a liability, the amount of such liability shall be considered to be an expenditure by the transferor for property other than nonexempt property. This subsection shall not apply unless the transferor corporation consents, at such time and in such manner as the Commissioner, with the approval of the Secretary, may by regulations prescribe, to the regulations prescribed under sec- tion 372 (a) (2) in effect at the time of filing its return for the taxable year in which the transfer occurs." (b) AMENDMENT OF SECTION 371 (f).-Section 371 (f) is amended to read as follows: "(f) APPLICATION OF SECTION. -T he provisions of this section shall not apply to an exchange, expenditure, investment, distribution, or sale unless (1) the order of the Securities and Exchange Commission in obedience to which such exchange, expenditure, investment, dis- tribution, or sale was made recites that such exchange, expenditure, investment, distribution, or sale is necessary or appropriate to effec- tuate the provisions of section 11 (b) of the Public Utility Holding Company Act of 1935, 49 Stat. 820 (U. S. C., title 15, sec. 79k (b)), (2) such order specifies and itemizes the stock and securities and other property which are ordered to be acquired, transferred, received, or sold upon such exchange, acquisition, expenditure, distribution, or sale, and, in the case of an investment, the investment to be made, and (3) such exchange, acquisition, expenditure, investment, distribution or sale was made in obedience to such order, and was completed within the time prescribed therefor." (c) AMENDMENTOF SECTION 372 (a). -Section 372 (a) is amended- (1) by inserting after "(a) EXCHANGES GENERALLY.- " the following: "(1) EXCHANGES SUBJECT TO THE PROVISIONS OF SECTION 371 (a) .- "; (2) by striking out "371 (a), (b), or (e)," and inserting in lieu thereof "371 (a) or (e)", and by striking out "371 (a) or (b)" and inserting in lieu thereof "371 (a)"; and (3) by inserting at the end thereof the following: "(2) EXCHANGES SUBJECT TO THE PROVISIONS OF SECTION 371 (b). -T he gain not recognized upon a transfer by reason of section 371 (b) shall be applied to reduce the basis for determin- ing gain or loss on sale or exchange of the following categories of property in the hands of the transferor immediately after the transfer, and property acquired within 24 months after such transfer by an expenditure or investment to which section 371 (b) relates on account of the acquisition of which gain is not recog- nized under such subsection, in the following order: "(1) Property of a character subject to the allowance for depreciation under section 23 (1); "(2) Property (not described in paragraph (1)) with respect to which a deduction for amortization is allowable under section 23 (t); [56 STAT.
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