65 STAT.]
(2) Section 461 (relating to definitions under part II) is amended by inserting at the end thereof the followir^ new subsections: " (g) COMPONENT CORPORATION W H I C H W A S A PURCHASING CORPORATION IN A PREVIOUS TRANSACTION.—See section 462(b)(4) for
rules applicable if the component corporation was a purchasing corporation (as defined in part IV) in a previous part IV transaction, or if (as an acquiring corporation in a previous part II transaction) it was subject to the provisions of section 462(b)(4). "(h)
561
PUBLIC LAW 183~OCT. 20, 1951
64 Stat. 1191. 26 U.S.C. § 461. Ante, p. 551.
Infra. Ante, p. 558.
DEFINITION OF PART II TRANSACTION.—For the purpose of
this subchapter, the term 'part II transaction' means a transaction 64 Stat. 1191. described in section 461(a). " 26 U.S.C. §461 (a). (3) Section 462(b) (relating to the method of recomputing the excess profits net income of an acquiring corporation under part II) is hereby amended by adding at the end thereof the following new paragraph: " (4) If the average base period net income of the acquiring corporation is determined under section 435(d) with reference to 64 Stat. 1149. 26 U.S.C.§ 435(d). this subsection, and if the provisions of section 474(b) (relating Ante, p. 544. to the computation of excess profits net income in the case of cer- Ante, p. 558. tain purchasing corporations) were applicable to the component corporation immediately prior to the part II transaction (or would have been applicable if such part II transaction had occurred in a taxable year of the component corporation ending after June 30, 1950), then the excess profits net income (or deficit therein) of the component corporation shall, for the purpose of this subsection, be determined with the application of the provisions of section 474(b). For the purpose of this paragraph, if a component corporation was an acquiring corporation in a previous part II transaction and, immediately prior to the later part II transaction, the provisions of this paragraph were applicable to such component corporation, its excess profits net income (or deficit therein) shall be determined with the application of the provisions of the preceding sentence. This paragraph shall be applicable to an acquiring corporation only if— " (A) the properties acquired by the acquiring corporation from the component corporation include substantially all of the properties (other than cash), or properties acquired in the ordinary course of business in the replacement of properties, which the component corporation acquired either from the selling corporation in the part IV transaction or from a previous component corporation subject (immediately prior to such acquisition) to the provisions of this paragraph; " (B) the business or businesses acquired by the acquiring corporation were operated by the acquiring corporation from the date of such transaction to the end of the taxable year or were transferred during the taxable year by the acquiring corporation in a part II transaction to which the provisions of this paragraph are applicable; and " (C) in the event that the part II transaction is one de1191. scribed in section 461(a)(1)(E), the provisions of section 64 Stat. C. § 461 (a) 26 U. S. 462 (i)(6) are satisfied." (1)(E). (4) Section 462(i)(6) (relating to allocation rules in the case 64 Stat. 1203. 462 (i) 26 U.S.C. § of transactions described in section 461(a)(1)(E)) i s hereby (C amended by adding at the end thereof the following: "Notwithstanding the provisions of paragraph (1), if an acquiring corporation in a transaction described in section 461(a)(1)(E) determines its average base period net income under section 435
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