614
PUBLIC LAW 91-172-DEC. 30, 1969
[83 STAT
"(2) whether there is subordination to or preference over a indebtedness of the corporation, ^^ " (3) the ratio of debt to equity of the corporation, " (4) whether there is convertibility into the stock of the corno ration, and ^" "(5) the relationship between holdings of stock in the cortDo ration and holdings of the interest in question." ^" (b) CLERICAL AMENDMENT.—The table of parts for subchapter C of chapter 1 is amended by striking out the last line and inserting in li^y thereof the following: "Part VI. -
^
Treatment of certain corporate interests as stock or indebtedness. "Part VII. Effective date of subchapter C."
• 26^s*c*305°"
Subtitle C—Stock Dividends
SEC. 421. STOCK DIVIDENDS. (^) -^^ GENERAL.—Section 305 (relating to distributions of stock and stock rights) is amended to read as follows: "SEC. 305. DISTRIBUTIONS OF STOCK AND STOCK RIGHTS. " (a) GENERAL RULE.—Except as otherwise provided in this section gross income does not include the amount of any distribution of the stock of a corporation made by such corporation to its shareholders with respect to its stock. (b) EXCEPTIONS.—Subsection (a) shall not apply to a distribution by a corporation of its stock, and the distribution shall be treated as a distribution of property to which section 301 applies— "(1) DISTRIBUTIONS I N LIEU OF MONEY.—If the distribution is, at the election of any of the shareholders (whether exercised before or aft^r the declaration thereof), payable either— " (A) in its stock, or " (B) in property. (2) DISPROPORTIONATE DISTRIBUTIONS.—If the distribution (or
a series of distributions of which such distribution is one) has the result of— " (A) the receipt of property by some shareholders, and " (B) an increase in the proportionate interests of other shareholders in the assets or earnings and profits of the corporation. " (3) DISTRIBUTIONS or COMMON AND PREFERRED STOCK.—If the
distribution (or a series of distributions of which such distribution is one) has the result of— " (A) the receipt of preferred stock by some common shareholders, and " (B) the receipt of common stock by other common shareholders. "(4) DISTRIBUTIONS ON PREFERRED STOCK.—If the distribution is with respect to preferred stock, other than an increase in the conversion ratio of convertible preferred stock made solely to take account of a stock dividend or stock split with respect to the stock into which such convertible stock is convertible. "(5) DISTRIBUTIONS OF CONVERTIBLE PREFERRED STOCK.—If tn^
distribution is of convertible preferred stock, unless it is established to the satisfaction of the Secretary or his delegate that such distribution will not have the result described in paragraph (2) • " (c) CERTAIN
26 USC 301.
TRANSACTIONS
TREATED
AS DISTRIBUTIONS.—For
purposes of this section and section 301, the Secretary or his delegate shall prescribe regulations under which a change in conversion ratio,
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