90 STAT. 1602
y:
PUBLIC LAW 94-455—OCT. 4, 1976 to the manner and extent of successive applications of this section in the case of increases in ownership and transfers of stock by the persons described in paragraph (4)(B) shall be prescribed by regulations issued by the Secretary. "(b)
26 USC 368.
REORGANIZATIONS.—
" (1) IN GENERAL.—If one corporation acquires the stock or assets of another corporation in a reorganization described in section 3 6 8 (a)(1)(A), (B), (C), (D) (but only if the requirements of section 354(b)(1) are m e t), or (F), and if— " (A) the acquiring or acquired corporation has a net operating loss for the taxable year which includes the date of the acquisition, or a net operating loss carryover from a prior taxable year to such taxable year, and " (B) the shareholders (immediately before the reorganization) of such corporation ( the 'loss corporation'), as the result of owning stock of the loss corporation, own (immediately after the reorganization) less than 40 percent of the total fair market value of the participating stock or of all the stock of the acquiring corporation, then the net operating loss carryover (if any) of the loss corporation from the taxable year which includes the date of the acquisition, and the net operating loss carryovers (if any) of the loss corporation from prior taxable years to such taxable year and subsequent taxable years, shall be reduced by the percentage determined under paragraph (2). " (2) REDUCTION OF NET OPERATING LOSS CARRYOVER.— " (A) O W N E R S H I P OF 20 PERCENT OR MORE.—If such share-
holders own less than 40 percent, but not less than 20 percent, of the total fair market value of the participating stock or of all the stock of the acquiring corporation, the reduction applicable under paragraph (1) shall be the percentage equal to the number of percentage points (including fractions thereof) less than 40 percent, multiplied by three and onehalf. "(B)
- .-
OWNERSHIP or
LESS THAN
20 PERCENT.—If
such
shareholders own less than 20 percent of the total fair market value of the participating stock or of all the stock of the acquiring corporation, the reduction applicable under paragraph (1) shall be the sum of— " (i) the percentage that would be determined under subparagraph (A) if the shareholders owned 20 percent of such stock, plus " ( i i) the percentage equal to the number of percentage points (including fractions thereof) of such stock less than 20 percent, multiplied by one and one-half. The reduction under this paragraph shall be determined by reference to the lesser of the percentage of the total fair market value of the participating stock or of all the stock of the acquiring corporation owned by such shareholders. "(3)
LOSSES o r CONTROLLED CORPORATIONS.—For purposes of
this subsection— "(A)
...
HOLDING COMPANIES.—If,
immediately
before
the
reorganization, the acquiring or acquired corporation controls a corporation which has a net operating loss for the taxable year which includes the date of the acquisition, or a net operating loss carryover from a prior taxable year to such taxable year, the acquiring or acquired corporation, as the case
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