CH. 1, SUBCH. C, PART I-DISTRIBUTIONS BY CORPORATIONS (68A Stat. 84-101): NOTE: The table of subparts for Part I of Subchapter C of Chapter 1 reads as follows (68A Stat. 84): "Subpart A. Effects on recipients. "Subpart B. Effects on corporation. "Subpart C. Definitions; constructive ownership of stock." This table has not been amended. CH. 1, SUBCH. C, PART I, SUBPART A-EFFECTS ON RECIPIENTS (68A Stat. 84-94): NOTE: The table of sections for Subpart A of Part I of Subchapter C of Chapter 1 reads as follows (68A Stat. 84): "Sec. 301. Distributions of property. "Sec. 302. Distributions in redemption of stock. "Sec. 303. Distributions in redemption of stock to pay death taxes. "Sec. 304. Redemption through use of related corporations. "Sec. 305. Distributions of stock and stock rights. "Sec. 306. Dispositions of certain stock. "Sec. 307. Basis of stock and stock rights acquired in distributions." This table has not been amended. SEC. 301. DISTRIBUTIONS OF PROPERTY (68A Stat. 84-85): (b)(1) (B)... Oct. 16, 1962, H.R. 10650, P.L. 87-834, § 13(f) (2), 76 Stat. 1035: (in part) Amended Sec. 301(b) 82 by striking out in paragraph (1)(B) (ii) – "subsection (b) or (c) of section 311" Do... Do... and inserting in lieu thereof "subsection (b) or (c) of section 311 or under section 1245(a)". Applicability: Taxable years beginning after December 31, 1962. (Id., § 13(g), 76 Stat. 1035). Feb. 26, 1964, H.R. 8363, P.L. 88-272, § 231 (b) (2), 78 Stat. 105: Amended Sec. 301(b) (as amended by P.L. 87-834, § 13(f) (2)) by striking out in paragraph (1)(B) (ii) — "under section 1245(a)" and inserting in lieu thereof "under section 1245(a) or 1250(a)”. Applicability: Dispositions after December 31, 1963, in taxable years ending after such date. (Id., § 231(c), 78 Stat. 105.) Aug. 22, 1964, H.R. 7301, P.L. 88-484, § 1(b) (1), 78 Stat. 597: Amended Sec. 301(b)(1)(B) (ii) (as amended by P.L. 87-834, § 13(f) (2) and by P.L. 88-272, § 231(b)(2)) by striking out "section 311" and inserting in lieu thereof "section 311, under section 341(f),”. 82 Subsection (b)(1) of section 301 originally read as follows (68A Stat. 84): "(b) AMOUNT DISTRIBUTED.— "(1) GENERAL RULE.-For purposes of this section, the amount of any distribution shall be "(A) NONCORPORATE DISTRIBUTEES.-If the shareholder is not a corporation, the amount of money received, plus the fair market value of the other property received. "(B) CORPORATE DISTRIBUTEES.-If the shareholder is a corporation, the amount of money received, plus whichever of the following is the lesser: "(i) the fair market value of the other property received; or "(ii) the adjusted basis (in the hands of the distributing corporation immediately before the distribution) of the other property received, increased in the amount of gain to the distributing corporation which is recognized under subsection (b) or (c) of section 311." SEC. 301-Continued (b)(1) (B) (amended Aug. 1964)—Continued Applicability: Transactions after the date of enactment (August 22, 1964) in taxable years ending after such date. (Id., § 2, 78 Stat. 597.) (b) (1) (C) _ _ _ Oct. 16, 1962, H.R. 10650, P.L. 87–834, § 5(a), 76 Stat. 977: (added) Amended Sec. 301(b) (1) by adding after subparagraph (B) the following new subparagraph (C): "(C) CERTAIN CORPORATE DISTRIBUTEES OF FOREIGN CORPORATION. Notwithstanding subparagraph (B), if the shareholder is a corporation and the distributing corporation is a foreign corporation, the amount taken into account with respect to property (other than money) shall be the fair market value of such property; except that if any deduction is allowable under section 245 with respect to such distribution, then the amount taken into account shall be the sum (determined under regulations prescribed by the Secretary or his delegate) of— "(i) the proportion of the adjusted basis of such property (or, if lower, its fair market value) properly attributable to gross income from sources within the United States, and "(ii) the proportion of the fair market value of such property properly attributable to gross income from sources without the United States." Oct. 16, 1962, H.R. 10650, P.L. 87-834, § 13(f) (2), 76 Stat. 1035: and inserting in lieu thereof "subsection (b) or (c) of section 311 or under section 1245 (a)". Applicability: Taxable years beginning after December 31, 1962. (Id., § 13(g), 76 Stat. 1035.) Feb. 26, 1964, H.R. 8363, P.L. 88-272, § 231(b) (2), 78 Stat. 105: Amended Sec. 301 (d) (as amended by P.L. 87-834, § 13(f) (2)) by striking out in paragraph (2) (B)— "under section 1245(a)" and inserting in lieu thereof "under section 1245(a) or 1250(a)". Applicability: Dispositions after December 31, 1963, in taxable years ending after such date. (Id., § 231(c), 78 Stat. 105.) *Subsection (d) of section 301 originally read as follows (68A Stat. 85): "(d) BASIS.-The basis of property received in a distribution to which subsection (a) applies shall be "(1) NONCORPORATE DISTRIBUTEES.-If the shareholder is not a corporation, the fair market value of such property. "(2) CORPORATE DISTRIBUTEES.-If the shareholder is a corporation, whichever of the following is the lesser: "(A) the fair market value of such property; or "(B) the adjusted basis (in the hands of the distributing corporation immediately before the distribution) of such property, increased in the amount of gain to the distributing corporation which is recognized under subsection (b) or (c) of section 311." SEC. 301-Continued (d) (2) (B)-Continued Do.... (in part) (d) (3) (1) (redesignated, added) Aug. 22, 1964, H.R. 7301, P.L. 88-484, § 1(b)(1), 78 Stat. 597: Amended Sec. 301(d) (2) (B) (as amended by P.L. 87-834, § 13(f) (2) and by P.L. 88-272, § 231(b) (2)) by striking out "section 311" and inserting in lieu thereof "section 311, under section 341(f),”. Applicability: Transactions after the date of enactment (August 22, 1964) in taxable years ending after such date. (Id., § 2, 78 Stat. 597.) Oct. 16, 1962, H.R. 10650, P.L. 87-834, § 5(b), 76 Stat. 977: Amended Sec. 301(d) (basis) by adding after paragraph (2) (corporate distributees) the following new paragraph: "(3) CERTAIN CORPORATE DISTRIBUTEES OF FOREIGN CORPORATION. In the case of property described in subparagraph (C) of subsection (b) (1), the basis shall be determined by substituting the amount determined under such subparagraph (C) for the amount described in paragraph (2) of this subsection." Applicability: Distributions made after December 31, 1962. (Id., § 5(d), 76 Stat. 977.) Feb. 2, 1962, H.R. 8847, P.L. 87-403, § 2(a), 76 Stat. 5: Amended Sec. 301 (distribution of property) by redesignating subsection (f) (special rules) as subsection (g) and by inserting after subsection (e) (exception for certain distributions by personal service corporations) a new subsection (f), as follows: "(f) SPECIAL RULES FOR DISTRIBUTIONS OF ANTITRUST STOCK TO CORPORATIONS. "(1) DEFINITION OF ANTITRUST STOCK.-For purposes of this subsection, the term 'antitrust stock' means stock received, by a corporation which is a party to a suit described in section 1111(d) (relating to definition of antitrust order), in a distribution made after September 6, 1961, either pursuant to the terms of, or in anticipation of, an antitrust order (as defined in subsection (d) of section 1111). "(2) AMOUNT DISTRIBUTED.Notwithstanding subsection (b)(1) (but subject to subsection (b)(2)), for purposes of this section the amount of a distribution of antitrust stock received by a corporation shall be the fair market value of such stock. "(3) BASIS.-Notwithstanding subsection (d), the basis of antitrust stock received by a corporation in a distribution to which subsection (a) applies shall be the fair market value of such stock decreased by so much of the deduction for dividends received under the provisions of section 243, 244, or 245 as is, under regulations prescribed by the Secretary or his delegate, attributable to the excess, if any, of "(A) the fair market value of the stock, over "(B) the adjusted basis (in the hands of the distributing corporation immediately before the distribution) of the stock, increased by the amount of gain which is recognized to the distributing corporation by reason of the distribution." Applicability: "Only distributions made after February 2, 1962-the date of enact ment. (Id., § 2(b), 76 Stat. 6.) SEC. 301-Continued (g).. (redesignated) Feb. 2, 1962, H.R. 8847, P.L. 87-403, § 2(a), 76 Stat. 5: 84 Redesignated subsection (f) of section 301 as subsection (g). February 3, 1962-the day after the date of enactment. SEC. 304. REDEMPTION THROUGH USE OF RELATED COR- (b)(1). (in part) Aug. 31, 1964, H.R. 10467, P.L. 88-554, § 4(b) (1), 78 Stat. 763: Amended Sec. 304 (b)(1) (relating to rule for determinations under section 302(b)) 85 by striking out "section 318(a)(2)(C)” and inserting in lieu thereof "sections 318(a) (2) (C) and 318(a)(3)(C)". The original subsection (f) of section 301, the text of which has not been amended, reads as follows (68A Stat. 85): "(f) SPECIAL RULES. "(1) For distributions in redemption of stock, see section 302. "(2) For distributions in partial or complete liquidation, see part II (sec. 331 and following). "(3) For distributions in corporate organizations and reorganizations, see part III (sec. 351 and following). "(4) For partial exclusion from gross income of dividends received by individuals, see section 116." 85 Section 304 originally read as follows (68A Stat. 89–90): "SEC. 304. REDEMPTION THROUGH USE OF RELATED CORPORATIONS. "(a) TREATMENT OF CERTAIN STOCK PURCHASES. "(1) ACQUISITION BY RELATED CORPORATION (OTHER THAN SUBSIDIARY). For purposes of sections 302 and 303, if "(A) one or more persons are in control of each of two corporations, and "(B) in return for property, one of the corporations acquires stock in the other corporation from the person (or persons) so in control, then (unless paragraph (2) applies) such property shall be treated as a distribution in redemption of the stock of the corporation acquiring such stock. In any such case, the stock so acquired shall be treated as having been transferred by the person from whom acquired, and as having been received by the corporation acquiring it, as a contribution to the capital of such corporation. "(2) ACQUISITION BY SUBSIDIARY.—For purposes of sections 302 and 303, if— "(A) in return for property, one corporation acquires from a shareholder of another corporation stock in such other corporation, and "(B) the issuing corporation controls the acquiring corporation, then such property shall be treated as a distribution in redemption of the stock of the issuing corporation. "(b) SPECIAL Rules for AppLICATION OF SUBSECTION (a).— "(1) RULE FOR DETERMINATIONS UNDER SECTION 302 (b).-In the case of any acquisition of stock to which subsection (a) of this section applies, determinations as to whether the acquisition is, by reason of section 302 (b), to be treated as a distribution in part or full payment in exchange for the stock shall be made by reference to the stock of the issuing corporation. In applying section 318 (a) (relating to constructive ownership of stock) with respect to section 302 (b) for purposes of this paragraph, section 318 (a) (2) (C) shall be applied without regard to the 50 percent limitation contained therein. "(2) AMOUNT CONSTITUTING DIVIDEND.— "(A) WHERE SUBSECTION (a) (1) APPLIES.-In the case of any acquisition of stock to which paragraph (1) (and not paragraph (2)) of subsection (a) of this section applies, the determination of the amount which is a dividend shall be made solely by reference to the earnings and profits of the acquiring corporation. "(B) WHERE SUBSECTION (a) (2) APPLIES.-In the case of any acquisition of stock to which subsection (a) (2) of this section applies, the determination of the amount which is a dividend shall be made as if the property were distributed by the acquiring corporation to the issuing corporation and immediately thereafter distributed by the issuing corporation. "(c) CONTROL.— (1) IN GENERAL.-For purposes of this section, control means the ownership of stock possessing at least 50 percent of the total combined voting power of all classes of stock entitled to vote, or at least 50 percent of the total value of shares of all classes of stock. If a person (or persons) is in control (within the meaning of the preceding sentence) of a corporation which in turn owns at least 50 percent of the total combined voting power of all stock entitled to vote of another corporation, or owns at least 50 percent of the total value of the shares of all classes of stock of another corporation, then such person (or persons) shall be treated as in control of such other corporation. (2) CONSTRUCTIVE OWNERSHIP.-Section 318 (a) (relating to the constructive ownership of stock) shall apply for purposes of determining control under paragraph (1). For purposes of the preceding sentence, section 318 (a) (2) (C) shall be applied without regard to the 50 percent limitation contained therein." SEC. 304-Continued (b)(1) (amended 1964)-Continued Effective Date: (c) (2). (in part) The date of enactment (August 31, 1964) "except that, for purposes of sections 302 and 304 of the Internal Revenue Code of 1954, such amendments [the amendments made by section 4 of P.L. 88-554] 86 shall not apply with respect to distributions in payment for stock acquisitions or redemptions, if such acquisitions or redemptions occurred before the date of the enactment of this Act [August 31, 1964]." (Id., § 4(c), 78 Stat. 764.) August 31, 1964, H.R. 10467, P.L. 88–554, § 4(b) (1), 78 Stat. 763: Amended Sec. 304 (c) (2) (relating to constructive ownership) by striking out "section 318(a) (2) (C)" and inserting in lieu thereof "sections 318(a)(2)(C) and 318(a)(3)(C)”. Effective Date: August 31, 1964-the date of enactment. For exceptions, see "Effective Date" for amendment to Sec. 304(b)(1) above. CH. 1, SUBCH. C, PART I, SUBPART B-EFFECTS ON CORPORATION (68A Stat. 94-98): NOTE: SEC. 312. (c) (3) _ (in part) The table of sections for Subpart B of Part I of Subchapter C of "SEC. 311. Taxability of corporation on distribution. EFFECT ON EARNINGS AND PROFITS (68A Stat. 95): "subsection (b) or (c) of section 311" and inserting in lieu thereof— "subsection (b) or (c) of section 311 or under section 1245(a)". Applicability: Taxable years beginning after December 31, 1962. (Id., § 13(g), 76 Stat. 1035.) 86 The amendments made by section 4 of P.L. 88-554 were as follows: Subsection (a) amended Code section 318(a). Subsection (b) (1) amended Code section 304 (b) (1) and (c)(2). Subsection (b) (2) amended Code section 318(b) by adding a new paragraph (7). Subsection (b) (4) amended Code section 856(d). Subsection (b) (5) amended Code section 958(b) in several respects. Subsection (b) (6) amended Code section 6038(d)(1). All of these amendments are set forth herein in their proper context. 87 Subsection (c) of section 312 originally read as follows (68A Stat. 96): "(c) ADJUSTMENTS FOR LIABILITIES, ETC.-In making the adjustments to the earnings and profits of a corporation under subsection (a) or (b), proper adjustment shall be made for"(1) the amount of any liability to which the property distributed is subject, "(2) the amount of any liability of the corporation assumed by a shareholder in connection with the distribution, and "(3) any gain to the corporation recognized under subsection (b) or (c) of section 311." |