113 STAT. 1940 PUBLIC LAW 106-170—DEC. 17, 1999 "(B) the corporate partner's adjusted basis in the stock of the distributed corporation shall be increased by such excess. "(5) CONTROL.— For purposes of this subsection, the term 'control' means ownership of stock meeting the requirements of section 1504(a)(2). "(6) INDIRECT DISTRIBUTIONS.—For purposes of paragraph (1), if a corporation acquires (other than in a distribution from a partnership) stock the basis of which is determined (by reason of being distributed from a partnership) in whole or in part by reference to subsection (a)(2) or (b), the corporation shall be treated as receiving a distribution of such stock from a partnership. " (7) SPECIAL RULE FOR STOCK IN CONTROLLED CORPORA- TION. —I f the property held by a distributed corporation is stock in a corporation which the distributed corporation controls, this subsection shall be applied to reduce the basis of the property of such controlled corporation. This subsection shall be reapplied to any property of any controlled corporation which is stock in a corporation which it controls. " (8) REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subsection, including regulations to avoid double counting and to prevent the abuse of such purposes.". 26 USC 732 note. (b) EFFECTIVE DATES.— (1) IN GENERAL.— Except as provided in paragraph (2), the amendment made by this section shall apply to distributions made after July 14, 1999. (2) PARTNERSHIPS IN EXISTENCE ON JULY 14, 1999. —In the case of a corporation which is a partner in a partnership as of July 14, 1999, the amendment made by this section shall apply to any distribution made (or treated as made) to such partner from such partnership after June 30, 2001, except that this paragraph shall not apply to any distribution after the date of the enactment of this Act unless the partner makes an election to have this paragraph apply to such distribution on the partner's return of Federal income tax for the taxable year in which such distribution occurs. PART II—PROVISIONS RELATING TO REAL ESTATE INVESTMENT TRUSTS Subpart A—Treatment of Income and Services Provided by Taxable REIT Subsidiaries SEC. 541. MODIFICATIONS TO ASSET DIVERSIFICATION TEST. (a) IN GENERAL. —Subparagraph (B) of section 856(c)(4) of the 26 USC 856. Internal Revenue Code of 1986 is amended to read as follows: "(B)(i) not more than 25 percent of the value of its total assets is represented by securities (other than those includible under subparagraph (A)), "(ii) not more than 20 percent of the value of its total assets is represented by securities of one or more taxable REIT subsidiaries, and "(iii) except with respect to a taxable REIT subsidiary and securities includible under subparagraph (A)—
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