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PUBLIC LAW 88-563-SEPT. 2, 1964
[78 STAT.
-SEC. 4913. LIMITATION ON TAX ON CERTAIN ACQUISITIONS. "(a) CERTAIN SURRENDERS, EXTENSIONS, RENEWALS, AND EXERCISES.— "(1) GENERAL, RULE.—If stock or a debt obligation of a foreign
issuer or obligor is acquired by a United States person as the result of— " (A) the surrender to the foreign obligor, for cancellation, of a debt obligation of such obligor; " (B) the extension or renewal of an existing debt obligation requiring affirmative action of the obligee; or " (C) the exercise of an option or similar right to acquire such stock or debt obligation (or of a right to convert a debt obligation into stock), then the tax imposed on such acquisition shall not exceed the amount determined under paragraph (2) or (3). "(2) GENERAL LIMITATION.—Except in cases to which paragraph (3) applies, the tax imposed upon an acquisition described in paragraph (1) shall be limited to— " (A) the amount of tax imposed by section 4911, less " (B) the amount of tax which would have been imposed under section 4911 if the debt obligation which was surrendered, extended, or renewed, or the option or right which was exercised, had been acquired in a transaction subject to such tax immediately before such surrender, extension, renewal, o r exercise. For purposes of this paragraph, a defaulted debt obligation of the government of a foreign country or a political subdivision thereof (or an agency or instrumentality of such a government) which has been in default as to principal for at least 10 years and which is surrendered in exchange for another debt obligation of that government (or agency or instrumentality) shall be deemed to have an actual value and period remaining to maturity equal to that of the debt obligation acquired. "(3)
SPECIAL LIMITATIONS.— "(A)
Post, p. 835.
CONVERSIONS OF DEBT OBLIGATIONS INTO STOCK.—The
tax imposed upon an acquisition of stock pursuant to the exercise of a right to convert a debt obligation (as defined in section 4920(a)(1)) into stock shall be limited to— " (i) the amount of tax which would have been imposed by section 4911 if the debt obligation had been treated as stock at the time of its acquisition by the person exercising the right (or by a decedent from whom such person acquired the right by bequest or inheritance or by reason of such decedent's death), less "(ii) the amount of tax paid by the person exercising the right (or by such decedent) as a result of the acquisition of the convertible debt obligation or, if such acquisition was not subject to the tax imposed by section 4911 the amount of tax which would have been imposed as a result of such acquisition if such acquisition had been subject to such tax. "(B)
EXERCISE OF CERTAIN SHAREHOLDERS' RIGHTS.—The
tax imposed upon an acquisition of stock or a debt obligation of a foreign corporation by a United States person, where— " (i) the stock or debt obligation is acquired pursuant to the exercise of an option or similar right to acquire such stock or debt obligation which was acquired by a
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