Page:United States Statutes at Large Volume 94 Part 3.djvu/750

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PUBLIC LAW 96-000—MMMM. DD, 1980

94 STAT. 3394

PUBLIC LAW 96-589—DEC. 24, 1980 "(B) TAXPAYERS ON RESERVE METHOD.—In the case of a taxpayer to whom subsection (c) of section 166 (relating to reserve for bad debts) applies, the amount determined under clause (ii) of subparagraph (A) shall be the aggregate charges to the reserve resulting from the worthlessness or partial worthlessness of the indebtedness. "(C) SPECIAL RULE FOR CASH BASIS TAXPAYERS.—In the case of any creditor who computes his taxable income under the cash receipts and disbursements method, proper adjustment shall be made in the amount taken into account under clause (ii) of subparagraph (A) for any amount which was not included in the creditor's gross income but which would have been included in such gross income if such indebtedness had been satisfied in full. "(D) STOCK OF PARENT CORPORATION.—For purposes of this u paragraph, stock of a corporation in control (within the ^ •' meaning of section 368(c)) of the debtor corporation shall be .:> treated as stock of the debtor corporation. "(E)

"Debtor corporation.

TREATMENT OF SUCCESSOR CORPORATION.—For

pur-

poses of this paragraph, the term 'debtor corporation' includes a successor corporation. "(F) PARTNERSHIP RULE.—Under regulations prescribed by the Secretary, rules similar to the rules of subparagraphs (A), (B), (C), (D), and (E) of this paragraph shall apply with respect to the indebtedness of a partnership. "(8) STOCK FOR DEBT EXCEPTION NOT TO APPLY IN DE MINIMIS

CASES.—For purposes of determining income of the debtor from discharge of indebtedness, the stock for debt exception shall not apply— "(A) to the issuance of nominal or token shares, or "(B) with respect to an unsecured creditor, where the ratio of the value of the stock received by such unsecured creditor to the amount of his indebtedness cancelled or exchanged for stock in the workout is less than 50 percent of a similar ratio computed for all unsecured creditors participating in the workout. "(9) DISCHARGE OF INDEBTEDNESS INCOME NOT TAKEN INTO ACCOUNT IN DETERMINING WHETHER ENTITY MEETS REIT QUALIFICA-

TIONS.—Any amount included in gross income by reason of the discharge of indebtedness shall not be taken into account for purposes of paragraphs (2) and (3) of section 856(c)." (b) AMENDMENT OF SECTION 1017.—Section 1017 (relating to discharge of indebtedness) is amended to read as follows: 26 USC 1017.

"SEC. 1017. DISCHARGE OF INDEBTEDNESS. "(a) GENERAL RULE.—If—

Ante, p. 3389.

"(1) an amount is excluded from gross income under subsection (a) of section 108 (relating to discharge of indebtedness), and "(2) Under subsection (b)(2)(D), (b)(5), or (c)(1)(A) of section 108, any portion of such amount is to be applied to reduce basis, then such portion shall be applied in reduction of the basis of any property held by the taxpayer at the beginning of the taxable year following the taxable year in which the discharge occurs. "(b) AMOUNT AND PROPERTIES DETERMINED UNDER REGULATIONS.—

"(1) IN GENERAL.—The amount of reduction to be applied under subsection (a) (not in excess of the portion referred to in subsection (a)), and the particular properties the bases of which are to