PUBLIC LAW 97-34—AUG. 13, 1981
95 STAT. 353
held by the partner or beneficiary. Any asset treated as held by a partner or beneficiary by reason of this subparagraph shall be so treated for purposes of applying this subparagraph successively to partnerships, trusts, or estates which are above the first partnership, trust, or estate in a chain thereof." (c) NoNRECOGNiTiON RuLES OVERRIDDEN IN CERTAIN CASES.—Subparagraph (B) of section 897(d)(1) is amended to read as follows: 26 USC 897. "(B) EXCEPTIONS.—Gain shall not be recognized under subparagraph (A)— "(pif"(I) at the time of the receipt of the distributed property, the distributee would be subject to taxation under this chapter on a subsequent disposition of the distributed property, and "(II) the basis of the distributed property in the hands of the distributee is no greater than the adjusted basis of such property before the distribution, increased by the amount of gain (if any) recognized by the distributing corporation, or "(ii) if such nonrecognition is provided in regulations prescribed by the Secretary under subsection (e)(2)." (d) FOREIGN CORPORATION PERMITTED TO ELECT TO B E TREATED AS A DOMESTICORPORATION.—Subsection (i) of section 897 is amended
to read as follows: "(i) ELECTION BY FOREIGN CORPORATION TO B E TREATED AS DOMESTICORPORATION.— "(1) IN GENERAL.—If—
"(A) a foreign corporation holds a United States real property interest, and "(B) under any treaty obligation of the United States the foreign corporation is entitled to nondiscriminatory treatment with respect to that interest, then such foreign corporation may make an election to be treated as a domestic corporation for purposes of this section and section 6039C. "(2) REVOCATION ONLY WITH CONSENT.—Any election under paragraph (1), once made, may be revoked only with the consent of the Secretary. "(3) MAKING OF ELECTION.—An election under paragraph (1) may be made only— "(A) if all of the owners of all classes of interests (other than interests solely as a creditor) in the foreign corporation at the time of the election consent to the making of the election and agree that gain, if any, from the disposition of such interest after June 18, 1980, which would be taken into account under subsection (a) shall be taxable notwithstanding any provision to the contrary in a treaty to which the United States is a party, and "(B) subject to such other conditions as the Secretary may prescribe by regulations with respect to the corporation or its shareholders. In the case of a class of interest (other than an interest solely as a creditor) which is regularly traded on an established securities market, the consent described in subparagraph (A) need only be made by any person if such person held more than 5 percent of such class of interest at some time during the shorter of the periods described in subsection (c)(l)(A)(ii). The constructive
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