PUBLIC LAW 103-66 —AUG. 10, 1993 107 STAT. 427 in such entity which was held by the taxpayer on the date on which such pass-thru entity acquired such stock and at all times thereafter before the disposition of such stock by such pass-thru entity. "(3) LIMITATION BASED ON INTEREST ORIGINALLY HELD BY TAXPAYER.—Paragraph (1) shall not apply to any amount to the extent such amount exceeds the amount to which paragraph (1) would have applied if such amount were determined by reference to the interest the taxpayer held in the pass-thru entity on the date the qualified small business stock was acquired. "(4) PASS-THRU ENTITY.— For purposes of this subsection, the term 'pass-thru entity means— "(A) any partnership, "(B) any S corporation, "(C) any regulated investment company, and "(D) any common trust fund. "(h) CERTAIN TAX-FREE AND OTHER TRANSFERS. — For purposes of this section— "(1) IN GENERAL.—In the case of a transfer described in paragraph (2), the transferee shall be treated as— "(A) having acquired such stock in the same manner as the transferor, and "(B) having held such stock during any continuous period immediately preceding the transfer during which it was held (or treated as held under this subsection) by the transferor. "(2) DESCRIPTION OF TRANSFERS. —A transfer is described in this subsection if such transfer is— "(A) by gift, "(B) at death, or "(C) from a partnership to a partner of stock with respect to which requirements similar to the requirements of subsection (g) are met at the time of the transfer (without regard to the 5-year holding period requirement). "(3) CERTAIN RULES MADE APPLICABLE. —Rules similar to the rules of section 1244(d)(2) shall apply for purposes of this section. "(4) INCORPORATIONS AND REORGANIZATIONS INVOLVING NONQUALIFIED STOCK.— "(A) IN GENERAL.—In the case of a transaction described in section 351 or a reorganization described in section 368, if qualified small business stock is exchanged for other stock which would not qualify as qualified small business stock but for this subparagraph, such other stock shall be treated as qualified small business stock acquired on the date on which the exchanged stock was acquired. "(B) LIMITATION.—This section shall apply to gain from the sale or exchange of stock treated as qualified small business stock by reason of subparagraph (A) only to the extent of the gain which would have been recognized at the time of the transfer described in subparagraph (A) if section 351 or 368 had not applied at such time. The preceding sentence shall not apply if the stock which is treated as qualified small biisiness stock by reason of subparagraph (A) is issued by a corporation which (as
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