PUBLIC LAWS-CH. 289-MAY 28, 1938 Noncorporate share- holders. Corporate share- holders. Exchanges and dis- tributions in obedi- ence to orders of Se- curities and Exchange Commission. Post, p. 653 . Gain from exchanges not solely in kind. Recognition of. Ante, p. 485 . Distribution on re- organization having effect of taxable divi- dend. Gain of corporation. Ante, p. 485. (E) NONCORPORATE SHAREHOLDERS.-In the case of a quali- fied electing shareholder other than a corporation- (i) There shall be recognized, and taxed as a divi- dend, so much of the gain as is not in excess of his ratable share of the earnings and profits of the corpo- ration accumulated after February 28, 1913, such earn- ings and profits to be determined as of December 31, 1938, but without diminution by reason of distributions made during the month of December, 1938; and (ii) There shall be recognized, and taxed as short- term or long-term capital gain, as the case may be, so much of the remainder of the gain as is not in excess of the amount by which the value of that portion of the assets received by him which consists of money, or of stock or securities acquired by the corporation after April 9, 1938, exceeds his ratable share of such earn- ings and profits. (F) CORPORATE SHAREHOLDERS.- In the case of a qualified electing shareholder which is a corporation the gain shall be recognized only to the extent of the greater of the two following- (i) The portion of the assets received by it which consists of money, or of stock or securities acquired by the liquidating corporation after April 9, 1938; or (ii) Its ratable share of the earnings and profits of the liquidating corporation accumulated after February 28, 1913, such earnings and profits to be determined as of December 31, 1938, but without diminution by rea- son of distributions made during the month of December, 1938. (8) EXCHANGES AND DISTRIBUTIONS IN OBEDIENCE TO ORDERS OF SECURITIES AND EXCHANGE COMMISSION.- In the case of any exchange or distribution described in section 371, no gain or loss shall be recognized to the extent specified in such section with respect to such exchange or distribution. (c) GAIN FROM EXCHANGES NOT SOLELY IN KIND.- (1) If an exchange would be within the provisions of subsec- tion (b) (1), (2), (3), or (5) of this section if it were not for the fact that the property received in exchange consists not only of property permitted by such paragraph to be received without the recognition of gain, but also of other property or money, then the gain, if any, to the recipient shall be recognized, but in an amount not in excess of the sum of such money and the fair market value of such other property. (2) If a distribution made in pursuance of a plan of reorgani- zation is within the provisions of paragraph (1) of this subsec- tion but has the effect of the distribution of a taxable dividend, then there shall be taxed as a dividend to each distributee such an amount of the gain recognized under paragraph (1) as is not in excess of his ratable share of the undistributed earnings and profits of the corporation accumulated after February 28, 1913. The remainder, if any, of the gain recognized under paragraph (1) shall be taxed as a gain from the exchange of property. (d) SAME-GAIN OF CORPORATION. -If an exchange would be within the provisions of subsection (b) (4) of this section if it were not for the fact that the property received in exchange consists not only of stock or securities permitted by such paragraph to be received without the recognition of gain, but also of other property or money, then- 488 [52 STAT.
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