PUBLIC LAWS-CH. 757-OCT. 8, 1940 Ante, p. g82. Highest bracket amount of transferor. Taxable year of ex- change. Taxable years after exchange involving control. Not involving con- trol. Taxable years after certain exchanges, etc. 53 Stat. 37. 26 U. 8. C., Supp. V, ! 112 (b) (5). 63 Stat. 39. 26U. .0.Supp. V, § 112 (c), (e). the exchange shall be the daily invested capital determined under section 717 reduced by an amount equal to the amount by which the equity invested capital of the transferee upon such exchange was increased by reason of the receipt of property from such transferor upon such exchange. "(b) HIGHEST BRACKET AMOUNT OF TRANSFEROR.- "(1) TAXABLE YEAR OF EXCHANGE.- In the case of a transferor upon an exchange after the beginning of its first taxable year under this subchapter, its highest bracket amount for the taxable year in which the exchange takes place shall be the sum of- "(A) Its highest bracket amount immediately preceding the exchange multiplied by the number of days in the tax- able year up to and including the day of the exchange, plus "(B) Its highest bracket amount for the taxable year after the exchange, multiplied by the number of days in the taxable year remaining after the day of the exchange, divided by the number of days in the taxable year. "(2) TAXABLE YEARS AFTER EXCHANGE INVOLVING CONTROL.--In the case of a transferor upon an exchange after the beginning of its first taxable year under this subchapter, if immediately after the exchange the transferor or its shareholders, or both, are in control of the transferee, the transferor's highest bracket amount for any taxable year after the taxable year in which the exchange takes place shall be an amount which is a percentage of its highest bracket amount immediately preceding the exchange equal to the percentage which its daily invested capital for the day after the exchange is of its daily invested capital for the day of the exchange. (3) TAXABLE YEARS AFTER EXCHANGE NOT INVOLVING CONTROL.- In the case of a transferor upon an exchange (other than a trans- feror described in paragraph (4) of this subsection) after the beginning of its first taxable year under this subchapter, if imme- diately after the exchange no transferor or its shareholders, or both, upon the exchange are in control of the transferee, and if the shareholders of the transferee immediately preceding the exchange are not in control of the transferee immediately after the exchange, the transferor's highest bracket amount for any taxable year after the exchange shall be the excess, if any, of the sum of the transferor's highest bracket amount immediately pre- ceding the exchange and the transferee's highest bracket amount immediately preceding the exchange, over $500,000. "(4) TAXABLE YEARS AFTER CERTAIN EXCHANGES UNDER SECTION 112 (b) (5).- In the case of an exchange after the beginning of the first taxable year under this subchapter of any transferor or transferee upon such exchange, involving two or more transferors or one or more transferors and one or more other persons, if immediately after the exchange no one of such transferors, or its shareholders, or both, and no one or more of such other persons are in control of the transferee and if such exchange is an exchange described in section 112 (b) (5) or so much of section 112 (c) or 112 (e) as refers to section 112 (b) (5), the highest bracket amount of any such transferor for any taxable year after the exchange shall be an amount equal to its highest bracket amount immediately preceding the exchange- "(A) Minus an amount which bears the same ratio to its highest bracket amount immediately preceding the exchange as the excess of its daily invested capital for the day of the exchange over its daily invested capital for the day after the exchange bears to its daily invested capital for the day of the exchange, and 996 [54 STAT.
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