122
PUBLIC LAW 88-272-FEB. 26, 1964 " (2)
i63^^6^stat ^809 26 USC 401,50 i.
[78
STOCK TREATED AS 'EXCLUDED STOCK'.— " (A) PARENT-SUBSIDIARY CONTROLIJOD (JKOUJ».—For
STAT.
purposes of subsection (a)(1), if a corporation (referred to in this paragraph as 'parent corporation') owns (within the meaning of subsections (d)(1) and (e)(4)), 50 percent or more of the total combined voting i)Ower of all classes of stock entitled to vote or 50 percent or more of the total vahie of shares of all classes of stock in another corporation (referred to in this paragraph as 'subsidiary corporation'), the following stock of the subsidiary corporation shall be treated as excluded stock— " (i) stock in the subsidiary corporation liehl by a trust which is part of a plan of deferred compensation for the benefit of the employees of the parent corporation or the subsidiary corporation, "(ii) stock in the subsidiary corporation owned by an individual (within the meaning of subsection (d)(2)) who is a principal stockholder or officer of the parent corporation. For purposes of this clause, the term 'principal stockholder' of a corporation means an individual who owns (within the meaning of subsection (d)(2)) 5 percent or more of the total combined voting power of all classes of stock entitled to vote or 5 percent or more of the total value of shares of all classes of stock in such corporation, or "(iii) stock in the subsidiary corporation owned (within the meaning of subsection (d)(2)) by an employee of the subsidiary corporation if such stock is subject to conditions which run in favor of such parent (or subsidiary) corporation and which substantialh' restrict or limit the employee's right (or if the employee constructively owns such stock, the direct owners right) tx) dispose of such stock. •'(B) BROTHER-SISTER coNiTiOLLKi) (}Rour.—For purposes of subsection (a)(2), if a person who is an individual, estate, or trust (referred to in this paragraph as 'common owner') owns (within the meaning of subsection (d)(2)), 50 percent or more of the total combined voting power of all classes of stxx?k entitled to vote or 50 percent or moiv of the total value of shares of all classes of sto<'k in a corporation, the following stock of such corporation shall be treated as excluded stock— " (i) stock in such corporation held by an employees' ti'ust described in section 401(a) which is exempt from tax under section 501(a), if such trust is for the benefit of the employees of such corporation, or "(ii) stock in such corporation owned (within the meaning of subsection (d)(2)) by an employee of the corporation if such stock is subject to conditions which run in favor of such common owner (or siu^h corporation) and which substaiitiallj'^ restrict or limit the employee's right (or if the employee constructively owns such stock, the direct owner's right) to dispose of such stock. If a condition which limits or restricts the employee's right (or the direct owner's right) to dispose of such stock also applies to the stock held by the common owner pursuant to a bona fide reciprocal stock purchase arrangement^ such condition shall not be treated as one which restricts or limits the employee's right to dispose of such stock.
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