95 STAT. 288
PUBLIC LAW 97-34—AUG. 13, 1981 "(i) which has been designated by the board of directors of the corporation as issued for purposes of this subsection, but "(ii) only if the number of shares to be issued to a shareholder was determined by reference to a value which is not less than 95 percent and not more than 105 percent of the stock's fair market value during the period immediately before the distribution (determined under regulations prescribed by the Secretary). "(B) CERTAIN PURCHASES BY CORPORATION OF ITS OWN
STOCK.—Except as provided in subparagraph (D), if a corporation has purchased or purchases its common stock within a 2-year period beginning 1 year before the date of the distributipn and ending 1 year after such date, such distribution shall be treated as not being a qualified reinvested dividend. "(C) MEMBERS OP AFFIUATED GROUP.—For purposes of subparagraph (B), the purchase by any corporation which is a member of the same affiliated group (as defined in paragraph (3)(C)(i)) as the distributing corporation of common stock in any corporation which is a member of such group from any person (other than a member of such group) shall be treated as a purchase by the distributing corporation of its common stock. "(D) WAIVER OF SUBPARAGRAPH (B) WHERE THERE IS BUSINESS PURPOSE.—Under regulations prescribed by the
Secretary, subparagraph (B) shall not apply where the distributing corporation establishes that there was a business purpose for the purchase of the stock and such purchase is not inconsistent with the purposes of this subsection. "(5) SHARE INCLUDES FRACTIONAL SHARE.—For purposes of this subsection, the term 'share' includes a fractional share. "(6) LIMITATION.—
26 USC 307.
"(A) IN GENERAL.—In the case of any individual, the aggregate amount of distributions to which this subsection applies for the taxable year shall not exceed $750 ($1,500 in the case of a joint return). "(B) APPLICATION OF CEILING.—If, but for this subparagraph, a share of stock would, by reason of subparagraph (A), be treated as partly within this subsection and partly outside this subsection, such share shall be treated as outeide this subsection. "(7) BASIS AND HOLDING PERIOD.—In the case of stock received as a qualified reinvested dividend— "(A) notwithstanding section 307, the basis shall be zero, and "(B) the holding period shall begin on the date the dividend would (but for this subsection) be includible in income. "(8) ELECTION.—An election under this subsection with respect to any share shall be made on the shareholder's return for the taxable year in which the dividend would (but for this subsection) be includible in income. Any such election, once made, shall be revocable only with the consent of the Secretary. "(9) DISPOSITIONS WITHIN i YEAR OF DISTRIBUTION.—Under
regulations prescribed by the Secretary— "(A) DISPOSITION OF OTHER COMMON STOCK.—If—
"(i) a shareholder receives any qualified reinvested dividend from a corporation, and
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