36) To coordinate the two subsections, the bill contained a provision that section 355(e) would not apply to any distribution to which section 355(d) applied.
Subsection (f) provided that section 355, in its entirety, would not apply to the distribution of stock from one member of an affiliated group filing a consolidated return to another member of such group.
The bill would apply to distributions made after April 16, 1997, unless certain transition rules applied.
Rather than apply the entity attribution rules of section 318(a)(2) without regard to the 50-percent threshold in section 318(a)(2)(C), as in the Archer/Rath/Moynihan bill, the House bill applied section 355(d)(8)(A), which incorporates section 318(a)(2), but attributes stock owned by a corporation to its shareholder only if the shareholder owns 10 percent of the corporation.
However, rather than apply the 10-percent threshold of section 355(d)(8)(A) for purposes of attributing stock ownership from a corporation, as in the House and Senate bills, the 1997 Act provides that the corporate entity attribution rules of section 318(a)(2)(C) apply without regard to the 50-percent threshold.
tax-free treatment should not apply where the divisive
Section 355(e) will only apply to a distribution that is part of a "plan" pursuant to which a person or persons acquire a 50-percent or greater interest in the distributing or any controlled corporation.
In order for section 355(e) to apply, there must be a plan "or series of related transactions.
Furthermore, although the presumption does not apply beyond two years before or after the distribution, acquisitions beyond the four-year period still may be part of a plan, and thus may fall within section 355(e).
In order for section 355(e) to apply, one or more persons must "acquire," directly or indirectly, stock representing a 50-percent or greater interest in the distributing or any controlled corporation.
Clearly, Congress intended that section 355(e) not apply to such a situation.
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