TEMPORARY REDUCTION IN RECOGNITION PERIOD FOR BUILT-IN GAINS TAX.

SEC. 1251. TEMPORARY REDUCTION IN RECOGNITION PERIOD FOR BUILT-IN GAINS TAX.(a) In General.—Paragraph (7) of section 1374(d) (relating to definitions and special rules) is amended to read as follows:“(7) Recognition period.—“(A) In general.—The term ‘recognition period’ means the 10-year period beginning with the 1st day of the 1st taxable year for which the corporation was an S corporation.“(B) Special rule for 2009 and 2010.—In the case of any taxable year beginning in 2009 or 2010, no tax shall be imposed on the net recognized built-in gain of an S corporation if the 7th taxable year in the recognition period preceded such taxable year. The preceding sentence shall be applied separately with respect to any asset to which paragraph (8) applies.“(C) Special rule for distributions to shareholders.—For purposes of applying this section to any amount includible in income by reason of distributions to shareholders pursuant to section 593(e)—“(i) subparagraph (A) shall be applied without regard to the phrase ‘10-year’, and“(ii) subparagraph (B) shall not apply.”.(b) Effective Date.—The amendment made by this section shall apply to taxable years beginning after December 31, 2008.