CERTAIN EARNINGS AND PROFITS ADJUSTMENTS NOT TO APPLY FOR CERTAIN PURPOSES.

SEC. 10222. CERTAIN EARNINGS AND PROFITS ADJUSTMENTS NOT TO APPLY FOR CERTAIN PURPOSES. (a) Special Rule for Determining Adjusted Basis of Stock of Members of Affiliated Group.— (1) In general.— Section 1503 (relating to computation and payment of tax by affiliated group) is amended by adding at the end thereof the following new subsection: “(e) Special Rule for Determining Adjustments to Basis.— “(1) In general.— Solely for purposes of determining gain or loss on the disposition of intragroup stock, in determining the adjustments to the basis of such intragroup stock on account of the earnings and profits of any member of an affiliated group for any consolidated year— “(A) such earnings and profits shall be determined as if section 312 were applied for such taxable year (and all preceding consolidated years of the member with respect to such group) without regard to subsections (k) and (n) thereof, and “(B) earnings and profits shall not include any amount excluded from gross income under section 108 to the extent the amount so excluded was not applied to reduce tax attributes (other than basis in property). “(2) Definitions.— For purposes of this subsection— “(A) Intragroup stock.— The term ‘intragroup stock’ means any stock which— “(i) is in a corporation which is or was a member of an affiliated group of corporations, and “(ii) is held by another member of such group. Such term includes any other property the basis of which is determined (in whole or in part) by reference to the basis of stock described in the preceding sentence. “(B) Consolidated year.— The term ‘consolidated year’ means any taxable year for which the affiliated group makes a consolidated return.” (2) Effective date.— (A) In general.— Except as provided in subparagraph (B), the amendment made by paragraph (1) shall apply to any intragroup stock disposed of after December 15, 1987. For purposes of determining the adjustments to the basis of such stock, such amendment shall be deemed to have been in effect113113 Copy read “been effect”. for all periods whether before, on, or after December 15, 1987. (B) Exception.— The amendment made by paragraph (1) shall not apply to any intragroup stock disposed of after December 15, 1987, and before January 1, 1989, if such disposition is pursuant to a written binding contract, governmental order, letter of intent or preliminary agreement, or stock acquisition agreement, in effect on or before December 15, 1987. (b) Distributions Received by 20-Percent Corporate Shareholders.— 101 STAT. 1330–411 (1) In general.— Paragraph (1) of section 301(0 (relating to special rule for certain distributions received by 20-percent corporate shareholders) is amended by striking out “subsection (n) thereof’ and inserting in lieu thereof “subsections (k) and (n) thereof”. (2) Effective dates.— (A) In general.— The amendment made by paragraph (1) shall apply to distributions after December 15, 1987. For purposes of applying such amendment to any such distribution— (i) for purposes of determining earnings and profits, such amendment shall be deemed to be in effect for all periods whether before, on, or after December 15, 1987, but (ii) such amendment shall not affect the determination of whether any distribution on or before December 15, 1987, is a dividend and the amount of any reduction in accumulated earnings and profits on account of any such distribution. (B) Exception.— The amendment made by paragraph (1) shall not apply for purposes of determining gain or loss on any disposition described in subsection (a)(2)(B) of this section.