TREATMENT OF MIRROR SUBSIDIARY TRANSACTIONS.

SEC. 10223. TREATMENT OF MIRROR SUBSIDIARY TRANSACTIONS. (a) Consolidated Return Regulations Not To Apply for 114114 Copy read “to Apply For Purposes”. Purposes of Nonrecognition Under Section 337.— Subsection (c) of section 337 (defining 80-percent distributee) is amended by adding at the end thereof the following new sentence: “For purposes of this section, the determination of whether any corporation is an 80-percent distributee shall be made without regard to any consolidated return regulation.” (b) Amendment to Section 355.— Subparagraph (D) of section 355(b)(2) (relating to requirements as to active business) is amended— (1) by amending clause (i) to read as follows: “(i) was not acquired by any distributee corporation directly (or through 1 or more corporations, whether through the distributing corporation or otherwise) within the period described in subparagraph (B), or”, (2) by striking out “by another corporation” in clause (ii) and inserting in lieu thereof “such distributee corporation”, and (3) by adding at the end thereof the following new sentence: “For purposes of subparagraph (D), all distributee corporations which are members of the same affiliated group (as defined in section 1504(a) without regard to section 1504(b)) shall be treated as 1 distributee corporation.” (c) Amendment to Section 304.— Subsection (b) of section 304 (relating to redemption through use of related corporations) is amended by adding at the end thereof the following new paragraph: “(4) Treatment of certain intragroup transactions.— “(A) In general.— In the case of any transfer described in subsection (a) of stock of 1 member of an affiliated group to another member of such group, proper adjustments shall be made to— 101 STAT. 1330–412 “(i) the adjusted basis of any intragroup stock, and “(ii) the earnings and profits of any member of such group, to the extent necessary to carry out the purposes of this section. “(B) Definitions.— For purposes of this paragraph— “(i) Affiliated group.— The term ‘affiliated group’ has the meaning given such term by section 1504(a). “(ii) Intragroup stock.— The term ‘intragroup stock’ means any stock which— “(I) is in a corporation which is a member of an affiliated group, and “(II) is held by another member of such group.” (d) Effective Dates.— (1) In general.— The amendments made by this section shall apply to distributions or transfers after December 15, 1987. (2) Exceptions.— (A) Distributions.— The amendments made by this section shall not apply to any distribution after December 15, 1987, and before January 1, 1993, if— (i) 80 percent or more of the stock of the distributing corporation was acquired by the distributee before December 15, 1987, or (ii) 80 percent or more of the stock of the distributing corporation was acquired by the distributee before January 1, 1989, pursuant to a binding written contract or tender offer in effect on December 15, 1987. For purposes of the preceding sentence, stock described in section 1504(a)(4) of the Internal Revenue Code of 1986 shall not be taken into account. (B) Section 304 transfers.— The amendment made by subsection (c) shall not apply to any transfer after December 15, 1987, and before January 1, 1993, if such transfer is— (i) between corporations which are members of the same affiliated group on December 15, 1987, or (ii) between corporations which become members of the same affiliated group before January 1, 1989, pursuant to a binding written contract or tender offer in effect on December 15, 1987. (C) Distributions covered by prior transition rule.— The amendments made by this section shall not apply to any distribution to which the amendments made by subtitle D of title VI of the Tax Reform Act of 1986 do not apply.