AMENDMENTS TO SECTION 382.

SEC. 10225. AMENDMENTS TO SECTION 382. (a) Treatment of Worthless Stock.— Paragraph (4) of section 382(g) (defining ownership change) is amended by adding at the end thereof the following new subparagraph: “(D) Treatment of worthless stock.— If any stock held by a 50-percent shareholder is treated by such shareholder as becoming worthless during any taxable year of such shareholder and such stock is held by such shareholder as of the close of such taxable year, for purposes of determining whether an ownership change occurs after the close of such taxable year, such shareholder— “(i) shall be treated as having acquired such stock on the 1st day of his 1st succeeding taxable year, and “(ii) shall not be treated as having owned such stock during any prior period. For purposes of the preceding sentence, the term ‘50-percent shareholder’ means any person owning 50 percent or more of the stock of the corporation at any time during the 3-year period ending on the last day of the taxable year with respect to which the stock was so treated.” (b) Treatment of Depreciation Under Built-In Loss Rules.— Subparagraph (B) of section 382(h)(2) (defining recognized built-in loss) is amended by adding at the end thereof the following new sentence: “Such term includes any amount allowable as depreciation, amortization, or depletion for any period within the recognition period except to the extent the new loss corporation establishes that the amount so allowable is not attributable to the excess described in clause (ii).” (c) Effective Dates.— (1) Subsection (a).— The amendment made by subsection (a) shall apply in the case of stock treated as becoming worthless in taxable years beginning after December 31, 1987. (2) Subsection (b).— The amendment made by subsection (b) shall apply in the case of ownership changes (as defined in section 382 of the Internal Revenue Code of 1986 as amended by subsection (a)) after December 15, 1987; except that such amendment shall not apply in the case of any ownership change pursuant to a binding written contract which was in effect on December 15, 1987, and at all times thereafter before such ownership change.