TREATMENT OF GAIN ON SALES OF CERTAIN PROPERTY BETWEEN SPOUSES AND BETWEEN AN INDIVIDUAL AND A CONTROLLED CORPORATION.

SEC. 328. TREATMENT OF GAIN ON SALES OF CERTAIN PROPERTY BETWEEN SPOUSES AND BETWEEN AN INDIVIDUAL AND A CONTROLLED CORPORATION. (a) Disallowance of Capital Gain Treatment.—Section 117 (relating to capital gains and losses) is hereby amended by adding at the end thereof the following new subsection: “(o) Gain From Sale of Certain Property Between Spouses or Between an Individual and a Controlled Corporation.— “(1) Treatment of gain as ordinary income.— In the case of a sale or exchange, directly or indirectly, of property described in paragraph (2)— “(A) between a husband and wife; or “(B) between an individual and a corporation more than 80 per centum in value of the outstanding stock of which is owned by such individual, his spouse, and his minor children and minor grandchildren; any gain recognized to the transferor from the sale or exchange of such property shall be considered as gain from the sale or exchange of property which is neither a capital asset nor property described in subsection (j). “(2) Subsection applicable only to sales or exchanges of depreciable property.—This subsection shall apply only in the case of a sale or exchange of property by a transferor which in the hands of the transferee is property of a character which is subject to the allowance for depreciation provided in section 23 (1).” (b) Effective Date.—The amendment made by subsection (a) shall be applicable with respect to taxable years ending after April 30, 1951, but shall apply only with respect to sales or exchanges made after May 3, 1951.