AVERAGE BASE PERIOD NET INCOME-ALTERNATIVE BASED ON GROWTH IN CASE OF NEW CORPORATIONS.

SEC. 504. AVERAGE BASE PERIOD NET INCOME-ALTERNATIVE BASED ON GROWTH IN CASE OF NEW CORPORATIONS. (a) General Rule.—Section 435 (e) (1) (relating to the alternative based on growth) is hereby amended by striking out the phrase “the beginning of its base period” and inserting in lieu thereof the following: “the end of its base period.” (b) Amendment of Part II.—Section 462 (c) (relating to the use by an acquiring corporation in a Part II transaction of an alternative average base period net income based on growth) is hereby amended as follows: (1) By amending paragraph (1) thereof to read as follows: “(1) In the case of a transaction described in section 461 (a), other than a transaction described in section 461 (a) (1) (E),— “(A) The acquiring corporation shall not be denied the right to determine whether it is eligible for the benefits of section 435 (e) without reference to the recomputation of its 65 Stat. 545 excess profits net income provided for in section 462 (b) where the transaction occurred on or after July 1, 1950, but it shall be denied such right where the transaction occurred prior to July 1, 1950. “(B) Where, immediately prior to the date of the transaction, the acquiring corporation and all the component corporations (other than a corporation created incident to such transaction) met the requirements of section 435 (e) (1) (A) (i), and, in case the transaction occurred on or after July 1, 1950, had commenced business prior to the beginning or its base period (determined without reference to section 461 (d)), the acquiring corporation shall be entitled to compute its average base period net income under section 435 (e) with reference to the recomputation of its excess profits net-income provided for in section 462 (b) if the tests of section 435 (e) are satisfied. For that purpose, the acquiring corporation shall combine with its total payroll and its total gross receipts for that portion of its base period which preceded such transaction the total payroll and total gross receipts of such component corporations for that portion of such period and it shall combine with its net sales for that portion of the period prior to January 1, 1951, which preceded such transaction the net sales of such component corporations for that portion of such period. The allocation of payroll and gross receipts amounts of a component corporation to any such portion of such period shall be made in accordance with the rules provided in section 435 (e) (4) and (5). For purposes of qualifying under section 435 (e) (1) (A) (i) (relating to total assets of the taxpayer), such acquiring corporation shall combine its total assets on the date specified in section 435 (e) (1) (A) (i) with the total assets of each component corporation on such date. The Secretary shall prescribe by regulations such rules as may be necessary to insure that such combined total gross receipts do not reflect a duplication for purposes of this section. “(C) Where, immediately prior to the date of the transaction, either the acquiring corporation or one or more component corporations (other than a corporation created incident to such transaction) did not meet the requirements of section 435 (e) (1) (A) (i), or, in case the transaction occurred on or after July 1, 1950, had not commenced business prior to the beginning of its base period (determined without reference to section 461 (d)), the acquiring corporation shall not be entitled to compute its average base period net income under section 435 (e) with reference to the recomputation of its excess profits net income provided for in section 462 (b). In any such case, where the transaction occurred on or after July 1, 1950, the monthly excess profits net income of the corporation entitled to the benefits of section 435 (e) for any month of the acquiring corporation’s base period shall be, for purposes of the recomputation provided for in section 462 (b), one-twelfth of the average base period net income to which such corporation was entitled under section 435 (e), and such monthly excess profits net income shall be in lieu of the monthly excess profits net income determined under paragraphs (1) and (2) of section 462 (b).” (2) By striking from the second sentence of paragraph (2) thereof the words: “had commenced business prior to the begin- 65 Stat. 546 ning of its base period (determined without reference to section 461 (d)) and”. (3) By striking from paragraph (3) thereof the words “which had commenced Business prior to the beginning of its base period” and by inserting in lieu thereof the following: “which had commenced business prior to the end of its base period”.