SMALL BUSINESS CORPORATIONS.

SEC. 233. SMALL BUSINESS CORPORATIONS. (a) Ownership of Certain Stock Disregarded.—Section 1371 (relating to definition of small business corporation) is amended by adding at the end thereof the following new subsection: “(d) Ownership of Certain Stock.—For purposes of subsection (a), a corporation shall not be considered a member of an affiliated group at any time during any taxable year by reason of the ownership of stock in another corporation if such other corporation— “(1) has not begun business at any time on or after the date of its incorporation and before the close of such taxable year, and “(2) does not have taxable income for the period included within such taxable year.” (b) Certain Distributions of Money After Close of Taxable Year.—Section 1375 (relating to special rules applicable to distributions of electing small business corporations) is amended by adding at the end thereof the following new subsection: “(e) Certain Distributions After Close of Taxable Year.— “(1) In general.—For purposes of this chapter, if— “(A) a corporation makes a distribution of money to its shareholders on or before the 15th day of the third month 78 Stat. 113following the close of a taxable year with respect to which it was an electing small business corporation, and “(B) such distribution is made pursuant to a resolution of the board of directors of the corporation, adopted before the close of such taxable year, to distribute to its shareholders all or a part of the proceeds of one or more sales of capital assets, or of property described in section 1231(b), made during such taxable year, such distribution shall, at the election of the corporation, be treated as a distribution of money made on the last day of such taxable year. “(2) Shareholders.—An election under paragraph (1) with respect to any distribution may be made by a corporation only if each person who is a shareholder on the day the distribution is received— “(A) owns the same proportion of the stock of the corporation on such day as he owned on the last day of the taxable year of the corporation preceding the distribution, and “(B) consents to such election at such time and in such manner as the Secretary or his delegate shall prescribe by regulations. “(3) Manner and time of election.—An election under paragraph (1) shall be made in such manner as the Secretary or his delegate shall prescribe by regulations. Such election shall be made not later than the time prescribed by law for filing the return for the taxable year during which the sale was made (including extensions thereof) except that, with respect to any taxable year ending on or More the date of the enactment of the Revenue Act of 1964, such election shall be made within 120 days after such date.” (c) Effective Dates.—The amendment made by subsection (a) shall apply with respect to taxable years of corporations beginning after December 31, 1962. The amendment made by subsection (b) shall apply with respect to taxable years of corporations beginning after December 31, 1957.