BASIS OF PROPERTY RECEIVED ON LIQUIDATION OF SUBSIDIARY.

SEC. 202. BASIS OF PROPERTY RECEIVED ON LIQUIDATION OF SUBSIDIARY. (a) Definition of Purchase.— Section 334(b)(3) (relating to definition of purchase) is amended by adding at the end thereof the following new sentence: “Notwithstanding subparagraph (C) of this paragraph, for purposes of paragraph (2)(B), the term ‘purchase’ also means an acquisition of stock from a corporation when ownership of such stock would be attributed under section 318(a) to the person acquiring such stock, if the stock of such corporation by reason of which such ownership would be attributed was acquired by purchase (within the meaning of the preceding sentence).” (b) Period of Acquisition.— Section 334(b)(2)(B) (relating to exception) is amended by striking out “during a period of not more than 12 months,” and inserting in lieu thereof “during a 12-month period beginning with the earlier of— “(i) the date of the first acquisition by purchase of such stock, or “(ii) if any of such stock was acquired in an acquisition which is a purchase within the meaning of the second sentence of paragraph (3), the date on which the distributee is first considered under section 318(a) as owning stock owned by the corporation from which such acquisition was made,”. (c) Distribution of Installment Obligations.— Section 453(d)(4)(A) (relating to distribution of installment obligations in certain liquidations) is amended to read as follows: “(A) Liquidations to which section 332 applies.— If— “(i) an installment obligation is distributed in a liquidation to which section 332 (relating to complete liquidations of subsidiaries) applies, and “(ii) the basis of such obligation in the hands of the distributee is determined under section 334(b)(1), then no gain or loss with respect to the distribution of such obligation shall be recognized by the distributing corporation.” (d) Effective Dates.—The amendment made by subsection (a) shall apply only with respect to acquisitions of stock after December 31, 1965. The amendments made by subsections (b) and (c) shall apply only with respect to distributions made after the date of the enactment of this Act.