AMENDMENTS REL ATED TO TITLE XVIII OF THE REFORM ACT.

SEC. 1018. AMENDMENTS REL ATED TO TITLE XVIII OF THE REFORM ACT. (a) Amendment Related to Section 1801 of the Reform Act.—Clause (iii) of section 1801(a)(2)(A) of the Reform Act is amended to read as follows: “(iii) a person became a partner in such partnership (or a beneficiary in such trust) after its formation but before September 26, 1985,”. (b) Amendments Related to Section 1802 of the Reform Act.— (1) The last sentence of section 31(g)(17)(I) of the Tax Reform Act of 1984, as added by section 1802(a)(10)(G) of the Reform Act, is amended— (A) by striking out “Registry of Deeds” each place it appears and inserting in lieu thereof “Register of Deed”, and (B) by striking out “May 7, 1985” and inserting in lieu thereof “May 7, 1984”. (2) Subparagraph (E) of section 168(j)(9) of the 1986 Code (as amended by section 1802(a)(2) of the Reform Act and as in effect before the amendments made by section 201 of the Reform Act) is amended— (A) by striking out “this paragraph” in clauses (i) and (iiXI) and inserting in lieu thereof “this paragraph and paragraph (8)”, and (B) by striking out clause (iii) and inserting in lieu thereof the following: “(iii) Tax-exempt controlled entity.— “(I) In general.— The term “tax-exempt controlled entity” means any corporation (which is not a tax-exempt entity determined without regard to this subparagraph and paragraph (4 KE)) if 50 percent or more (in value) of the stock in such corpora-102 STAT. 3578tion is held by 1 or more tax-exempt entities (other than a foreign person or entity). “(II) Only 5-percent shareholders taken into account in case of publicly traded stock.—For purposes of subclause (I), in the case of a corporation the stock of which is publicly traded on an established securities market, stock held by a tax-exempt entity shall not be taken into account unless such entity holds at least 5 percent (in value) of the stock in such corporation. For purposes of this subclause, related entities (within the meaning of paragraph (7)) shall be treated as 1 entity. “(III) Section 318 to apply.—For purposes of this clause, a tax-exempt entity shall be treated as holding stock which it holds through application of section 318 (determined without regard to the 50-percent limitation contained in subsection (a)(2)(C) thereof).” (c) Amendment Related to Section 1803 of the Reform Act.— (1) Subparagraph (A) of section 1803(a)(8) of the Reform Act is amended by striking out “September 27, 1985” and inserting in lieu thereof “December 31, 1985”. (2) Subsection (c) of section 1278 of the 1986 Code is amended by inserting before the period “, including regulations providing proper adjustments in the case of a bond the principal of which may be paid in 2 or more payments”. (3) Section 1278(b) of the 1986 Code is amended by adding at the end thereof the following new paragraph: “(4) Basis adjustment.—The basis of any bond in the hands of the taxpayer shall be increased by the amount included in gross income pursuant to this subsection.” (d) Amendments Related to Section 1804 of the Reform Act.— (1) Paragraph (3) of section 1804(b) of the Reform Act is amended by striking out “Paragraph (3) of section 54” and inserting “Paragraph (3) of section 54(d)”. (2) Clause (i) of section 54(d)(3)(D) of the Tax Reform Act of 1984 is amended by striking out “subtitle D of title VI” and inserting “subtitle D of title VI of the Tax Reform Act of 1986”. (3) Clause (ii) of section 54(d)(3)(D) of the Tax Reform Act of 1984 (as added by section 1804(b)(3) of the Tax Reform Act of 1986) is amended— (A) by striking out “December 9, 1968,” each place it appears and inserting in lieu thereof “December 10, 1968,”, and (B) by striking out “October 5, 1981” and inserting in lieu thereof “March 2, 1978,”. (4) Subsection (b) of section 312 of the 1986 Code is amended by striking out “of any property” and inserting in lieu thereof “of any property (other than an obligation of such corporation)”. (5) (A) Section 361 of the 1986 Code is amended to read as follows: “SEC. 361. NONRECOGNITION OF GAIN OR LOSS TO CORPORATIONS; TREATMENT OF DISTRIBUTIONS. “(a) General Rule.—No gain or loss shall be recognized to a corporation if such corporation is a party to a reorganization and 102 STAT. 3579exchanges property, in pursuance of the plan of reorganization, solely for stock or securities in another corporation a party to the reorganization. “(b) Exchanges Not Solely in Kind.— “(1) Gain.— If subsection (a) would apply to an exchange but for the fact that the property received in exchange consists not only of stock or securities permitted by subsection (a) to be received without the recognition of gain, but also of other property or money, then— “(A) Property distributed.—If the corporation receiving such other property or money distributes it in pursuance of the plan of reorganization, no gain to the corporation shall be recognized from the exchange, but “(B) Property not distributed.—If the corporation receiving such other property or money does not distribute it in pursuance of the plan of reorganization, the gain, if any, to the corporation shall be recognized. The amount of gain recognized under subparagraph (B) shall not exceed the sum of the money and the fair market value of the other property so received which is not so distributed. “(2) Loss.—If subsection (a) would apply to an exchange but for the fact that the property received in exchange consists not only of property permitted by subsection (a) to be received without the recognition of gain or loss, but also of other property or money, then no loss from the exchange shall be recognized. “(3) Treatment of transfers to creditors.— For purposes of paragraph (1), any transfer of the other property or money received in the exchange by the corporation to its creditors in connection with the reorganization shall be treated as a distribution in pursuance of the plan of reorganization. The Secretary may prescribe such regulations as may be necessary to prevent avoidance of tax through abuse of the preceding sentence or subsection (c)(3). “(c) Treatment of Distributions.— “(1) In general.—Except as provided in paragraph (2), no gain or loss shall be recognized to a corporation a party to a reorganization on the distribution to its shareholders of property in pursuance of the plan of reorganization. “(2) Distributions of appreciated property.— “(A) In general.— If— “(i) in a distribution referred to in paragraph (1), the corporation distributes property other than qualified property, and “(ii) the fair market value of such property exceeds its adjusted basis (in the hands of the distributing corporation), then gain shall be recognized to the distributing corporation as if such property were sold to the distributee at its fair market value. “(B) Qualified property.—For purposes of this subsection, the term ‘qualified property’ means— “(i) any stock in (or right to acquire stock in) the distributing corporation or obligation of the distributing corporation, or “(ii) any stock in (or right to acquire stock in) another corporation which is a party to the reorganization or obligation of another corporation which is such a party if such stock (or right) or obligation102 STAT. 3580 is received by the distributing corporation in the exchange. “(C) Treatment of liabilities.—If any property distributed in the distribution referred to in paragraph (1) is subject to a liability or the shareholder assumes a liability of the distributing corporation in connection with the distribution, then, for purposes of subparagraph (A), the fair market value of such property shall be treated as not less than the amount of such liability. “(3) Treatment of certain transfers to creditors.—For purposes of this subsection, any transfer of qualified property by the corporation to its creditors in connection with the reorganization shall be treated as a distribution to its shareholders pursuant to the plan of reorganization. “(4) Coordination with other provisions.— Section 311 and subpart B of part II of this subchapter shall not apply to any distribution referred to in paragraph (1).” (B) Section 358 of the 1986 Code is amended by adding at the end thereof the following new subsection: “(f) Definition of Nonrecognition Property in Case of Section 361 Exchange.—For purposes of this section, the property permitted to be received under section 361 without the recognition of gain or loss shall be treated as consisting only of stock or securities in another corporation a party to the reorganization.” (C) Section 355 of the 1986 Code is amended by adding at the end thereof the following new subsection: “(c) Taxability of Corporation on Distribution.—Section 311 shall apply to any distribution— “(1) to which this section (or so much of section 356 as relates to this section) applies, and “(2) which is not in pursuance of a plan of reorganization, in the same manner as if such distribution were a distribution to which subpart A of part I applies; except that subsection (b) of section 311 shall not apply to any distribution of stock or securities in the controlled corporation.” (D) Subsection (c) of section 336 of the 1986 Code (as amended by section 631 of the Reform Act) is amended to read as follows: “(c) Exception for Liquidations Which Are Part of a Reorganization.— “For provision providing that this subpart does not apply to distributions in pursuance of a plan of reorganization, see section 361(c)(4),” (E) Subsection (a) of section 311 of the 1986 Code is amended by striking out “distribution, with respect to its stock,” and inserting in lieu thereof “distribution (not in complete liquidation) with respect to its stock”. (F) The table of sections for subpart C of part III of subchapter C of chapter 1 of the 1986 Code is amended by striking out the item relating to section 361 and inserting in lieu thereof the following new item: “Sec. 361. Nonrecognition of gain or loss to corporations; treatment of distributions.” (G) Effective with respect to transfers on or after June 21, 1988, section 351 of the 1986 Code is amended by redesignating 102 STAT. 3581subsection (0 as subsection (g) and by inserting after subsection: (e) the following new subsection: “(f) Treatment of Controlled Corporation.—If— “(1) property is transferred to a corporation (hereinafter in this subsection referred to as the ‘controlled corporation’) in an exchange with respect to which gain or loss is not recognized (in whole or in part) to the transferor under this section, and “(2) such exchange is not in pursuance of a plan of reorganization, section 311 shall apply to any transfer in such exchange by the controlled corporation in the same manner as if such transfer were a distribution to which subpart A of part I applies.” (6) Subparagraph (A) of section 280G(b)(5) of the 1986 Code is amended— (A) in clause (i) by striking out “section 1361(b))” and inserting in lieu thereof “section 1361(b) but without regard to paragraph (1)(C) thereof)”, and (B) by adding at the end thereof the following: “Stock described in action 1504(a)(4) shall not be taken into ac-count under clause ((j)(1) if the payment does not adversely affect the shareholder’s redemption and liquidation rights.” (7) Subparagraph (B) of section 280G(b)(5) of the 1986 Code (relating to shareholder approval requirements) is amended by adding at the end thereof the following new sentence: “The regulations prescribed under subsection (e) shall include regulations providing for the application of this subparagraph in the case of shareholders which are not individuals (including the treatment of non voting interests in an entity which is a shareholder) and where an entity holds a de minimis amount of stock in the corporation.” (8) Paragraph (5) of section 2800(d) of the 1986 Code is amended by striking out “officer or any member” and inserting in lieu thereof “officer of any member”. (9) Paragraph (3) of section 338(e) of the 1986 Code is amended by striking out “which meet the 80 percent requirements of subparagraphs (A) and (B) of subsection (d)(3)” and inserting in lieu thereof “which meet the requirements of section 1504(a)(2)”. (10) (A) Paragraph (7) of section 1504(b) of the 1986 Code is amended to read as follows: “(7) A DISC (as defined in section 992(a)(1)).” (B) Section 1504 of the 1986 Code is amended by adding at the end thereof the following new subsection: “(f) Special Rule for Certain Amounts Derived From a Corporation Previously Treated as a DISC.—In determining the consolidated taxable income of an affiliated group for any taxable year beginning after December 31, 1984, a corporation which had been a DISC and which would otherwise be a member of such group shall not be treated as such a member with respect to— “(1) any distribution (or deemed distribution) of accumulated DISC income which was not treated as previously taxed income under section 805(b)(2)(A) of the Tax Reform Act of 1984, and “(2) any amount treated as received under section 805(b)(3) of such Act.” (e) Provision Related to Section 1806 of the Reform Act.—If— (1) on a return for the 1st taxable year of the trusts involved beginning after March 1, 1984, 2 or more trusts were treated as 102 STAT. 3582a single trust for purposes of the tax imposed by chapter 1 of the Internal Revenue Code of 1954. (2) such trusts would have been required to be so treated but for the amendment made by section 1806(b) of the Reform Act, and (3) such trusts did not accumulate any income during such taxable year and did not make any accumulation distributions during such taxable year, then, notwithstanding the amendment maße by section 1806(b) of the Reform Act, such trusts shall be treated as one trust for purposes of such taxable year. (f) Amendments Related to Section 1807 of the Reform Act.— (1) Paragraphs (1)(A) and (2)(E) of section 468B(d) of the 1986 Code are each amended by striking out “the taxpayer” and inserting in lieu thereof “the taxpayer (or any related person)”. (2) Subparagraph (A) of section 468B(d)(2) of the 1986 Code is amended to read as follows: “(A) which is established pursuant to a court order and which extinguishes completely the taxpayer’s tort liability with respect to claims described in subparagraph (D),”. (3) Clause (i) of section 1807(a)(6)(C) of the Reform Act is amended to read as follows: “(i) any portion of such fund which is established pursuant to a court order and with qualified payments, which meets the requirements of subparagraphs (C) and (D) of section 468B(d)(2) of the Internal Revenue Code of 1954 (as added by this paragraph), and with respect to which an election is made under subparagraph (F) thereof, shall be treated as a designated settlement fund for purposes of section 468B of such Code,”. (4) Paragraph (2) of section 468B(b) of the 1986 Code is amended— (A) by striking out “the corporation,” and inserting in lieu thereof “a corporation.”, and (B) by striking out “no other” and inserting in lieu thereof “No other”. (5) (A) Section 468B of the 1986 Code is amended by adding at the end thereof the following new subsection: “(g) Clarification of Taxation of Certain Funds.—Nothing in any provision of law shall be construed as providing that an escrow account, settlement fund, or similar fund is not subject to current income tax. The Secretary shall prescribe regulations providing for the taxation of any such account or fund whether as a grantor trust or otherwise.” (B) Subparagraph (D) of section 1807(a)(7) of the Reform Act is hereby repealed. (g) Amendments Related to Section 1810 of the Reform Act.— (1) Paragraph (5) of section 1810(a) of the Reform Act is amended by striking out “section 125(b)(5)” each place it appears and inserting in lieu thereof “section 121(b)(5)”. (2) Section 133(d)(3)(B)(iii) of the Tax Reform Act of 1984, as amended by section 1810(1)(2) of the Reform Act, is amended by striking out “Tax Reform Act of 1985” and inserting in lieu thereof “Tax Reform Act of 1986”. 102 STAT. 3583 (3) Clause (iv) of section 7701(b)(5)(A) of the 1986 Code is amended by striking out “section 274(k)(2)” and inserting in lieu thereof “section 274(c)(1)(B)”. (h) Amendment Related to Section 1821 of the Reform Act.— (1) Subsection (e) of section 812 of the 1986 Code (relating to dividends from certain subsidiaries not included in gross investment income) is amended to read as follows: “(e) Dividends From Certain Subsidiaries Not Included in Gross Investment Income.— “(1) In general.— For purposes of this section, the term ‘gross investment income’ shall not include any dividend received by the life insurance company which is a 100 percent dividend. “(2) 100 percent dividend defined.— “(A) In general—Except as provided in subparagraphs (B) and (C), the term ‘100 percent dividend’ means any dividend if the percentage used for purposes of determining the deduction allowable under section 243, 244, or 245(b) is 100 percent. “(B) Certain dividends out of tax-exempt interest, etc.—The term ‘100 percent dividend’ does not include any distribution by a corporation to the extent such distribution is out of tax-exempt interest or out of dividends which are not 100 percent dividends (determined with the application of this subparagraph). “(C) Certain dividends received by foreign corporations.—The term 100 percent dividends’ does not include any dividend described in section 805(a)(4)(E) (relating to certain dividends in the case of foreign corporations).” (2) The amendment made by paragraph (1) shall take effect as if included in the amendments made by section 211 of the Tax Reform Act of 1984. (i) Amendment Related to Section 1822 of the Reform Act.—Clause (i) of section 216(b)(4)(C) of the Tax Reform Act of 1984 (relating to section 818(c) elections made by certain acquired companies) is amended by striking out “clause (i)” and inserting in lieu thereof “subclause (I)”. (j) Amendment Related to Section 1825 of the Reform Act.—Paragraph (4) of sectioo 1825(a) of the Reform Act (relating to amendments related to section 221 of the Tax Reform Act of 1984) is amended by striking out “Section 7702(e)(2)” and inserting in lieu thereof “Effective with respect to contracts entered into after October 22, 1986, section 7702(e)(2)”. (k) Amendments Related to Section 1826 of the Reform Act.— (1) Paragraph (5) of section 72(s) of the 1986 Code is amended by striking out “or” at the end of subparagraph (B), by striking out the period at the end of subparagraph (Q and inserting in lieu thereof “, or”, and by adding at the end thereof the following new subparagraph: “(D) which is a qualified funding asset (as defined in section 130(d), but without regard to whether there is a qualified assignment).” (2) The paragraph heading of paragraph (5) of section 72(s) of the 1986 Code is amended by striking out “annuity contracts which are part of qualified plans” and inserting in lieu thereof “certain annuity contracts”. (l) Amendments Related to Section 1842 of the Reform Act. 102 STAT. 3584 (1) Subsection (c) of section 425 of the 1986 Code is amended by adding at the end thereof the following new paragraph: “(4) Transfers between spouses or incident to divorce.— In the case of any transfer described in subsection (a) of section 1041— “(A) such transfer shall not be treated as a disposition for purposes of this part, and “(B) the same tax treatment under this part with respect to the transferred property shall apply to the transferee as would have applied to the transferor.” (2) Paragraph (1) of section 425(c) of the 1986 Code is amended by striking out “paragraph (2) and (3)” and inserting in lieu thereof “paragraphs (2), (3), and (4)”. (3) Effective with respect to transfers after June 21, 1988, subsection (d) of section 1041 of the 1986 Code is amended— (A) by striking out “Paragraph (1) of subsection (a)” and inserting in lieu thereof “Subsection (a)”, and (B) by striking out “the spouse” and inserting in lieu thereof “the spouse (or former spouse)”. (m) Amendments Related to Section 1866 of the Reform Act.— (1) Section 1866 of the Reform Act is amended by striking out “obligation issued to refund” and inserting in lieu thereof “obligation (or series of obligations) issued to refund”. (2) (A) Paragraph (1) of section 1866 of the Reform Act is amended to read as follows: (2) the average maturity of the issue of which the refunding obligation is a part does not exceed the average maturity of the obligations to be refunded by such issue,”. (B) Section 1866 of the Reform Act is amended by adding at the end thereof the following new sentence: “For purposes of paragraph (1), average maturity shall be determined in accordance with subsection (b)(14)(B)(i) of such Code.” (3) Paragraph (4) of section 1866 of the Reform Act is amended by striking out “30 days” and inserting in lieu thereof “90 days”. (4) Section 1866 of the Reform Act is amended by adding “and” at the end of paragraph (2), by striking out paragraph (3), and by redesignating paragraph (4) as paragraph (3). (5) A refunding obligation issued before July 1, 1987, shall be treated as meeting the requirement of paragraph (1) of section 1866 of the Reform Act if such obligation met the requirement of such paragraph as enacted by the Reform Act. (n) Amendments Related to Section 1869 of the Reform Act.— (1) Clause (ii) of section 1869(c)(3)(A) of the Reform Act is amended by striking out “pursuant to the exercise of eminent domain” and inserting in lieu thereof “(by a governmental unit having the power to exercise eminent domain)”. (2) Subparagraph (C) of section 1869(c)(3) of the Reform Act is amended by inserting “(or similar issues)” after “resulting from the issue”. (o) Amendments Related to Section 1875 of the Reform Act.— (1) Clause (ii) of section 6230(a)(2)(A) of the 1986 Code is amended by striking out “nonpartnership items” and inserting in lieu thereof “nonpartnership items (other than by reason of section 6231(b)(1)(C))”. 102 STAT. 3585 (2) Subsection (g) of section 1246 of the 1986 Code (as redesignated by this Act) is amended by striking out “1248(g)(3)” and inserting in lieu thereof “1248(g)(2)”. (3) Subsection (f) of section 6229 of the 1986 Code is amended by adding at the end thereof the following new sentence: “The period described in the preceding sentence (including any extension period under this sentence) may be extended with respect to any partner by agreement entered into by the Secretary and such partner.” (p) Amendment Related to Section 1878 of the Reform Act.—Paragraph (1) of section 852(e) of the 1986 Code is amended by striking out “subsection (a)(3)” and inserting in lieu thereof “subsection (a)(2)”. (q) Amendments Related to Section 1879 of the Reform Act.— (1) Subclause (II) of section 28(b)(2)(A)(ii) of the 1986 Code is amended to read as follows: “(II) before the date on which an application with respect to such drug is approved under section 505(b) or 507 of such Act or, if the drug is a biological product, before the date on which a license for such drug is issued under section 351 of the Public Health Service Act; and”. (2) The last sentence of section 1361(d)(3) of the 1986 Code is amended by striking out “treated as a separate trust under section 663(c)” and inserting in lieu thereof “within the meaning of section 663(c)”. (3) Subsection (p) of section 1879 of the Reform Act is amended— (A) by striking out “Subsection (a)” in paragraph (2) and inserting “Paragraph (1)”, and (B) by striking out “subsection (a)” each place it appears in paragraphs (2) and (3) and inserting in lieu thereof “paragraph (1)”. (4) (A) Subsection (d) of section 1286 of the 1986 Code is amended to read as follows: “(d) Special Rules for Tax-Exempt Obligations.— “(1) In general.— In the case of any tax-exempt obligation (as defined in section 1275(a)(3)) from which 1 or more coupons have been stripped— “(A) the amount of the original issue discount determined under subsection (a) with respect to any stripped bond or stripped coupon— “(i) shall be treated as original issue discount on a tax-exempt obligation to the extent such discount does not exceed the tax-exempt portion of such discount, and “(ii) shall be treated as original issue discount on an obligation which is not a tax-exempt obligation to the extent such discount exceeds the tax-exempt portion of such discount, “(B) subsection (b)(1)(A) shall not apply, and “(C) subsection (b)(2) shall be applied by increasing the basis of the bond or coupon by the sum of— “(i) the interest accrued but not paid before such bond or coupon was disposed of (and not previously reflected in basis), plus “(ii) the amount included in gross income under subsection (b)(1)(B). 102 STAT. 3586 “(2) Tax-exempt portion.— For purposes of paragraph (1), the tax-exempt portion of the original issue discount determined under subsection (a) is the excess of— “(A) the amount referred to in subsection (a)(1), over “(B) an issue price which would produce a yield to maturity as of the purchase date equal to the lower of— “(i) the coupon rate of interest on the obligation from which the coupons were separated, or “(ii) the yield to maturity (on the basis of the purchase price) of the stripped obligation or coupon. The purchaser of any stripped obligation or coupon may elect to apply clause (i) by substituting ‘original yield to maturity or for ‘coupon rate of interest on’.” (B) (i) Except as provided in clause (ii), the amendment made by subparagraph (A) shall apply to any purchase or sale after June 10, 1987, of any stripped tax-exempt obligation or stripped coupon from such an obligation. (ii) If— (I) any person held any obligation or coupon in stripped form on June 10, 1987, and (II) such obligation or coupon was held by such person on such date for sale in the ordinary course of such person’s trade or business, the amendment made by subparagraph (A) shall not apply to any sale of such obligation or coupon by such person and shall not apply to any such obligation or coupon while held by another person who purchased such obligation or coupon from the person referred to in subclause (I). (5) Clause (ii) of section 368(a)(2)(F) of the 1986 Code is amended— (A) by striking out the two parenthetical phrases in the first sentence, and (B) by adding at the end thereof the following new sentence: “For purposes of this clause, a person holding stock in a regulated investment company, a real estate investment trust, or an investment company which meets the requirements of this clause shall, except as provided in regulations, be treated as holding its proportionate share of the assets held by such company or trust.’ (r) Amendments Related to Section 1895 of the Reform Act.— (1) Subsection (b) of section 1895 of the Reform Act is amended by striking out paragraphs (1) and (2). (2) (A) Clause (ii) of section 3121(u)(2)(B) of the 1986 Code is amended by striking out “or” at the end of subclause (IV), by striking out the period at the end of subclause (V) and inserting in lieu thereof ‘, or”, and by inserting after subclause (V) the following new subclause: “(VI) by an individual in a position described in section 1402(c)(2)(E).” (B) The amendment made by subparagraph (A) shall apply to services performed after March 31, 1986. (s) Miscellaneous Provisions.— (1) Subsection (a) of section 8021 of the 1986 Code is amended by striking out “6103(d)” and inserting in lieu thereof “6103(f)”. (2) (A) Section 2503 of the 1986 Code is amended by adding at the end thereof the following new subsection: “(f) Treatment of Certain Loans of Artworks.— 102 STAT. 3587 “(1) In general.— For purposes of this subtitle, any loan of a qualified work of art shall not be treated as a transfer (and the value of such qualified work of art shall be determined as if such loan had not been made) if— “(A) such loan is to an organization described in section 501(c)(3) and exempt from tax under section 501(c) (other than a private foundation), and “(B) the use of such work by such organization is related to the purpose or function constituting the basis for its exemption under section 501. “(2) Definitions.— For purposes of this section— “(A) Qualified work of art.—The term ‘qualified work of art’ means any archaeological, historic, or creative tangible personal property. “(B) Private foundation.—The term ’private foundation’ has the meaning given such term by section 509, except that such term shall not include any private operating foundation (as defined in section 4942(j)(3)).” (B) The amendment made by subparagraph (A) shall apply to loans after July 31, 1969. (3) (A) Subparagraph (B) of section 1563(d)(1) of the 1986 Code is amended by striking out “subsection (e)(i)” and inserting in lieu thereof “paragraphs (1), (2), and (3) of subsection (e)” (B) The amendment made by subparagraph (A) shall apply to taxable years beginning after the date of the enactment of this Act. (t) Additional Amendments Related to Pension Plans.— (1) Amendments related to section 1826 of the reform act— (A) Section 72(s)(7) of the 1986 Code is amended by striking out “primary annuity” and inserting in lieu thereof “primary annuitant”. (B) Section 72(q)(2)(B) of the 1986 Code is amended by striking out the last parenthesis. (C) Section 419A(f)(5) of the 1986 Code is amended by striking out “accounts” and inserting in lieu thereof “account”. (D) Section 1826(c) of the Reform Act is amended by striking out “made” and inserting in lieu thereof “commencing”. (2) Amendments related to section 1851 of the reform act.— (A) Section 1851(a) of the Reform Act is amended by striking out paragraph (4) thereof. (B) Subclause (II) of section 512(a)(3)(E)(ii) of the 1986 Code is amended, (i) by striking out “subclause (11)” and inserting in lieu thereof “subclause (I)”, and (ii) by striking out the comma at the end thereof and inserting in lieu thereof a period. (C) Section 419(a)(1) of the 1986 Code is amended by striking out “subchapter” and inserting in lieu thereof “chapter”. (D) Subparagraph (B) of section 1851(a)(3) of the Reform Act is amended by inserting “, section 505, and section 4976(b)(1)(B)” after “section 419A”. (3) Amendments related to section 1852 of the reform act.— 102 STAT. 3588 (A) Paragraph (4) of section 1852(a) of the Reform Act is amended by adding at the end thereof the following new subparagraph: “(C) An individual whose required beginning date would, but for the amendment made by subparagraph (A), occur after December 31, 1986, but whose required beginning date after such amendment occurs before January 1, 1987, shall be treated as if such individual had become a 5-percent owner during the plan year ending in 1986,” (B) Section 1852(h)(2) of the Reform Act is amended by striking out “section 416(1)” and inserting in lieu thereof “section 415(1)”. (C) Section 1852(h)(1) of the Reform Act is amended by striking out “Subsection” and inserting in lieu thereof “Effective for years beginning after December 31, 1985, su bssction * (D) Subparagraph (E) of section 408(d)(3) of the 1986 Code is amended by striking out “subparagraph” and inserting in lieu thereof “paragraph”, (4) Amendments related to section 1854 of the reform act.— (A) Section 404(k) of the 1986 Code is amended by striking out “avoidance” in the 4th sentence and inserting in lieu thereof “evasion”. (B) Section 409(h)(2) of the 1986 Code (relating to plan may distribute cash) is amended by striking out “section 409(o)” and inserting in lieu thereof “paragraph (1)(B)”. (C) Subparagraph (C) of section 409(n)(3) of the 1986 Code (defining nonallocation period) is amended to read as fol-lows: “(C) Nonallocation period.— The term ‘nonallocation period’ means the period beginning on the date of the sale of the qualified securities and ending on the later of— “(i) the date which is 10 years after the date of sale, or “(ii) the date of the plan allocation attributable to the final payment of acquisition indebtedness incurred in connection with such sale.” (D) Subparagraph (A) of section 1042(c)(4) of the 1986 Code (defining qualified replacement property) is amended by inserting “(as in effect immediately before the Tax Reform Act of 1986)” after “section 954(c)(3)”. (E) Clause (i) of section 1042(c)(4)(B) of the 1986 Code (relating to operating corporation) is amended by striking out “placement period” and inserting in lieu thereof “replacement period”. (F) Section 1854(a)(3)(B) of the Reform Act is amended by striking out “1042(b)(3)” and inserting in lieu thereof “1042(b)”. (G) Subparagraph (C) of section 1854(a)(3) of the Reform Act is amended to read as follows: “(C) (i) Except as provided in clause (ii), the amendments made by this paragraph shall apply to sales of securities after the date of the enactment of this Act. “(ii) A taxpayer or executor may elect to have section 1042(b)(3) of the Internal Revenue Code of 1954 (as in effect before the amendment made by subparagraph (B)) apply to sales 102 STAT. 3589before the date of the enactment of this Act as if such section included the last sentence of section 409(n)(1) of the Internal Revenue Code of 1986 (as added by subparagraph (A)).” (H) Section 409(e)(5) of the 1986 Code is amended by striking out “(2) or”. (5) Amendment related to section 1875 of the reform act.—Section 1875(c)(6)(B) of the Reform Act is amended by striking out “and section 405(c)”. (6) Amendment related to section 1879 of the reform act.—Subparagraph (B) of section 125(c)(2) of the 1986 Code (relating to exception for cash and deferred arrangements) is amended by inserting “or rural electric cooperative plan (within the meaning of section 401(k)(7))” after “stock bonus plan”. (7) Amendments related to section 1895 of the reform act.— (A) Section 106(b)(1) of the 1986 Code (relating to exception for highly compensated individuals where plan fails to provide certain continuation coverage) is amended— (i) by striking out “any amount contributed by an employer” and inserting in lieu thereof “any employer-provided coverage”, and (ii) by striking out “to a group” and inserting in lieu thereof “under a group”. (B) Section 1895(d)(5)(A) of the Reform Act is amended by striking out “section 162(k)(2)” and inserting in lieu thereof “section 162(k)(5)”. (8) Amendments related to section 1898 of the reform act.— (A) Subparagraph (G) of section 402(a)(6) of the 1986 Code (relating to treatment of potential future vesting), as added by section 1898(a)(3) of the Reform Act, is redesignated as subparagraph (I). (B) Subparagraph (A) of section 411(a)(11) of the 1986 Code is amended by striking out “vested” and inserting in lieu thereof “nonforfeitable. (C) Section 402(f)(1) of the 1986 Code is amended by striking out “a eligible” and inserting in lieu thereof “an eligible”. (D) Section 1899A of the Reform Act is amended by striking out paragraph (13). (E) Subparagraph (B) of section 414(p)(4) of the 1986 Code is amended— (i) by striking out “means earlier of and inserting in lieu thereof “means the earlier of’, and (ii) by striking out “in” each place it appears. (F) Section 414(p)(10) of the 1986 Code (relating to waiver of certain distribution requirements) is amended by inserting “, 403(b),” after “section 401”. (G) Section 414(p)(9) of the 1986 Code is amended by adding at the end thereof the following new sentence: “For purposes of this title, except as provided in regulations, any distribution from an annuity contract under section 403(b) pursuant to a qualified domestic relations order shall be treated in the same manner as a distribution from a plan to which section 401(a)(13) applies.” (u) Additional Clerical Amendments.— 102 STAT. 3590 (1) Paragraph (5) of section 104(b) of the Reform Act is amended by striking out “1222(b)” and inserting in lieu thereof “1122(b)”. (2) The amendment made by section 122(c)(2) of the Reform Act shall be applied as if it also struck out the comma at the end of section 274(b)(1)(B) of the 1986 Code. (3) Clause (i) of section 280F(b)(3)(B) of the 1986 Code is amended by striking out “recovery deductions” and inserting in lieu thereof “depreciation deductions”. (4) Subparagraph (A) of section 803(b)(3) of the Reform Act is amended by inserting closing quotation marks after “section 189)” and by striking out the closing quotation marks following “subpa ragraph (B)”. (5) Paragraph (1) of section 823(b) of the Reform Act is amended to read as follows: “(1) Paragraph (5) of section 461(h), as amended by section 805(c)(5), is amended by striking out subparagraph (B) and by redesignating subparagraph (C) as subparagraph (B).” (6) The amendment made by section 1122(b)(2)(BXiii) of the Reform Act shall be applied as if it struck out “Initial separate tax”. (7) The amendment made by section 1122(b)(2)(C) of the Reform Act shall be applied as if it did not strike out “the” (8) Paragraph (2) of section 72((j)(2) of the 1986 Code is amended by striking out the period at the end of subparagraph (D) and inserting in lieu thereof a comma. (9) Subparagraph (A) of section 417(e)(3) of the 1986 Code is amended by striking out “subclause (II)” and inserting in lieu thereof ^clause (ii)** (10) Subparagraph (A) of section 246(c)(1) of the 1986 Code is amended by striking out “Which” and inserting in lieu thereof “which”. (11) Subsection (a) of section 164 of the 1986 Code is amended by striking out “the GST tax” and inserting in lieu thereof “The GST tax”. (12) Subparagraph (B) of section 1851(a)(6) of the Reform Act is amended by striking out “Subsection (b)” and inserting in lieu thereof “Subsection (a)”. (13) (A) Paragraph (1) of section 1878(e) of the Reform Act is amended by striking out “last sentence of section 514(c)(6)(B) (relating to exceptions)” and inserting in lieu thereof “second to the last sentence of section 514(c)(6)(B) (as amended by paragraph (3))”. (B) Paragraph (3) of section 1878(e) of the Reform Act is amended by striking out “is amended” and inserting in lieu thereof “, and the last sentence of such section, are amended”. (14) Paragraph (23) of section 501(c) of the 1986 Code is amended by striking out “any association” and inserting in lieu (15) Paragraph (1) of section 501(c) of the 1986 Code is amended by striking out “any corporation organized” and inserting in lieu thereof “Any corporation organized” (16) The table of chapters for subtitle E of the 1986 Code is amended by inserting “smokeless tobacco,” after “cigarettes,” in the item relating to chapter 52. (17) Paragraph (4) of section 3321(c) of the 1986 Code is amended by adding a period at the end thereof. 102 STAT. 3591 (18) Paragraph (3) of section 521(b) of the Superfund Revenue Act of 1986 is amended by striking out “Paragraph (1) of section 9506(b)” and inserting in lieu thereof “Subsection (b) of section 9506”. (19) Paragraph (2) of section 5054(a) of the 1986 Code is amended by adding a period at the end thereof. (20) Paragraph (3) of section 9507(b) of the 1986 Code is amended by striking out “Deep Water” each place it appears and inserting in lieu thereof “Deepwater”. (21) Subparagraph (I) of section 231(d)(3) of the Reform Act is amended by striking out “section 6511(d)(6)” and inserting in lieu thereof “section 6511(d)(4)”. (22) Subsection (a) of section 1016 of the 1986 Code is amended by striking out all that follows paragraph (20) and inserting in lieu thereof the following: “(21) to the extent provided in section 48(q), in the case of expenditures with respect to which a credit has been allowed under section 38; “(22) for amounts allowed as deductions under section 59(e) (relating to optional 10-year writeoff of certain tax preferences); “(23) to the extent provided in section 1059 (relating to reduction in basis for extraordinary dividends); and “(24) in the case of qualified replacement property the acquisition of which resulted under section 1042 in the nonrecognition of any part of the gain realized on the sale or exchange of any property, to the extent provided in section 1042(d).” (23) Paragraph (1) of section 7518(g) of the 1986 Code is amended by striking out “not qualified withdrawal” and inserting in lieu thereof “not a qualified withdrawal”. (24) The table of sections for part IV of subchapter P of chapter 1 of the 1986 Code is amended by striking out the item relating to section 1254 and inserting in lieu thereof the following: “Sec. 1254. Gain from disposition of interest in oil, gas, geothermal, or other mineral properties.” (25) Paragraph (1) of section 453(f) of the 1986 Code is amended by striking out “subsection (g)” and inserting in lieu thereof “subsections (g)”. (26) Paragraph (8) of section 453(0 of the 1986 Code is amended by striking out “payment to be” and inserting in lieu thereof “payments to be”, (27) Subparagraph (B) of section 668(b)(1) of the Reform Act is amended by striking out “section 856” and inserting in lieu thereof “section 858” (28) The second to the last sentence of section 857(b)(3)(C) of the 1986 Code is amended by striking out “such capital loss such” and inserting in lieu thereof “such capital loss shall”. (29) Subsection (a) of section 669 of the Reform Act is amended by striking out “this part” and inserting in lieu thereof “this subtitle”. (30) The table of parts for subchapter M of chapter 1 of the 1986 Code is amended by adding at the end thereof the following new item: “Part IV. Real estate mortgage investment conduits.” 102 STAT. 3592 (31) Subsection (c) of section 1277 of the 1986 Code is amended by inserting a closing parenthesis after “section 585(a)(2)”. (32) The table of parts for subchapter L of chapter 1 of the 1986 Code is amended by striking out the items relating to parts II, m, and IV and inserting in lieu thereof the following: “Part II. Other insurance companies. “Part III. Provisions of general application .” (33) Paragraph (7) of section 6051(a) of the 1986 Code is amended by adding a comma at the end thereof. (34) Paragraph (14) of section 1114(b) of the Reform Act is amended— (A) by striking out “section 501(c)(17)” and inserting in lieu thereof “section 501(c)(17)(A)”, and (B) by striking out “duties consists” and inserting in lieu thereof “duties consist”. (35) Subparagraph (O of section 3121(v)(3) of the 1986 Code is amended by striking out “Saving” and inserting in lieu thereof “Savings”. (36) Paragraph (4) of section 6652(k) of the 1986 Code is amended by striking out “or section 6678” and inserting in lieu thereof “or part II of subchapter B of this chapter”. (37) The table of sections for part I of subchapter N of chapter 1 of the 1986 Code is amended by adding at the end thereof the following new item: “Sec. 865. Source rules for personal property sales.” (38) The amendment made by section 1221(b)(3)(B) of the Reform Act shall be construed as striking out paragraph (3) of section 954(e) of the 1986 Code. (39) The heading of section 861(a)(6) of the 1986 Code is amended by striking out “personal property” and inserting in lieu thereof “inventory property”. (40) Subsection (a) of section 1296 of the 1986 Code is amended by inserting a comma after “this subpart”. (41) Subsection (b) of section 7703 of the 1986 Code is amended by striking out “section 151(e)(3)” and inserting in lieu thereof “section 151(c)(3)”. (42) Paragraph (3) of section 1404(c) of the Reform Act is amended by striking out “section 6601” and inserting in lieu thereof “section 6601(b)”. (43) Subsection (a) of section 2611 of the 1986 Code is amended by striking out “mean” and inserting in lieu thereof “means”. (44) Subparagraph (D) of section 3406(h)(5) of the 1986 Code is amended by adding a period at the end thereof. (45) The table of sections for part III of subchapter C of chapter 76 of the 1986 Code is amended by adding at the end thereof the following new item: “Sec. 7475. Practice fee.” (46) The paragraph added to section 1276(b) of the 1986 Code by section 1803(a)(13)(A)(ii) of the Reform Act is amended— (A) by inserting “(3)” before “Special” in the paragraph heading, (B) by inserting a 1 em dash after “payments.” in the heading, and 102 STAT. 3593 (C) by adding a period at the end thereof. (47) Subparagraph (C) of section 809(d)(4) of the 1986 Code is amended by striking out “the Secretary—” and inserting in lieu thereof “The Secretary—”. (48) Subsection (f) of section 7872 of the 1986 Code is amended by redesignating the paragraph (11) added by section 1854 of the Reform Act as paragraph (12). (49) Paragraph (5) of section 761 l(i) of the 1986 Code is amended by striking out “the title” and inserting in lieu thereof “this title”. (50) Section 13303(a) of Public Law 99–272 is amended (in the matter proposed to be inserted in section 3306(c) of the Internal Revenue Code of 1954), effective as of the date of its enactment, by inserting a comma immediately after “1988”. (51) Subsection (f) of section 6511 of the 1986 Code is amended— (A) by striking out “chapter 42” in the text and inserting in lieu thereof “section 4912, chapter 42,”, and (B) by striking out “Certain Chapter 43 Taxes” in the subsection heading and inserting in lieu thereof “Similar Taxes”. (52) Section 2503(e)(2)(B) of the 1986 Code is amended by striking out “section 213(e)” and inserting in lieu thereof “section 213(d)”.