PROHIBITION ON NONRECOGNITION OF GAIN THROUGH COMPLETE LIQUIDATION OF HOLDING COMPANY.

SEC. 893. PROHIBITION ON NONRECOGNITION OF GAIN THROUGH COMPLETE LIQUIDATION OF HOLDING COMPANY. (a) In General.—Section 332 is amended by adding at the end the following new subsection:“(d) Recognition of Gain on Liquidation of Certain Holding Companies.—“(1) In general.—In the case of any distribution to a foreign corporation in complete liquidation of an applicable holding company—“(A) subsection (a) and section 331 shall not apply to such distribution, and“(B) such distribution shall be treated as a distribution to which section 301 applies. “(2) Applicable holding company.—For purposes of this subsection:“(A) In general.—The term ‘applicable holding company’ means any domestic corporation—“(i) which is a common parent of an affiliated group, “(ii) stock of which is directly owned by the distributee foreign corporation, “(iii) substantially all of the assets of which consist of stock in other members of such affiliated group, and118 STAT. 1647“(iv) which has not been in existence at all times during the 5 years immediately preceding the date of the liquidation.“(B) Affiliated group.—For purposes of this subsection, the term ‘affiliated group’ has the meaning given such term by section 1504(a) (without regard to paragraphs (2) and (4) of section 1504(b)). “(3) Coordination with subpart f.—If the distributee of a distribution described in paragraph (1) is a controlled foreign corporation (as defined in section 957), then notwithstanding paragraph (1) or subsection (a), such distribution shall be treated as a distribution to which section 331 applies.“(4) Regulations.—The Secretary shall provide such regulations as appropriate to prevent the abuse of this subsection, including regulations which provide, for the purposes of clause (iv) of paragraph (2)(A), that a corporation is not in existence for any period unless it is engaged in the active conduct of a trade or business or owns a significant ownership interest in another corporation so engaged.”.(b) Effective Date.—The amendment made by this section shall apply to distributions in complete liquidation occurring on or after the date of the enactment of this Act.