RECAPTURE OF OVERALL FOREIGN LOSSES ON SALE OF CONTROLLED FOREIGN CORPORATION.

SEC. 895. RECAPTURE OF OVERALL FOREIGN LOSSES ON SALE OF CONTROLLED FOREIGN CORPORATION.(a) In General.—Section 904(f)(3) (relating to dispositions) is amending by adding at the end the following new subparagraph:“(D) Application to certain dispositions of stock in controlled foreign corporation.—“(i) In general.—This paragraph shall apply to an applicable disposition in the same manner as if it were a disposition of property described in subparagraph (A), except that the exception contained in subparagraph (C)(i) shall not apply.“(ii) Applicable disposition.—For purposes of clause (i), the term ‘applicable disposition’ means any disposition of any share of stock in a controlled foreign corporation in a transaction or series of transactions if, immediately before such transaction or series of transactions, the taxpayer owned more than 50 percent (by vote or value) of the stock of the controlled foreign corporation. Such term shall not include a disposition described in clause (iii) or (iv), except that clause (i) 118 STAT. 1648 shall apply to any gain recognized on any such disposition.“(iii) Exception for certain exchanges where ownership percentage retained.—A disposition shall not be treated as an applicable disposition under clause (ii) if it is part of a transaction or series of transactions—“(I) to which section 351 or 721 applies, or under which the transferor receives stock in a foreign corporation in exchange for the stock in the controlled foreign corporation and the stock received is exchanged basis property (as defined in section 7701(a)(44)), and“(II) immediately after which, the transferor owns (by vote or value) at least the same percentage of stock in the controlled foreign corporation (or, if the controlled foreign corporation is not in existence after such transaction or series of transactions, in another foreign corporation stock in which was received by the transferor in exchange for stock in the controlled foreign corporation) as the percentage of stock in the controlled foreign corporation which the taxpayer owned immediately before such transaction or series of transactions.“(iv) Exception for certain asset acquisitions.—A disposition shall not be treated as an applicable disposition under clause (ii) if it is part of a transaction or series of transactions in which the taxpayer (or any member of a controlled group of corporations filing a consolidated return under section 1501 which includes the taxpayer) acquires the assets of a controlled foreign corporation in exchange for the shares of the controlled foreign corporation in a liquidation described in section 332 or a reorganization described in section 368(a)(1).“(v) Controlled foreign corporation.—For purposes of this subparagraph, the term ‘controlled foreign corporation’ has the meaning given such term by section 957. “(vi) Stock ownership.—For purposes of this subparagraph, ownership of stock shall be determined under the rules of subsections (a) and (b) of section 958.”. (b) Effective Date.—The amendment made by this section shall apply to dispositions after the date of the enactment of this Act.