TREATMENT OF THE SALE OF INTEREST IN A QUALIFIED SUBCHAPTER S SUBSIDIARY.

SEC. 8234. TREATMENT OF THE SALE OF INTEREST IN A QUALIFIED SUBCHAPTER S SUBSIDIARY.(a) In General.—Subparagraph (C) of section 1361(b)(3) (relating to treatment of terminations of qualified subchapter S subsidiary status) is amended—(1) by striking “For purposes of this title,” and inserting the following:“(i) In general.—For purposes of this title,”, and(2) by inserting at the end the following new clause:“(ii) Termination by reason of sale of stock.—If the failure to meet the requirements of subparagraph (B) is by reason of the sale of stock of a corporation which is a qualified subchapter S subsidiary, the sale of such stock shall be treated as if—“(I) the sale were a sale of an undivided interest in the assets of such corporation (based on the percentage of the corporation’s stock sold), and“(II) the sale were followed by an acquisition by such corporation of all of its assets (and the 121 STAT. 199 assumption by such corporation of all of its liabilities) in a transaction to which section 351 applies.”.(b) Effective Date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2006.