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S. 750 (104th): A bill to amend the Internal Revenue Code of 1986 to properly characterize certain redemptions of stock held by corporations.

The text of the bill below is as of May 3, 1995 (Introduced).


S 750 IS

104th CONGRESS

1st Session

S. 750

To amend the Internal Revenue Code of 1986 to properly characterize certain redemptions of stock held by corporations.

IN THE SENATE OF THE UNITED STATES

May 3 (legislative day, MAY 1), 1995

Mr. PACKWOOD (for himself and Mr. MOYNIHAN) introduced the following bill; which was read twice and referred to the Committee on Finance


A BILL

To amend the Internal Revenue Code of 1986 to properly characterize certain redemptions of stock held by corporations.

    Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. TREATMENT OF DISTRIBUTIONS IN REDEMPTION OF STOCK HELD BY A CORPORATION.

    (a) IN GENERAL- Subsection (b) of section 302 of the Internal Revenue Code of 1986 (relating to redemptions treated as exchanges) is amended by redesignating paragraph (5) as paragraph (6) and by inserting after paragraph (4) the following new paragraph:

      ‘(5) REDEMPTION FROM CERTAIN CORPORATE SHAREHOLDERS- Except as provided in regulations, subsection (a) shall apply to a distribution in redemption of stock held by a corporation if--

        ‘(A) such redemption is--

          ‘(i) part of a partial liquidation (within the meaning of subsection (e)) of the redeeming corporation, or

          ‘(ii) not pro rata as to all shareholders, and

        ‘(B) such corporation would be entitled to a deduction under section 243, 244, or 245 with respect to such distribution but for the application of this paragraph.

      To the extent provided by regulations, no loss shall be recognized solely by reason of the application of this paragraph.’

    (b) TECHNICAL AMENDMENTS-

      (1) Subsection (a) of section 302 of such Code is amended by striking ‘or (4)’ and inserting ‘(4), or (5)’.

      (2) Paragraph (6) of section 302(b) of such Code (as redesignated by subsection (a)) is amended by striking ‘or (4)’ each place it appears and inserting ‘(4), or (5)’.

      (3) Subsection (e) of section 1059 of such Code is amended by striking paragraph (1) and by redesignating paragraphs (2) and (3) as paragraphs (1) and (2), respectively.

      (4) Subsection (g) of section 1059 of such Code is amended by inserting ‘and section 302(b)(5)’ after ‘this section’ in paragraph (1) and in the material preceding paragraph (1).

    (c) EFFECTIVE DATE-

      (1) IN GENERAL- The amendments made by this section shall apply to redemptions after May 3, 1995.

      (2) EXCEPTION- The amendments made by this section shall not apply to any redemption pursuant to the terms of--

        (A) a written binding contract in effect on May 3, 1995, or

        (B) a tender offer outstanding on May 3, 1995.