
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC382]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
          Subchapter C--Corporate Distributions and Adjustments
 
                           PART V--CARRYOVERS
 
Sec. 382. Limitation on net operating loss carryforwards and 
        certain built-in losses following ownership change
        

(a) General rule

    The amount of the taxable income of any new loss corporation for any 
post-change year which may be offset by pre-change losses shall not 
exceed the section 382 limitation for such year.

(b) Section 382 limitation

    For purposes of this section--

                           (1) In general

        Except as otherwise provided in this section, the section 382 
    limitation for any post-change year is an amount equal to--
            (A) the value of the old loss corporation, multiplied by
            (B) the long-term tax-exempt rate.

                (2) Carryforward of unused limitation

        If the section 382 limitation for any post-change year exceeds 
    the taxable income of the new loss corporation for such year which 
    was offset by pre-change losses, the section 382 limitation for the 
    next post-change year shall be increased by the amount of such 
    excess.

    (3) Special rule for post-change year which includes change 
                                    date

        In the case of any post-change year which includes the change 
    date--

        (A) Limitation does not apply to taxable income before change

            Subsection (a) shall not apply to the portion of the taxable 
        income for such year which is allocable to the period in such 
        year on or before the change date. Except as provided in 
        subsection (h)(5) and in regulations, taxable income shall be 
        allocated ratably to each day in the year.

        (B) Limitation for period after change

            For purposes of applying the limitation of subsection (a) to 
        the remainder of the taxable income for such year, the section 
        382 limitation shall be an amount which bears the same ratio to 
        such limitation (determined without regard to this paragraph) 
        as--
                (i) the number of days in such year after the change 
            date, bears to
                (ii) the total number of days in such year.

(c) Carryforwards disallowed if continuity of business requirements not 
        met

                           (1) In general

        Except as provided in paragraph (2), if the new loss corporation 
    does not continue the business enterprise of the old loss 
    corporation at all times during the 2-year period beginning on the 
    change date, the section 382 limitation for any post-change year 
    shall be zero.

                   (2) Exception for certain gains

        The section 382 limitation for any post-change year shall not be 
    less than the sum of--
            (A) any increase in such limitation under--
                (i) subsection (h)(1)(A) for recognized built-in gains 
            for such year, and
                (ii) subsection (h)(1)(C) for gain recognized by reason 
            of an election under section 338, plus

            (B) any increase in such limitation under subsection (b)(2) 
        for amounts described in subparagraph (A) which are carried 
        forward to such year.

(d) Pre-change loss and post-change year

    For purposes of this section--

                         (1) Pre-change loss

        The term ``pre-change loss'' means--
            (A) any net operating loss carryforward of the old loss 
        corporation to the taxable year ending with the ownership change 
        or in which the change date occurs, and
            (B) the net operating loss of the old loss corporation for 
        the taxable year in which the ownership change occurs to the 
        extent such loss is allocable to the period in such year on or 
        before the change date.

    Except as provided in subsection (h)(5) and in regulations, the net 
    operating loss shall, for purposes of subparagraph (B), be allocated 
    ratably to each day in the year.

                        (2) Post-change year

        The term ``post-change year'' means any taxable year ending 
    after the change date.

(e) Value of old loss corporation

    For purposes of this section--

                           (1) In general

        Except as otherwise provided in this subsection, the value of 
    the old loss corporation is the value of the stock of such 
    corporation (including any stock described in section 1504(a)(4)) 
    immediately before the ownership change.

        (2) Special rule in the case of redemption or other 
                            corporate contraction

        If a redemption or other corporate contraction occurs in 
    connection with an ownership change, the value under paragraph (1) 
    shall be determined after taking such redemption or other corporate 
    contraction into account.

                (3) Treatment of foreign corporations

        Except as otherwise provided in regulations, in determining the 
    value of any old loss corporation which is a foreign corporation, 
    there shall be taken into account only items treated as connected 
    with the conduct of a trade or business in the United States.

(f) Long-term tax-exempt rate

    For purposes of this section--

                           (1) In general

        The long-term tax-exempt rate shall be the highest of the 
    adjusted Federal long-term rates in effect for any month in the 3-
    calendar-month period ending with the calendar month in which the 
    change date occurs.

                 (2) Adjusted Federal long-term rate

        For purposes of paragraph (1), the term ``adjusted Federal long-
    term rate'' means the Federal long-term rate determined under 
    section 1274(d), except that--
            (A) paragraphs (2) and (3) thereof shall not apply, and
            (B) such rate shall be properly adjusted for differences 
        between rates on long-term taxable and tax-exempt obligations.

(g) Ownership change

    For purposes of this section--

                           (1) In general

        There is an ownership change if, immediately after any owner 
    shift involving a 5-percent shareholder or any equity structure 
    shift--
            (A) the percentage of the stock of the loss corporation 
        owned by 1 or more 5-percent shareholders has increased by more 
        than 50 percentage points, over
            (B) the lowest percentage of stock of the loss corporation 
        (or any predecessor corporation) owned by such shareholders at 
        any time during the testing period.

           (2) Owner shift involving 5-percent shareholder

        There is an owner shift involving a 5-percent shareholder if--
            (A) there is any change in the respective ownership of stock 
        of a corporation, and
            (B) such change affects the percentage of stock of such 
        corporation owned by any person who is a 5-percent shareholder 
        before or after such change.

                 (3) Equity structure shift defined

        (A) In general

            The term ``equity structure shift'' means any reorganization 
        (within the meaning of section 368). Such term shall not 
        include--
                (i) any reorganization described in subparagraph (D) or 
            (G) of section 368(a)(1) unless the requirements of section 
            354(b)(1) are met, and
                (ii) any reorganization described in subparagraph (F) of 
            section 368(a)(1).

        (B) Taxable reorganization-type transactions, etc.

            To the extent provided in regulations, the term ``equity 
        structure shift'' includes taxable reorganization-type 
        transactions, public offerings, and similar transactions.

           (4) Special rules for application of subsection

        (A) Treatment of less than 5-percent shareholders

            Except as provided in subparagraphs (B)(i) and (C), in 
        determining whether an ownership change has occurred, all stock 
        owned by shareholders of a corporation who are not 5-percent 
        shareholders of such corporation shall be treated as stock owned 
        by 1 5-percent shareholder of such corporation.

        (B) Coordination with equity structure shifts

            For purposes of determining whether an equity structure 
        shift (or subsequent transaction) is an ownership change--
            (i) Less than 5-percent shareholders

                Subparagraph (A) shall be applied separately with 
            respect to each group of shareholders (immediately before 
            such equity structure shift) of each corporation which was a 
            party to the reorganization involved in such equity 
            structure shift.
            (ii) Acquisitions of stock

                Unless a different proportion is established, 
            acquisitions of stock after such equity structure shift 
            shall be treated as being made proportionately from all 
            shareholders immediately before such acquisition.

        (C) Coordination with other owner shifts

            Except as provided in regulations, rules similar to the 
        rules of subparagraph (B) shall apply in determining whether 
        there has been an owner shift involving a 5-percent shareholder 
        and whether such shift (or subsequent transaction) results in an 
        ownership change.

        (D) Treatment of worthless stock

            If any stock held by a 50-percent shareholder is treated by 
        such shareholder as becoming worthless during any taxable year 
        of such shareholder and such stock is held by such shareholder 
        as of the close of such taxable year, for purposes of 
        determining whether an ownership change occurs after the close 
        of such taxable year, such shareholder--
                (i) shall be treated as having acquired such stock on 
            the 1st day of his 1st succeeding taxable year, and
                (ii) shall not be treated as having owned such stock 
            during any prior period.

        For purposes of the preceding sentence, the term ``50-percent 
        shareholder'' means any person owning 50 percent or more of the 
        stock of the corporation at any time during the 3-year period 
        ending on the last day of the taxable year with respect to which 
        the stock was so treated.

(h) Special rules for built-in gains and losses and section 338 gains

    For purposes of this section--

                           (1) In general

        (A) Net unrealized built-in gain

            (i) In general

                If the old loss corporation has a net unrealized built-
            in gain, the section 382 limitation for any recognition 
            period taxable year shall be increased by the recognized 
            built-in gains for such taxable year.
            (ii) Limitation

                The increase under clause (i) for any recognition period 
            taxable year shall not exceed--
                    (I) the net unrealized built-in gain, reduced by
                    (II) recognized built-in gains for prior years 
                ending in the recognition period.

        (B) Net unrealized built-in loss

            (i) In general

                If the old loss corporation has a net unrealized built-
            in loss, the recognized built-in loss for any recognition 
            period taxable year shall be subject to limitation under 
            this section in the same manner as if such loss were a pre-
            change loss.
            (ii) Limitation

                Clause (i) shall apply to recognized built-in losses for 
            any recognition period taxable year only to the extent such 
            losses do not exceed--
                    (I) the net unrealized built-in loss, reduced by
                    (II) recognized built-in losses for prior taxable 
                years ending in the recognition period.

        (C) Special rules for certain section 338 gains

            If an election under section 338 is made in connection with 
        an ownership change and the net unrealized built-in gain is zero 
        by reason of paragraph (3)(B), then, with respect to such 
        change, the section 382 limitation for the post-change year in 
        which gain is recognized by reason of such election shall be 
        increased by the lesser of--
                (i) the recognized built-in gains by reason of such 
            election, or
                (ii) the net unrealized built-in gain (determined 
            without regard to paragraph (3)(B)).

                (2) Recognized built-in gain and loss

        (A) Recognized built-in gain

            The term ``recognized built-in gain'' means any gain 
        recognized during the recognition period on the disposition of 
        any asset to the extent the new loss corporation establishes 
        that--
                (i) such asset was held by the old loss corporation 
            immediately before the change date, and
                (ii) such gain does not exceed the excess of--
                    (I) the fair market value of such asset on the 
                change date, over
                    (II) the adjusted basis of such asset on such date.

        (B) Recognized built-in loss

            The term ``recognized built-in loss'' means any loss 
        recognized during the recognition period on the disposition of 
        any asset except to the extent the new loss corporation 
        establishes that--
                (i) such asset was not held by the old loss corporation 
            immediately before the change date, or
                (ii) such loss exceeds the excess of--
                    (I) the adjusted basis of such asset on the change 
                date, over
                    (II) the fair market value of such asset on such 
                date.

        Such term includes any amount allowable as depreciation, 
        amortization, or depletion for any period within the recognition 
        period except to the extent the new loss corporation establishes 
        that the amount so allowable is not attributable to the excess 
        described in clause (ii).

          (3) Net unrealized built-in gain and loss defined

        (A) Net unrealized built-in gain and loss

            (i) In general

                The terms ``net unrealized built-in gain'' and ``net 
            unrealized built-in loss'' mean, with respect to any old 
            loss corporation, the amount by which--
                    (I) the fair market value of the assets of such 
                corporation immediately before an ownership change is 
                more or less, respectively, than
                    (II) the aggregate adjusted basis of such assets at 
                such time.
            (ii) Special rule for redemptions or other corporate 
                    contractions

                If a redemption or other corporate contraction occurs in 
            connection with an ownership change, to the extent provided 
            in regulations, determinations under clause (i) shall be 
            made after taking such redemption or other corporate 
            contraction into account.

        (B) Threshold requirement

            (i) In general

                If the amount of the net unrealized built-in gain or net 
            unrealized built-in loss (determined without regard to this 
            subparagraph) of any old loss corporation is not greater 
            than the lesser of--
                    (I) 15 percent of the amount determined for purposes 
                of subparagraph (A)(i)(I), or
                    (II) $10,000,000,

          the net unrealized built-in gain or net unrealized built-in 
            loss shall be zero.
            (ii) Cash and cash items not taken into account

                In computing any net unrealized built-in gain or net 
            unrealized built-in loss under clause (i), except as 
            provided in regulations, there shall not be taken into 
            account--
                    (I) any cash or cash item, or
                    (II) any marketable security which has a value which 
                does not substantially differ from adjusted basis.

            (4) Disallowed loss allowed as a carryforward

        If a deduction for any portion of a recognized built-in loss is 
    disallowed for any post-change year, such portion--
            (A) shall be carried forward to subsequent taxable years 
        under rules similar to the rules for the carrying forward of net 
        operating losses (or to the extent the amount so disallowed is 
        attributable to capital losses, under rules similar to the rules 
        for the carrying forward of net capital losses), but
            (B) shall be subject to limitation under this section in the 
        same manner as a pre-change loss.

    (5) Special rules for post-change year which includes change 
                                    date

        For purposes of subsection (b)(3)--
            (A) in applying subparagraph (A) thereof, taxable income 
        shall be computed without regard to recognized built-in gains to 
        the extent such gains increased the section 382 limitation for 
        the year (or recognized built-in losses to the extent such 
        losses are treated as pre-change losses), and gain described in 
        paragraph (1)(C), for the year, and
            (B) in applying subparagraph (B) thereof, the section 382 
        limitation shall be computed without regard to recognized built-
        in gains, and gain described in paragraph (1)(C), for the year.

               (6) Treatment of certain built-in items

        (A) Income items

            Any item of income which is properly taken into account 
        during the recognition period but which is attributable to 
        periods before the change date shall be treated as a recognized 
        built-in gain for the taxable year in which it is properly taken 
        into account.

        (B) Deduction items

            Any amount which is allowable as a deduction during the 
        recognition period (determined without regard to any carryover) 
        but which is attributable to periods before the change date 
        shall be treated as a recognized built-in loss for the taxable 
        year for which it is allowable as a deduction.

        (C) Adjustments

            The amount of the net unrealized built-in gain or loss shall 
        be properly adjusted for amounts which would be treated as 
        recognized built-in gains or losses under this paragraph if such 
        amounts were properly taken into account (or allowable as a 
        deduction) during the recognition period.

                    (7) Recognition period, etc.

        (A) Recognition period

            The term ``recognition period'' means, with respect to any 
        ownership change, the 5-year period beginning on the change 
        date.

        (B) Recognition period taxable year

            The term ``recognition period taxable year'' means any 
        taxable year any portion of which is in the recognition period.

       (8) Determination of fair market value in certain cases

        If 80 percent or more in value of the stock of a corporation is 
    acquired in 1 transaction (or in a series of related transactions 
    during any 12-month period), for purposes of determining the net 
    unrealized built-in loss, the fair market value of the assets of 
    such corporation shall not exceed the grossed up amount paid for 
    such stock properly adjusted for indebtedness of the corporation and 
    other relevant items.

                 (9) Tax-free exchanges or transfers

        The Secretary shall prescribe such regulations as may be 
    necessary to carry out the purposes of this subsection where 
    property held on the change date was acquired (or is subsequently 
    transferred) in a transaction where gain or loss is not recognized 
    (in whole or in part).

(i) Testing period

    For purposes of this section--

                          (1) 3-year period

        Except as otherwise provided in this section, the testing period 
    is the 3-year period ending on the day of any owner shift involving 
    a 5-percent shareholder or equity structure shift.

      (2) Shorter period where there has been recent ownership 
                                   change

        If there has been an ownership change under this section, the 
    testing period for determining whether a 2nd ownership change has 
    occurred shall not begin before the 1st day following the change 
    date for such earlier ownership change.

       (3) Shorter period where all losses arise after 3-year 
                                period begins

        The testing period shall not begin before the earlier of the 1st 
    day of the 1st taxable year from which there is a carryforward of a 
    loss or of an excess credit to the 1st post-change year or the 
    taxable year in which the transaction being tested occurs. Except as 
    provided in regulations, this paragraph shall not apply to any loss 
    corporation which has a net unrealized built-in loss (determined 
    after application of subsection (h)(3)(B)).

(j) Change date

    For purposes of this section, the change date is--
        (1) in the case where the last component of an ownership change 
    is an owner shift involving a 5-percent shareholder, the date on 
    which such shift occurs, and
        (2) in the case where the last component of an ownership change 
    is an equity structure shift, the date of the reorganization.

(k) Definitions and special rules

    For purposes of this section--

                        (1) Loss corporation

        The term ``loss corporation'' means a corporation entitled to 
    use a net operating loss carryover or having a net operating loss 
    for the taxable year in which the ownership change occurs. Except to 
    the extent provided in regulations, such term includes any 
    corporation with a net unrealized built-in loss.

                      (2) Old loss corporation

        The term ``old loss corporation'' means any corporation--
            (A) with respect to which there is an ownership change, and
            (B) which (before the ownership change) was a loss 
        corporation.

                      (3) New loss corporation

        The term ``new loss corporation'' means a corporation which 
    (after an ownership change) is a loss corporation. Nothing in this 
    section shall be treated as implying that the same corporation may 
    not be both the old loss corporation and the new loss corporation.

                         (4) Taxable income

        Taxable income shall be computed with the modifications set 
    forth in section 172(d).

                              (5) Value

        The term ``value'' means fair market value.

                     (6) Rules relating to stock

        (A) Preferred stock

            Except as provided in regulations and subsection (e), the 
        term ``stock'' means stock other than stock described in section 
        1504(a)(4).

        (B) Treatment of certain rights, etc.

            The Secretary shall prescribe such regulations as may be 
        necessary--
                (i) to treat warrants, options, contracts to acquire 
            stock, convertible debt interests, and other similar 
            interests as stock, and
                (ii) to treat stock as not stock.

        (C) Determinations on basis of value

            Determinations of the percentage of stock of any corporation 
        held by any person shall be made on the basis of value.

                      (7) 5-percent shareholder

        The term ``5-percent shareholder'' means any person holding 5 
    percent or more of the stock of the corporation at any time during 
    the testing period.

(l) Certain additional operating rules

    For purposes of this section--

      (1) Certain capital contributions not taken into account

        (A) In general

            Any capital contribution received by an old loss corporation 
        as part of a plan a principal purpose of which is to avoid or 
        increase any limitation under this section shall not be taken 
        into account for purposes of this section.

        (B) Certain contributions treated as part of plan

            For purposes of subparagraph (A), any capital contribution 
        made during the 2-year period ending on the change date shall, 
        except as provided in regulations, be treated as part of a plan 
        described in subparagraph (A).

            (2) Ordering rules for application of section

        (A) Coordination with section 172(b) carryover rules

            In the case of any pre-change loss for any taxable year 
        (hereinafter in this subparagraph referred to as the ``loss 
        year'') subject to limitation under this section, for purposes 
        of determining under the 2nd sentence of section 172(b)(2) the 
        amount of such loss which may be carried to any taxable year, 
        taxable income for any taxable year shall be treated as not 
        greater than--
                (i) the section 382 limitation for such taxable year, 
            reduced by
                (ii) the unused pre-change losses for taxable years 
            preceding the loss year.

        Similar rules shall apply in the case of any credit or loss 
        subject to limitation under section 383.

        (B) Ordering rule for losses carried from same taxable year

            In any case in which--
                (i) a pre-change loss of a loss corporation for any 
            taxable year is subject to a section 382 limitation, and
                (ii) a net operating loss of such corporation from such 
            taxable year is not subject to such limitation,

        taxable income shall be treated as having been offset first by 
        the loss subject to such limitation.

         (3) Operating rules relating to ownership of stock

        (A) Constructive ownership

            Section 318 (relating to constructive ownership of stock) 
        shall apply in determining ownership of stock, except that--
                (i) paragraphs (1) and (5)(B) of section 318(a) shall 
            not apply and an individual and all members of his family 
            described in paragraph (1) of section 318(a) shall be 
            treated as 1 individual for purposes of applying this 
            section,
                (ii) paragraph (2) of section 318(a) shall be applied--
                    (I) without regard to the 50-percent limitation 
                contained in subparagraph (C) thereof, and
                    (II) except as provided in regulations, by treating 
                stock attributed thereunder as no longer being held by 
                the entity from which attributed,

                (iii) paragraph (3) of section 318(a) shall be applied 
            only to the extent provided in regulations,
                (iv) except to the extent provided in regulations, an 
            option to acquire stock shall be treated as exercised if 
            such exercise results in an ownership change, and
                (v) in attributing stock from an entity under paragraph 
            (2) of section 318(a), there shall not be taken into 
            account--
                    (I) in the case of attribution from a corporation, 
                stock which is not treated as stock for purposes of this 
                section, or
                    (II) in the case of attribution from another entity, 
                an interest in such entity similar to stock described in 
                subclause (I).

        A rule similar to the rule of clause (iv) shall apply in the 
        case of any contingent purchase, warrant, convertible debt, put, 
        stock subject to a risk of forfeiture, contract to acquire 
        stock, or similar interests.

        (B) Stock acquired by reason of death, gift, divorce, 
                separation, etc.

            If--
                (i) the basis of any stock in the hands of any person is 
            determined--
                    (I) under section 1014 (relating to property 
                acquired from a decedent),
                    (II) section 1015 (relating to property acquired by 
                a gift or transfer in trust), or
                    (III) section 1041(b)(2) (relating to transfers of 
                property between spouses or incident to divorce),

                (ii) stock is received by any person in satisfaction of 
            a right to receive a pecuniary bequest, or
                (iii) stock is acquired by a person pursuant to any 
            divorce or separation instrument (within the meaning of 
            section 71(b)(2)),

        such person shall be treated as owning such stock during the 
        period such stock was owned by the person from whom it was 
        acquired.

        (C) Certain changes in percentage ownership which are 
                attributable to fluctuations in value not taken into 
                account

            Except as provided in regulations, any change in 
        proportionate ownership which is attributable solely to 
        fluctuations in the relative fair market values of different 
        classes of stock shall not be taken into account.

     (4) Reduction in value where substantial nonbusiness assets

        (A) In general

            If, immediately after an ownership change, the new loss 
        corporation has substantial nonbusiness assets, the value of the 
        old loss corporation shall be reduced by the excess (if any) 
        of--
                (i) the fair market value of the nonbusiness assets of 
            the old loss corporation, over
                (ii) the nonbusiness asset share of indebtedness for 
            which such corporation is liable.

        (B) Corporation having substantial nonbusiness assets

            For purposes of subparagraph (A)--
            (i) In general

                The old loss corporation shall be treated as having 
            substantial nonbusiness assets if at least \1/3\ of the 
            value of the total assets of such corporation consists of 
            nonbusiness assets.
            (ii) Exception for certain investment entities

                A regulated investment company to which part I of 
            subchapter M applies, a real estate investment trust to 
            which part II of subchapter M applies, a REMIC to which part 
            IV of subchapter M applies, or a FASIT to which part V of 
            subchapter M applies, shall not be treated as a new loss 
            corporation having substantial nonbusiness assets.

        (C) Nonbusiness assets

            For purposes of this paragraph, the term ``nonbusiness 
        assets'' means assets held for investment.

        (D) Nonbusiness asset share

            For purposes of this paragraph, the nonbusiness asset share 
        of the indebtedness of the corporation is an amount which bears 
        the same ratio to such indebtedness as--
                (i) the fair market value of the nonbusiness assets of 
            the corporation, bears to
                (ii) the fair market value of all assets of such 
            corporation.

        (E) Treatment of subsidiaries

            For purposes of this paragraph, stock and securities in any 
        subsidiary corporation shall be disregarded and the parent 
        corporation shall be deemed to own its ratable share of the 
        subsidiary's assets. For purposes of the preceding sentence, a 
        corporation shall be treated as a subsidiary if the parent owns 
        50 percent or more of the combined voting power of all classes 
        of stock entitled to vote, and 50 percent or more of the total 
        value of shares of all classes of stock.

                    (5) Title 11 or similar case

        (A) In general

            Subsection (a) shall not apply to any ownership change if--
                (i) the old loss corporation is (immediately before such 
            ownership change) under the jurisdiction of the court in a 
            title 11 or similar case, and
                (ii) the shareholders and creditors of the old loss 
            corporation (determined immediately before such ownership 
            change) own (after such ownership change and as a result of 
            being shareholders or creditors immediately before such 
            change) stock of the new loss corporation (or stock of a 
            controlling corporation if also in bankruptcy) which meets 
            the requirements of section 1504(a)(2) (determined by 
            substituting ``50 percent'' for ``80 percent'' each place it 
            appears).

        (B) Reduction for interest payments to creditors becoming 
                shareholders

            In any case to which subparagraph (A) applies, the pre-
        change losses and excess credits (within the meaning of section 
        383(a)(2)) which may be carried to a post-change year shall be 
        computed as if no deduction was allowable under this chapter for 
        the interest paid or accrued by the old loss corporation on 
        indebtedness which was converted into stock pursuant to title 11 
        or similar case during--
                (i) any taxable year ending during the 3-year period 
            preceding the taxable year in which the ownership change 
            occurs, and
                (ii) the period of the taxable year in which the 
            ownership change occurs on or before the change date.

        (C) Coordination with section 108

            In applying section 108(e)(8) to any case to which 
        subparagraph (A) applies, there shall not be taken into account 
        any indebtedness for interest described in subparagraph (B).

        (D) Section 382 limitation zero if another change within 2 years

            If, during the 2-year period immediately following an 
        ownership change to which this paragraph applies, an ownership 
        change of the new loss corporation occurs, this paragraph shall 
        not apply and the section 382 limitation with respect to the 2nd 
        ownership change for any post-change year ending after the 
        change date of the 2nd ownership change shall be zero.

        (E) Only certain stock taken into account

            For purposes of subparagraph (A)(ii), stock transferred to a 
        creditor shall be taken into account only to the extent such 
        stock is transferred in satisfaction of indebtedness and only if 
        such indebtedness--
                (i) was held by the creditor at least 18 months before 
            the date of the filing of the title 11 or similar case, or
                (ii) arose in the ordinary course of the trade or 
            business of the old loss corporation and is held by the 
            person who at all times held the beneficial interest in such 
            indebtedness.

        (F) Special rule for certain financial institutions

            (i) In general

                In the case of any ownership change to which this 
            subparagraph applies, this paragraph shall be applied--
                    (I) by substituting ``1504(a)(2)(B)'' for 
                ``1504(a)(2)'' and ``20 percent'' for ``50 percent'' in 
                subparagraph (A)(ii), and
                    (II) without regard to subparagraphs (B) and (C).
            (ii) Special rule for depositors

                For purposes of applying this paragraph to an ownership 
            change to which this subparagraph applies--
                    (I) a depositor in the old loss corporation shall be 
                treated as a stockholder in such loss corporation 
                immediately before the change,
                    (II) deposits which, after the change, become 
                deposits of the new loss corporation shall be treated as 
                stock of the new loss corporation, and
                    (III) the fair market value of the outstanding stock 
                of the new loss corporation shall include the amount of 
                deposits in the new loss corporation immediately after 
                the change.
            (iii) Changes to which subparagraph applies

                This subparagraph shall apply to--
                    (I) an equity structure shift which is a 
                reorganization described in section 368(a)(3)(D)(ii) \1\ 
                (as modified by section 368(a)(3)(D)(iv)),\1\ or
---------------------------------------------------------------------------
    \1\ See References in Text note below.
---------------------------------------------------------------------------
                    (II) any other equity structure shift (or 
                transaction to which section 351 applies) which occurs 
                as an integral part of a transaction involving a change 
                to which subclause (I) applies.

          This subparagraph shall not apply to any equity structure 
            shift or transaction occurring on or after May 10, 1989.

        (G) Title 11 or similar case

            For purposes of this paragraph, the term ``title 11 or 
        similar case'' has the meaning given such term by section 
        368(a)(3)(A).

        (H) Election not to have paragraph apply

            A new loss corporation may elect, subject to such terms and 
        conditions as the Secretary may prescribe, not to have the 
        provisions of this paragraph apply.

            (6) Special rule for insolvency transactions

        If paragraph (5) does not apply to any reorganization described 
    in subparagraph (G) of section 368(a)(1) or any exchange of debt for 
    stock in a title 11 or similar case (as defined in section 
    368(a)(3)(A)), the value under subsection (e) shall reflect the 
    increase (if any) in value of the old loss corporation resulting 
    from any surrender or cancellation of creditors' claims in the 
    transaction.

            (7) Coordination with alternative minimum tax

        The Secretary shall by regulation provide for the application of 
    this section to the alternative tax net operating loss deduction 
    under section 56(d).

               (8) Predecessor and successor entities

        Except as provided in regulations, any entity and any 
    predecessor or successor entities of such entity shall be treated as 
    1 entity.

(m) Regulations

    The Secretary shall prescribe such regulations as may be necessary 
or appropriate to carry out the purposes of this section and section 
383, including (but not limited to) regulations--
        (1) providing for the application of this section and section 
    383 where an ownership change with respect to the old loss 
    corporation is followed by an ownership change with respect to the 
    new loss corporation, and
        (2) providing for the application of this section and section 
    383 in the case of a short taxable year,
        (3) providing for such adjustments to the application of this 
    section and section 383 as is necessary to prevent the avoidance of 
    the purposes of this section and section 383, including the 
    avoidance of such purposes through the use of related persons, pass-
    thru entities, or other intermediaries,
        (4) providing for the application of subsection (g)(4) where 
    there is only 1 corporation involved, and
        (5) providing, in the case of any group of corporations 
    described in section 1563(a) (determined by substituting ``50 
    percent'' for ``80 percent'' each place it appears and determined 
    without regard to paragraph (4) thereof), appropriate adjustments to 
    value, built-in gain or loss, and other items so that items are not 
    omitted or taken into account more than once.

(Aug. 16, 1954, ch. 736, 68A Stat. 129; Pub. L. 88-554, Sec. 4(b)(3), 
Aug. 31, 1964, 78 Stat. 763; Pub. L. 94-455, title VIII, Sec. 806(e), 
Oct. 4, 1976, 90 Stat. 1599; Pub. L. 96-589, Sec. 2(d), Dec. 24, 1980, 
94 Stat. 3396; Pub. L. 97-34, title II, Sec. 242, Aug. 13, 1981, 95 
Stat. 255; Pub. L. 98-369, div. A, title I, Sec. 62(b)(1), July 18, 
1984, 98 Stat. 583; Pub. L. 99-514, title VI, Sec. 621(a), (e)(1), Oct. 
22, 1986, 100 Stat. 2254, 2266; Pub. L. 100-203, title X, Sec. 10225(a), 
(b), Dec. 22, 1987, 101 Stat. 1330-413; Pub. L. 100-647, title I, 
Sec. 1006(d)(1)(A)-(C), (2)-(10), (17)(A), (18)-(28)(A), (29), 
(t)(22)(A), title IV, Sec. 4012(a)(3), (b)(1)(B), title V, Sec. 5077(a), 
Nov. 10, 1988, 102 Stat. 3395-3400, 3426, 3656, 3657, 3683; Pub. L. 101-
73, title XIV, Sec. 1401(a)(2), Aug. 9, 1989, 103 Stat. 548; Pub. L. 
101-239, title VII, Secs. 7205(a), 7304(d)(1), 7811(c)(5)(A), 7815(h), 
7841(d)(11), Dec. 19, 1989, 103 Stat. 2335, 2354, 2407, 2420, 2428; Pub. 
L. 103-66, title XIII, Sec. 13226(a)(2)(A), Aug. 10, 1993, 107 Stat. 
487; Pub. L. 104-188, title I, Sec. 1621(b)(3), Aug. 20, 1996, 110 Stat. 
1867.)

                       References in Text

    Section 368(a)(3)(D), referred to in subsec. (l)(5)(F)(iii)(I), was 
amended generally by Pub. L. 99-514, title IX, Sec. 904(a), Oct. 22, 
1986, 100 Stat. 2385, and, as so amended, does not contain a cl. (ii) or 
(iv).


                               Amendments

    1996--Subsec. (l)(4)(B)(ii). Pub. L. 104-188 substituted ``a REMIC 
to which part IV of subchapter M applies, or a FASIT to which part V of 
subchapter M applies'' for ``or a REMIC to which part IV of subchapter M 
applies''.
    1993--Subsec. (l)(5)(C). Pub. L. 103-66 amended heading and text of 
subpar. (C) generally. Prior to amendment, text read as follows:
    ``(i) In general.--In any case to which subparagraph (A) applies, 50 
percent of the amount which, but for the application of section 
108(e)(10)(B), would have been applied to reduce tax attributes under 
section 108(b) shall be so applied.
    ``(ii) Clarification with subparagraph (b).--In applying clause (i), 
there shall not be taken into account any indebtedness for interest 
described in subparagraph (B).''
    1989--Subsec. (h)(3)(B)(i). Pub. L. 101-239, Sec. 7205(a), amended 
cl. (i) generally. Prior to amendment, cl. (i) read as follows: ``If the 
amount of the net unrealized built-in gain or net unrealized built-in 
loss (determined without regard to this subparagraph) of any old loss 
corporation is not greater than 25 percent of the amount determined for 
purposes of subparagraph (A)(i)(I), the net unrealized built-in gain or 
net unrealized built-in loss shall be zero.''
    Subsec. (h)(6)(B). Pub. L. 101-239, Sec. 7811(c)(5)(A)(i), inserted 
``(determined without regard to any carryover)'' after ``during the 
recognition period''.
    Subsec. (h)(6)(C). Pub. L. 101-239, Sec. 7811(c)(5)(A)(ii), 
substituted ``which would be treated as recognized built-in gains or 
losses under this paragraph if such amounts were properly taken into 
account (or allowable as a deduction) during the recognition period'' 
for ``treated as recognized built-in gains or losses under this 
paragraph''.
    Subsec. (l)(3)(B)(i)(III). Pub. L. 101-239, Sec. 7841(d)(11), 
substituted ``incident to divorce),'' for ``incident to divorce,''.
    Subsec. (l)(3)(C). Pub. L. 101-239, Sec. 7304(d)(1), redesignated 
subpar. (D) as (C) and struck out former subpar. (C) which related to 
special rule for employee stock ownership plans.
    Subsec. (l)(3)(C)(ii). Pub. L. 101-239, Sec. 7815(h), substituted 
``For purposes of subclause (III),'' for ``for purposes of subclause 
(III),'' in concluding provisions.
    Subsec. (l)(3)(D). Pub. L. 101-239, Sec. 7304(d)(1), redesignated 
subpar. (D) as (C).
    Subsec. (l)(5)(F). Pub. L. 101-73 substituted ``on or after May 10, 
1989'' for ``after December 31, 1989'' in last sentence.
    1988--Subsec. (e)(2). Pub. L. 100-647, Sec. 1006(d)(1)(A), inserted 
``or other corporate contraction'' after ``redemption'' in heading and 
in two places in text.
    Subsec. (e)(3). Pub. L. 100-647, Sec. 1006(d)(17)(A), added par. 
(3).
    Subsec. (g)(1)(A). Pub. L. 100-647, Sec. 1006(d)(21)(A), struck out 
``new'' after ``stock of the''.
    Subsec. (g)(1)(B). Pub. L. 100-647, Sec. 1006(d)(21)(B), struck out 
``old'' after ``stock of the''.
    Subsec. (g)(4)(C). Pub. L. 100-647, Sec. 1006(d)(2), inserted 
``rules similar to'' after ``provided in regulations,''.
    Subsec. (h)(1)(C). Pub. L. 100-647, Sec. 1006(d)(3)(A), substituted 
``Special rules for certain section 338 gains'' for ``Section 338 gain'' 
in heading and amended text generally. Prior to amendment, text read as 
follows: ``The section 382 limitation for any taxable year in which gain 
is recognized by reason of an election under section 338 shall be 
increased by the excess of--
        ``(i) the amount of such gain, over
        ``(ii) the portion of such gain taken into account in computing 
    recognized built-in gains for such taxable year.''
    Subsec. (h)(3)(A)(ii). Pub. L. 100-647, Sec. 1006(d)(28)(A), 
inserted ``to the extent provided in regulations,'' after ``an ownership 
change,''.
    Pub. L. 100-647, Sec. 1006(d)(1)(B), inserted ``or other corporate 
contractions'' after ``redemptions'' in heading and ``or other corporate 
contraction'' after ``redemption'' in two places in text.
    Subsec. (h)(3)(B)(ii). Pub. L. 100-647, Sec. 1006(d)(26), inserted 
``except as provided in regulations,'' after ``under clause (i),''.
    Subsec. (h)(4). Pub. L. 100-647, Sec. 1006(d)(20), substituted 
``allowed as a carryforward'' for ``treated as a net operating loss'' in 
heading and inserted ``(or to the extent the amount so disallowed is 
attributable to capital losses, under rules similar to the rules for the 
carrying forward of net capital losses)'' after ``net operating losses'' 
in subpar. (A).
    Subsec. (h)(5)(A). Pub. L. 100-647, Sec. 1006(d)(3)(B), substituted 
``recognized built-in gains to the extent such gains increased the 
section 382 limitation for the year (or recognized built-in losses to 
the extent such losses are treated as pre-change losses)'' for 
``recognized built-in gains and losses''.
    Subsec. (h)(6). Pub. L. 100-647, Sec. 1006(d)(22), substituted 
``Treatment of certain built-in items'' for ``Secretary may treat 
certain deductions as built-in losses'' in heading and amended text 
generally. Prior to amendment, text read as follows: ``The Secretary may 
by regulation treat amounts which accrue on or before the change date 
but which are allowable as a deduction after such date as recognized 
built-in losses.''
    Subsec. (h)(9). Pub. L. 100-647, Sec. 1006(d)(23), substituted ``was 
acquired (or is subsequently transferred)'' for ``is transferred''.
    Subsec. (i)(3). Pub. L. 100-647, Sec. 1006(d)(4), inserted ``the 
earlier of'' after ``not begin before'' and ``or the taxable year in 
which the transaction being tested occurs'' after ``1st post-change 
year''.
    Subsec. (k)(1). Pub. L. 100-647, Sec. 1006(d)(5)(A), inserted ``or 
having a net operating loss for the taxable year in which the ownership 
change occurs'' after ``operating loss carryover''.
    Subsec. (k)(2). Pub. L. 100-647, Sec. 1006(d)(5)(B), amended par. 
(2) generally. Prior to amendment, par. (2) read as follows: ``The term 
`old loss corporation' means any corporation with respect to which there 
is an ownership change--
        ``(A) which (before the ownership change) was a loss 
    corporation, or
        ``(B) with respect to which there is a pre-change loss described 
    in subsection (d)(1)(B).''
    Subsec. (l)(3)(A)(iv), (v). Pub. L. 100-647, Sec. 1006(d)(6), added 
cls. (iv) and (v) and struck out former cl. (iv) which read as follows: 
``except to the extent provided in regulations, paragraph (4) of section 
318(a) shall apply to an option if such application results in an 
ownership change.''
    Subsec. (l)(3)(C)(ii). Pub. L. 100-647, Sec. 5077(a), added subcl. 
(III) and concluding provisions.
    Subsec. (l)(4)(B)(ii). Pub. L. 100-647, Sec. 1006(t)(22)(A), 
substituted ``REMIC'' for ``real estate mortgage pool''.
    Subsec. (l)(5)(A)(ii). Pub. L. 100-647, Sec. 1006(d)(25), 
substituted ``stock of a controlling corporation'' for ``stock of 
controlling corporation''.
    Pub. L. 100-647, Sec. 1006(d)(7), substituted ``after such ownership 
change and as a result of being shareholders or creditors immediately 
before such change'' for ``immediately after such ownership change''.
    Subsec. (l)(5)(B). Pub. L. 100-647, Sec. 1006(d)(27), substituted 
``the pre-change losses and excess credits (within the meaning of 
section 383(a)(2)) which may be carried to a post-change year shall be 
computed'' for ``the net operating loss deduction under section 172(a) 
for any post-change year shall be determined''.
    Subsec. (l)(5)(C). Pub. L. 100-647, Sec. 1006(d)(18), substituted 
``tax attributes'' for ``carryforwards'' in heading and amended text 
generally. Prior to amendment, text read as follows: ``In any case to 
which subparagraph (A) applies, the pre-change losses and excess credits 
(within the meaning of section 383(a)(2)) which may be carried to a 
post-change year shall be computed as if 50 percent of the amount which, 
but for the application of section 108(e)(10)(B), would have been 
includible in gross income for any taxable year had been so included.''
    Subsec. (l)(5)(E). Pub. L. 100-647, Sec. 1006(d)(19), substituted 
``taken into account'' for ``of creditors taken into account'' in 
heading and amended introductory provisions generally. Prior to 
amendment, introductory provisions read as follows: ``For purposes of 
subparagraph (A)(ii), stock transferred to a creditor in satisfaction of 
indebtedness shall be taken into account only if such indebtedness--''.
    Subsec. (l)(5)(F). Pub. L. 100-647, Sec. 4012(a)(3), substituted 
``1989'' for ``1988'' in last sentence.
    Subsec. (l)(5)(F)(i)(I). Pub. L. 100-647, Sec. 1006(d)(8)(A), 
inserted `` `1504(a)(2)(B)' for `1504(a)(2)' and'' after ``by 
substituting''.
    Subsec. (l)(5)(F)(ii)(III). Pub. L. 100-647, Sec. 1006(d)(8)(B), 
substituted ``the amount of deposits in the new loss corporation 
immediately after the change'' for ``deposits described in subclause 
(II)''.
    Subsec. (l)(5)(F)(iii)(I). Pub. L. 100-647, Sec. 4012(b)(1)(B), 
inserted ``(as modified by section 368(a)(3)(D)(iv))'' after ``section 
368(a)(3)(D)(ii)''.
    Pub. L. 100-647, Sec. 1006(d)(29), which directed amendment of 
subcl. (I) by substituting ``section 368(a)(3)(D)(ii)'' for ``section 
368(a)(D)(ii)'', could not be executed because ``section 
368(a)(3)(D)(ii)'' appeared and ``section 368(a)(D)(ii)'' did not 
appear.
    Subsec. (l)(6). Pub. L. 100-647, Sec. 1006(d)(9), substituted 
``shall reflect the increase (if any) in value of the old loss 
corporation resulting from any surrender or cancellation of creditors' 
claims in the transaction'' for ``shall be the value of the new loss 
corporation immediately after the ownership change''.
    Subsec. (l)(8). Pub. L. 100-647, Sec. 1006(d)(10), added par. (8).
    Subsec. (m)(4). Pub. L. 100-647, Sec. 1006(d)(1)(C), redesignated 
par. (5) as (4) and struck out former par. (4) which read as follows: 
``providing for the treatment of corporate contractions as redemptions 
for purposes of subsections (e)(2) and (h)(3)(A), and''.
    Subsec. (m)(5). Pub. L. 100-647, Sec. 1006(d)(24), added par. (5).
    Pub. L. 100-647, Sec. 1006(d)(1)(C), redesignated former par. (5) as 
(4).
    1987--Subsec. (g)(4)(D). Pub. L. 100-203, Sec. 10225(a), added 
subpar. (D).
    Subsec. (h)(2)(B). Pub. L. 100-203, Sec. 10225(b), inserted at end 
``Such term includes any amount allowable as depreciation, amortization, 
or depletion for any period within the recognition period except to the 
extent the new loss corporation establishes that the amount so allowable 
is not attributable to the excess described in clause (ii).''
    1986--Pub. L. 99-514, Sec. 621(a), in amending section generally, in 
subsec. (a), substituted provisions setting forth general rule that 
amount of taxable income of any new loss corporation for any post-change 
year which may be offset by pre-change losses shall not exceed section 
382 limitation for such year for provisions relating to change in 
ownership of corporation and change in its business, description of 
persons owning corporation, attribution of ownership, and definition of 
``purchase'', in subsec. (b), substituted provisions relating to section 
382 limitation for provisions relating to change in ownership as result 
of reorganization, in subsec. (c), substituted provisions relating to 
disallowance of carryforwards if continuity of business requirements are 
not met for provisions defining stock as all shares except nonvoting 
stock which is limited and preferred as to dividends, and added subsecs. 
(d) to (m).
    Pub. L. 99-514, Sec. 621(e)(1), repealed amendment by Pub. L. 94-
455, Sec. 806(e). See 1976 Amendment note below.
    1984--Subsec. (b)(1). Pub. L. 98-369, in section as amended by Pub. 
L. 94-455, substituted ``subparagraph (A), (B), (C), or (F) of section 
368(a)(1) or subparagraph (D) or (G) of section 368(a)(1) (but only if 
the requirements of section 354(b)(1) are met)'' for ``section 
368(a)(1)(A), (B), (C), (D) (but only if the requirements of section 
354(b)(1) are met, or (F)''.
    1981--Subsec. (b)(7). Pub. L. 97-34 designated existing provisions 
as subpar. (A) and added subpar. (B).
    1980--Subsec. (b)(7). Pub. L. 96-589 added par. (7).
    1976--Pub. L. 94-455, Sec. 806(e), which amended section generally, 
substituting provisions relating to special limitations on net operating 
loss carryovers based on continuity of trade or business conducted, for 
provisions relating to special limitations on net operating loss 
carryovers based on continuity of ownership, was repealed by Pub. L. 99-
514, Sec. 621(e)(1). See Effective Date of 1986 and 1976 Amendment notes 
below.
    1964--Subsec. (a)(3). Pub. L. 88-554 inserted reference to section 
318(a)(3)(C) of this title.


                    Effective Date of 1996 Amendment

    Amendment by Pub. L. 104-188 effective Sept. 1, 1997, see section 
1621(d) of Pub. L. 104-188, set out as a note under section 26 of this 
title.


                    Effective Date of 1993 Amendment

    Amendment by Pub. L. 103-66 applicable to stock transferred after 
Dec. 31, 1994, in satisfaction of any indebtedness, except that such 
amendment inapplicable to stock transferred in satisfaction of any 
indebtedness if such transfer is in a title 11 or similar case filed on 
or before Dec. 31, 1993, see section 13226(a)(3) of Pub. L. 103-66, set 
out as a note under section 108 of this title.


                    Effective Date of 1989 Amendments

    Amendment by section 7205(a) of Pub. L. 101-239 applicable, except 
as otherwise provided, to ownership changes and acquisitions after Oct. 
2, 1989, in taxable years ending after such date, see section 7205(c) of 
Pub. L. 101-239, set out as a note under section 56 of this title.
    Section 7304(d)(2) of Pub. L. 101-239 provided that: ``The 
amendments made by this subsection [amending this section] shall apply 
to acquisitions of employer securities after July 12, 1989, except that 
such amendments shall not apply to acquisitions after July 12, 1989, 
pursuant to a written binding contract in effect on July 12, 1989, and 
at all times thereafter before such acquisition.''
    Amendment by sections 7811(c)(5)(A) and 7815(h) of Pub. L. 101-239 
effective, except as otherwise provided, as if included in the provision 
of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100-647, 
to which such amendment relates, see section 7817 of Pub. L. 101-239, 
set out as a note under section 1 of this title.
    Section 1401(c)(2) of Pub. L. 101-73 provided that: ``The amendment 
made by subsection (a)(2) [amending this section] shall apply to 
transactions on or after May 10, 1989.''


                    Effective Date of 1988 Amendment

    Section 1006(d)(1)(D) of Pub. L. 100-647 provided that: ``The 
amendments made by this paragraph [amending this section] shall apply 
with respect to ownership changes after June 10, 1987.''
    Section 1006(d)(17)(B) of Pub. L. 100-647 provided that: ``The 
amendment made by subparagraph (A) [amending this section] shall apply 
to any ownership change after June 10, 1987. For purposes of the 
preceding sentence, any equity structure shift pursuant to a plan of 
reorganization adopted on or before June 10, 1987, shall be treated as 
occurring when such plan was adopted.''
    Section 1006(d)(28)(B) of Pub. L. 100-647 provided that: ``The 
amendment made by subparagraph (A) [amending this section] shall apply 
in the case of ownership changes on or after June 21, 1988.''
    Amendment by section 1006(d)(2)-(10), (18)-(27), (29), (t)(22)(A) of 
Pub. L. 100-647 effective, except as otherwise provided, as if included 
in the provision of the Tax Reform Act of 1986, Pub. L. 99-514, to which 
such amendment relates, see section 1019(a) of Pub. L. 100-647, set out 
as a note under section 1 of this title.
    Section 4012(b)(1)(C)(ii) of Pub. L. 100-647 provided that: ``The 
amendment made by subparagraph (B) [amending this section] shall apply 
to any ownership change occurring after the date of the enactment of 
this Act [Nov. 10, 1988] and before January 1, 1990.''
    Section 5077(b) of Pub. L. 100-647 provided that:
    ``(1) In General.--The amendment made by subsection (a) [amending 
this section] shall apply to acquisition after December 31, 1988.
    ``(2) Exception.--The amendment made by subsection (a) shall not 
apply to acquisitions after December 31, 1988, pursuant to a binding 
written contract entered into on or before October 21, 1988.''


                    Effective Date of 1987 Amendment

    Section 10225(c) of Pub. L. 100-203 provided that:
    ``(1) Subsection (a).--The amendment made by subsection (a) 
[amending this section] shall apply in the case of stock treated as 
becoming worthless in taxable years beginning after December 31, 1987.
    ``(2) Subsection (b).--The amendment made by subsection (b) 
[amending this section] shall apply in the case of ownership changes (as 
defined in section 382 of the Internal Revenue Code of 1986 as amended 
by subsection (a)) after December 15, 1987; except that such amendment 
shall not apply in the case of any ownership change pursuant to a 
binding written contract which was in effect on December 15, 1987, and 
at all times thereafter before such ownership change.''


          Effective Date of 1986 Amendment; Savings Provisions

    Section 621(f) of Pub. L. 99-514, as amended by Pub. L. 100-647, 
title I, Sec. 1006(d)(11)-(16), title VI, Sec. 6277(a), (b), Nov. 10, 
1988, 102 Stat. 3397, 3398, 3753, 3754, provided that:
    ``(1) Amendments made by subsections (a), (b), and (c).--
        ``(A) In general.--
            ``(i) Changes after 1986.--The amendments made by 
        subsections (a), (b), and (c) [amending this section and 
        sections 318 and 383 of this title] shall apply to any ownership 
        change after December 31, 1986.
            ``(ii) Plans of reorganization adopted before 1987.--For 
        purposes of clause (i), any equity structure shift pursuant to a 
        plan of reorganization adopted before January 1, 1987, shall be 
        treated as occurring when such plan was adopted.
        ``(B) Termination of old section 382.--Except in a case 
    described in any of the following paragraphs--
            ``(i) section 382(a) of the Internal Revenue Code of 1954 
        (as in effect before the amendment made by subsection (a) and 
        the amendments made by section 806 of the Tax Reform Act of 1976 
        [section 806 of Pub. L. 94-455]) shall not apply to any increase 
        in percentage points occurring after December 31, 1988, and
            ``(ii) section 382(b) of such Code (as so in effect) shall 
        not apply to any reorganization occurring pursuant to a plan of 
        reorganization adopted after December 31, 1986.
    In no event shall sections 382(a) and (b) of such Code (as so in 
    effect) apply to any ownership change described in subparagraph (A).
        ``(C) Coordination with section 382(i).--For purposes of section 
    382(i) of the Internal Revenue Code of 1986 (as added by this 
    section), any equity structure shift pursuant to a plan of 
    reorganization adopted before January 1, 1987, shall be treated as 
    occurring when such plan was adopted.
    ``(2) For amendments to tax reform act of 1976.--
        ``(A) In general.--The repeals made by subsection (e)(1) 
    [repealing amendments by Pub. L. 94-455, Sec. 806(e), (f), amending 
    this section and sections 108, 368, and 383 of this title] and the 
    amendment made by subsection (e)(2) [repealing section 806(g)(2), 
    (3) of Pub. L. 94-455, formerly set out as an Effective Date of 1976 
    Amendment note below] shall take effect on January 1, 1986.
        ``(B) Election to have amendments apply.--
            ``(i) If a taxpayer described in clause (ii) elects to have 
        the provisions of this subparagraph apply, the amendments made 
        by subsections (e) and (f) of section 806 of the Tax Reform Act 
        of 1976 [amending this section and sections 108, 368, and 383 of 
        this title] shall apply to the reorganization described in 
        clause (ii).
            ``(ii) A taxpayer is described in this clause if the 
        taxpayer filed a title 11 or similar case on December 8, 1981, 
        filed a plan of reorganization on February 5, 1986, filed an 
        amended plan on March 14, 1986, and received court approval for 
        the amended plan and disclosure statement on April 16, 1986.
        ``(C) Application of old rules to certain debt.--In the case of 
    debt of a corporation incorporated in Colorado on November 8, 1924, 
    and reincorporated in Delaware in 1987, with headquarters in Denver, 
    Colorado--
            ``(i) the amendments made by subsections (a), (b), and (c) 
        shall not apply to any debt restructuring of such debt which was 
        approved by the debtor's Board of Directors and the lenders in 
        1986, and
            ``(ii) the amendments made by subsections (e) and (f) of 
        section 806 of the Tax Reform Act of 1976 shall not apply to 
        such debt restructuring, except that the amendment treated as 
        part of such subsections under section 59(b) of the Tax Reform 
        Act of 1984 (relating to qualified workouts) shall apply to such 
        debt restructuring.
        ``(D) Special rule for oil and gas well drilling business.--In 
    the case of a Texas corporation incorporated on July 23, 1935, in 
    applying section 382 of the Internal Revenue Code of 1986 (as in 
    effect before and after the amendments made by subsections (a), (b), 
    and (c)) to a loan restructuring agreement during 1985, section 
    382(a)(5)(C) of the Internal Revenue Code of 1954 (as added by the 
    amendments made by subsections (e) and (f) of section 806 of the Tax 
    Reform Act of 1976) shall be applied as if it were in effect with 
    respect to such restructuring. For purposes of the preceding 
    sentence, in applying section 382 (as so in effect), if a person has 
    a warrant to acquire stock, such stock shall be considered as owned 
    by such person.
    ``(3) Testing period.--For purposes of determining whether there is 
an ownership change, the testing period shall not begin before the later 
of--
        ``(A) May 6, 1986, or
        ``(B) in the case of an ownership change which occurs after May 
    5, 1986, and to which the amendments made by subsections (a), (b), 
    and (c) do not apply, the first day following the date on which such 
    ownership change occurs.
    ``(4) Special transition rules.--The amendments made by subsections 
(a), (b), and (c) shall not apply to any--
        ``(A) stock-for-debt exchanges and stock sales made pursuant to 
    a plan of reorganization with respect to a petition for 
    reorganization filed by a corporation under chapter 11 of title 11, 
    United States Code, on August 26, 1982, and which filed with a 
    United States district court a first amended and related plan of 
    reorganization before March 1, 1986, or
        ``(B) ownership change of a Delaware corporation incorporated in 
    August 1983, which may result from the exercise of put or call 
    option under an agreement entered into on September 14, 1983, but 
    only with respect to taxable years beginning after 1991 regardless 
    of when such ownership change takes place.
Any regulations prescribed under section 382 of the Internal Revenue 
Code of 1986 (as added by subsection (a)) which have the effect of 
treating a group of shareholders as a separate 5-percent shareholder by 
reason of a public offering shall not apply to any public offering 
before January 1, 1989, for the benefit of institutions described in 
section 591 of such Code. Unless the corporation otherwise elects, an 
underwriter of any offering of stock in a corporation before September 
19, 1986 (January 1, 1989, in the case of an offering for the benefit of 
an institution described in the preceding sentence), shall not be 
treated as acquiring any stock of such corporation by reason of a firm 
commitment underwriting to the extent the stock is disposed of pursuant 
to the offering (but in no event later than 60 days after the initial 
offering).
    ``(5) Bankruptcy proceedings.--Unless the taxpayer elects not to 
have the provisions of this paragraph apply, in the case of a 
reorganization described in subparagraph (G) of section 368(a)(1) of the 
Internal Revenue Code of 1986 or an exchange of debt for stock in a 
title 11 or similar case, as defined in section 368(a)(3) of such Code, 
the amendments made by subsections (a), (b), and (c) shall not apply to 
any ownership change resulting from such a reorganization or proceeding 
if a petition in such case was filed with the court before August 14, 
1986. The determination as to whether an ownership change has occurred 
during the period beginning January 1, 1987, and ending on the final 
settlement of any reorganization or proceeding described in the 
preceding sentence shall be redetermined as of the time of such final 
settlement.
    ``(6) Certain plans.--The amendments made by subsections (a), (b), 
and (c) shall not apply to any ownership change with respect to--
        ``(A) the acquisition of a corporation the stock of which is 
    acquired pursuant to a plan of divestiture which identified such 
    corporation and its assets, and was agreed to by the board of 
    directors of such corporation's parent corporation on May 17, 1985,
        ``(B) a merger which occurs pursuant to a merger agreement 
    (entered into before September 24, 1985) and an application for 
    approval by the Federal Home Loan Bank Board was filed on October 4, 
    1985,
        ``(C) a reorganization involving a party to a reorganization of 
    a group of corporations engaged in enhanced oil recovery operations 
    in California, merged in furtherance of a plan of reorganization 
    adopted by a board of directors vote on September 24, 1985, and a 
    Delaware corporation whose principal oil and gas producing fields 
    are located in California, or
        ``(D) the conversion of a mutual savings and loan association 
    holding a Federal charter dated March 22, 1985, to a stock savings 
    and loan association pursuant to the rules and regulations of the 
    Federal Home Loan Bank Board.
    ``(7) Ownership change of regulated air carrier.--The amendments 
made by subsections (a), (b), and (c) shall not apply to an ownership 
change of a regulated air carrier if--
        ``(A) on July 16, 1986, at least 40 percent of the outstanding 
    common stock (excluding all preferred stock, whether or not 
    convertible) of such carrier had been acquired by a parent 
    corporation incorporated in March 1980 under the laws of Delaware, 
    and
        ``(B) the acquisition (by or for such parent corporation) or 
    retirement of the remaining common stock of such carrier is 
    completed before the later of March 31, 1987, or 90 days after the 
    requisite governmental approvals are finally granted,
but only if the ownership change occurs on or before the later of March 
31, 1987, or such 90th day. The aggregate reduction in tax for any 
taxable year by reason of this paragraph shall not exceed $10,000,000. 
The testing period for determining whether a subsequent ownership change 
has occurred shall not begin before the 1st day following an ownership 
change to which this paragraph applies.
    ``(8) The amendments made by subsections (a), (b), and (c) shall not 
apply to any ownership change resulting from the conversion of a 
Minnesota mutual savings bank holding a Federal charter dated December 
31, 1985, to a stock savings bank pursuant to the rules and regulations 
of the Federal Home Loan Bank Board, and from the issuance of stock 
pursuant to that conversion to a holding company incorporated in 
Delaware on February 21, 1984. For purposes of determining whether any 
ownership change occurs with respect to the holding company or any 
subsidiary thereof (whether resulting from the transaction described in 
the preceding sentence or otherwise), any issuance of stock made by such 
holding company in connection with the transaction described in the 
preceding sentence shall not be taken into account.
    ``(9) Definitions.--Except as otherwise provided, terms used in this 
subsection shall have the same meaning as when used in section 382 of 
the Internal Revenue Code of 1986 (as amended by this section).''
    [Section 6277(c) of Pub. L. 100-647 provided that: ``The amendments 
made by this section [amending section 621(f) of Pub. L. 99-514, set out 
above] shall take effect as if included in section 621(f)(5) of the Tax 
Reform Act of 1986 [Pub. L. 99-514].'']


                    Effective Date of 1984 Amendment

    Section 62(b)(2) of Pub. L. 98-369 provided that: ``The amendment 
made by paragraph (1) [amending this section] shall take effect as if 
included in the amendments made by section 4 of the Bankruptcy Tax Act 
of 1980 [Pub. L. 96-589].''


                    Effective Date of 1981 Amendment

    Amendment by Pub. L. 97-34 applicable to any transfer made on or 
after Jan. 1, 1981, see section 246(a) of Pub. L. 97-34, set out as a 
note under section 368 of this title.


                    Effective Date of 1980 Amendment

    Section 2(d) of Pub. L. 96-589 provided that the amendment made by 
section 2(b) of Pub. L. 96-589 is to subsec. (b) as in effect before its 
amendment by section 806 of the Tax Reform Act of 1976, Pub. L. 94-455.
    Amendment by Pub. L. 96-589 applicable to transactions which occur 
after Dec. 31, 1980, other than transactions which occur in a proceeding 
in a bankruptcy case or similar judicial proceeding or in a proceeding 
under Title 11 commencing on or before Dec. 31, 1980, with an exception 
permitting the debtor to make the amendment applicable to transactions 
occurring after Sept. 30, 1979, in a specified manner, see section 
7(a)(1), (f) of Pub. L. 96-589, set out as a note under section 108 of 
this title.


                    Effective Date of 1976 Amendment

    Section 806(g)(2), (3) of Pub. L. 94-455, as amended by Pub. L. 95-
600, title III, Sec. 368(a), Nov. 6, 1978, 92 Stat. 2857; Pub. L. 95-
615, Sec. 8, Nov. 8, 1978, 92 Stat. 3098; Pub. L. 96-167, Sec. 9(e), 
Dec. 29, 1979, 93 Stat. 1279; Pub. L. 97-119, title I, Sec. 111, Dec. 
29, 1981, 95 Stat. 1640; Pub. L. 98-369, div. A, title I, Sec. 62(a), 
July 18, 1984, 98 Stat. 583, which provided an effective date for the 
amendments made by section 806(e), (f) of Pub. L. 94-455 for purposes of 
applying sections 382(a) and 383 (as it relates to section 382(a)) of 
this title, was repealed by Pub. L. 99-514, title VI, Sec. 621(e)(2), 
(f)(2), Oct. 22, 1986, 100 Stat. 2266, eff. Jan. 1, 1986.


                    Effective Date of 1964 Amendment

    Amendment by Pub. L. 88-554 effective Aug. 31, 1964, except that for 
purposes of sections 302 and 304 of this title, such amendment shall not 
apply to distributions in payment for stock acquisitions or redemptions, 
if such acquisitions or redemptions occurred before Aug. 31, 1964, see 
section 4(c) of Pub. L. 88-554, set out as a note under section 318 of 
this title.


                Delay in Effective Date of 1976 Amendment

    Pub. L. 95-600, title III, Sec. 368, Nov. 6, 1978, 92 Stat. 2857, 
provided for delaying the effective date established by section 
806(g)(2), (3) of Pub. L. 94-455, formerly set out above, by 
substituting ``1980'' for ``1978'', with certain elections.


  Report on Depreciation and Built-In Deductions; Report on Bankruptcy 
                                Workouts

    Section 621(d) of Pub. L. 99-514 directed Secretary of the Treasury 
or his delegate to, not later than Jan. 1, 1989, conduct a study and 
report to Committee on Ways and Means of House of Representatives and 
Committee on Finance of Senate with respect to treatment of 
depreciation, amortization, depletion, and other built-in deductions for 
purposes of sections 382 and 383 of this title, and, not later than Jan. 
1, 1988, conduct a study and report to committees referred to above with 
respect to treatment of informal bankruptcy workouts for purposes of 
sections 108 and 382 of this title, prior to repeal by Pub. L. 101-508, 
title XI, Sec. 11832(3), Nov. 5, 1990, 104 Stat. 1388-559.

                  Section Referred to in Other Sections

    This section is referred to in sections 56, 172, 318, 383, 384 of 
this title.
