To amend the Internal Revenue Code of 1986 to permit certain tax free corporate liquidations into a 501(c)(3) organization and to revise the unrelated business income tax rules regarding receipt of debt-financed property in such a liquidation.

Amends the Internal Revenue Code to allow certain tax-free liquidations from a closely held corporation into a tax-exempt organization. Revises unrelated business income provisions regarding property acquired subject to a mortgage with respect to such a liquidation.

[Congressional Bills 104th Congress]
[From the U.S. Government Printing Office]
[H.R. 4243 Introduced in House (IH)]







                                    


104th CONGRESS
  2d Session
                                H. R. 4243

 To amend the Internal Revenue Code of 1986 to permit certain tax free 
corporate liquidations into a 501(c)(3) organization and to revise the 
unrelated business income tax rules regarding receipt of debt-financed 
                    property in such a liquidation.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           September 27, 1996

Ms. Dunn of Washington (for herself, Ms. Furse, Mr. Bunn of Oregon, and 
 Mr. Blumenauer) introduced the following bill; which was referred to 
                    the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to permit certain tax free 
corporate liquidations into a 501(c)(3) organization and to revise the 
unrelated business income tax rules regarding receipt of debt-financed 
                    property in such a liquidation.

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

SECTION 1. ELIMINATION OF CORPORATE LEVEL TAX UPON LIQUIDATION OF 
              CLOSELY HELD CORPORATIONS UNDER CERTAIN CONDITIONS.

    (a) In General.--Paragraph (2) of section 337(b) of the Internal 
Revenue Code of 1986 (relating to treatment of indebtedness of 
subsidiary, etc.) is amended--
            (1) by striking ``Except as provided in subparagraph (B)'' 
        in subparagraph (A) and inserting ``Except as provided in 
        subparagraph (B) or (C)'', and
            (2) by adding at the end the following new subparagraph:
                    ``(C) Exception in the case of stock acquired 
                without consideration.--If the 80-percent distributee 
                is an organization described in section 501(c)(3) and 
                acquired stock in a liquidated domestic corporation 
                from either a decedent (within the meaning of section 
                1014(b)) or the decedent's spouse, subparagraph (A) 
                shall not apply to any distribution of property to the 
                80-percent distributee. This subparagraph shall apply 
                only if all of the following conditions are met:
                            ``(i) Eighty percent or more of the stock 
                        in the liquidated corporation was acquired by 
                        the distributee, solely by a distribution from 
                        an estate or trust created by one or more 
                        qualified persons. For purposes of this clause, 
                        the term `qualified person' means a citizen or 
                        individual resident of the United States, an 
                        estate (other than a foreign estate within the 
                        meaning of section 7701(a)(31)(A)), or any 
                        trust described in clause (i), (ii), or (iii) 
                        of section 1361(c)(2)(A).
                            ``(ii) The liquidated corporation adopted 
                        its plan of liquidation on or after January 1, 
                        1997.
                            ``(iii) The 80-percent distributee is an 
                        organization created or organized under the 
                        laws of the United States or of any State.
                Nothing in subsection (d) shall be construed to limit 
                the application of this subsection in circumstances in 
                which this subparagraph applies.''.
    (b) Revision of Unrelated Business Income Tax Rules To Exempt 
Certain Assets.--Subparagraph (B) of section 514(c)(2) of the Internal 
Revenue Code of 1986 (relating to property acquired subject to 
mortgage, etc.) is amended by inserting ``or pursuant to a liquidation 
described in section 337(b)(2)(C),'' after ``bequest or devise,''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.
                                 <all>