[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 750 Introduced in Senate (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.
                                 <all>