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FEDERAL INCOME, ESTATE & GIFT TAX PROJECT 1 (PRELIMINARY DRAFT 198A, May 1956)

handle is hein.ali/aliftp0205 and id is 1 raw text is: DRAFT STATUTE
Section 1. CORPORATE CONTRACTIONS.
(a) General Rule.A-If
(1) pursuant to a plan to reduce the business of the corporation,
(2) a corporation distributes in redemption of a part of its
stock
(3) qualifying property (as defined in subsection (b)),
(4) as a result of the distribution of the qualifying property
the excess of the value of all the property of the corporation over the
liabilities of the corporation (other than liabilities to shareholders
where such liabilities are substantially proportionate to the stock-
holdings of the shareholders) immediately after the distribution is
equal to or less than 20% [70%]l of such excess immediately before
the distribution, and
(5) the value of the qualifying property distributed exceeds the
value of all the nonqualifying property owned by the corporation im-
mediately before the distribution of the qualifying property (the
amount of which excess is hereinafter referred to as the qualifying
amount),
then to the extent of the qualifying amount the distribution shall be treated
in accordance with the provisions of subsection[s] (c) [and (d)]. 1 If the
distribution consists of both qualifying and nonqualifying property, the non-
qualifying property shall be treated as having been distributed immediately
before the distribution of the qualifying property. The Secretary or his dele-
gate shall prescribe in the Regulations the proper method for determining
the stock that shall be treated as redeemed.

1. Bracketed language applies for Alternatives IV and V.

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