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‘‘(11) SPLIT-DOLLAR LIFE INSURANCE, ANNUITY,
AND ENDOWMENT CONTRACTS.—
‘‘(A) IN GENERAL.—Nothing in this section
or in section 545(b)(2), 556(b)(2), 642(c), 2055,
2106(a)(2), or 2522 shall be construed to allow
a deduction, and no deduction shall be allowed,
for any transfer to or for the use of an organiza-
tion described in subsection (c) if in connection
with such transfer—
‘‘(i) the organization directly or indi-
rectly pays, or has previously paid, any
premium on any personal benefit contract
with respect to the transferor, or
‘‘(ii) there is an understanding or ex-
pectation that any person will directly or
indirectly pay any premium on any per-
sonal benefit contract with respect to the
transferor.
‘‘(B) PERSONAL BENEFIT CONTRACT.—For
purposes of subparagraph (A), the term ‘personal
benefit contract’ means, with respect to the
transferor, any life insurance, annuity, or en-
dowment contract if any direct or indirect bene-
ficiary under such contract is the transferor, any
member of the transferor’s family, or any other
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person (other than an organization described in
subsection (c)) designated by the transferor.
‘‘(C) APPLICATION TO CHARITABLE REMAIN-
DER TRUSTS.—In the case of a transfer to a
trust referred to in subparagraph (E), references
in subparagraphs (A) and (F) to an organiza-
tion described in subsection (c) shall be treated
as a reference to such trust.
‘‘(D) EXCEPTION
FOR
CERTAIN
ANNUITY
CONTRACTS.—If, in connection with a transfer to
or for the use of an organization described in
subsection (c), such organization incurs an obli-
gation to pay a charitable gift annuity (as de-
fined in section 501(m)) and such organization
purchases any annuity contract to fund such ob-
ligation, persons receiving payments under the
charitable gift annuity shall not be treated for
purposes of subparagraph (B) as indirect bene-
ficiaries under such contract if—
‘‘(i) such organization possesses all of
the incidents of ownership under such con-
tract,
‘‘(ii) such organization is entitled to
all the payments under such contract, and
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‘‘(iii) the timing and amount of pay-
ments under such contract are substantially
the same as the timing and amount of pay-
ments to each such person under such obli-
gation (as such obligation is in effect at the
time of such transfer).
‘‘(E) EXCEPTION FOR CERTAIN CONTRACTS
HELD BY CHARITABLE REMAINDER TRUSTS.—A
person shall not be treated for purposes of sub-
paragraph (B) as an indirect beneficiary under
any life insurance, annuity, or endowment con-
tract held by a charitable remainder annuity
trust or a charitable remainder unitrust (as de-
fined in section 664(d)) solely by reason of being
entitled to any payment referred to in para-
graph (1)(A) or (2)(A) of section 664(d) if—
‘‘(i) such trust possesses all of the inci-
dents of ownership under such contract, and
‘‘(ii) such trust is entitled to all the
payments under such contract.
‘‘(F) EXCISE TAX ON PREMIUMS PAID.—
‘‘(i) IN GENERAL.—There is hereby im-
posed on any organization described in sub-
section (c) an excise tax equal to the pre-
miums paid by such organization on any
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life insurance, annuity, or endowment con-
tract if the payment of premiums on such
contract is in connection with a transfer for
which a deduction is not allowable under
subparagraph (A), determined without re-
gard to when such transfer is made.
‘‘(ii) 
PAYMENTS
BY
OTHER
PER-
SONS.—For purposes of clause (i), pay-
ments made by any other person pursuant
to an understanding or expectation referred
to in subparagraph (A) shall be treated as
made by the organization.
‘‘(iii) REPORTING.—Any organization
on which tax is imposed by clause (i) with
respect to any premium shall file an annual
return which includes—
‘‘(I) the amount of such premium
paid during the year and the name
and TIN of each beneficiary under the
contract to which the premium relates,
and
‘‘(II) such other information as
the Secretary may require.
The penalties applicable to returns required
under section 6033 shall apply to returns
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required under this clause. Returns required
under this clause shall be furnished at such
time and in such manner as the Secretary
shall by forms or regulations require.
‘‘(iv) CERTAIN RULES TO APPLY.—The
tax imposed by this subparagraph shall be
treated as imposed by chapter 42 for pur-
poses of this title other than subchapter B
of chapter 42.
‘‘(G) SPECIAL
RULE
WHERE
STATE
RE-
QUIRES SPECIFICATION OF CHARITABLE GIFT AN-
NUITANT IN CONTRACT.—In the case of an obli-
gation to pay a charitable gift annuity referred
to in subparagraph (D) which is entered into
under the laws of a State which requires, in
order for the charitable gift annuity to be exempt
from insurance regulation by such State, that
each beneficiary under the charitable gift annu-
ity be named as a beneficiary under an annuity
contract issued by an insurance company au-
thorized to transact business in such State, the
requirements of clauses (i) and (ii) of subpara-
graph (D) shall be treated as met if—
‘‘(i) such State law requirement was in
effect on February 8, 1999,
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‘‘(ii) each such beneficiary under the
charitable gift annuity is a bona fide resi-
dent of such State at the time the obligation
to pay a charitable gift annuity is entered
into, and
‘‘(iii) the only persons entitled to pay-
ments under such contract are persons enti-
tled to payments as beneficiaries under such
obligation on the date such obligation is en-
tered into.
‘‘(H) MEMBER OF FAMILY.—For purposes
of this paragraph, an individual’s family con-
sists of the individual’s grandparents, the grand-
parents of such individual’s spouse, the lineal de-
scendants of such grandparents, and any spouse
of such a lineal descendant.
‘‘(I) REGULATIONS.—The Secretary shall
prescribe such regulations as may be necessary
or appropriate to carry out the purposes of this
paragraph, including regulations to prevent the
avoidance of such purposes.’’.
(b) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as otherwise provided
in this section, the amendment made by this section
shall apply to transfers made after February 8, 1999.
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(2) EXCISE TAX.—Except as provided in para-
graph (3) of this subsection, section 170(f)(11)(F) of
the Internal Revenue Code of 1986 (as added by this
section) shall apply to premiums paid after the date
of the enactment of this Act.
(3) REPORTING.—Clause (iii) of such section
170(f)(11)(F) shall apply to premiums paid after
February 8, 1999 (determined as if the tax imposed
by such section applies to premiums paid after such
date).
SEC. 1316. RESTRICTION ON USE OF REAL ESTATE INVEST-
MENT TRUSTS TO AVOID ESTIMATED TAX
PAYMENT REQUIREMENTS.
(a) IN GENERAL.—Subsection (e) of section 6655 (re-
lating to estimated tax by corporations) is amended by add-
ing at the end the following new paragraph:
‘‘(5) TREATMENT
OF
CERTAIN
REIT
DIVI-
DENDS.—
‘‘(A) IN GENERAL.—Any dividend received
from a closely held real estate investment trust
by any person which owns (after application of
subsections (d)(5) and (l)(3)(B) of section 856)
10 percent or more (by vote or value) of the stock
or beneficial interests in the trust shall be taken
into account in computing annualized income
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installments under paragraph (2) in a manner
similar to the manner under which partnership
income inclusions are taken into account.
‘‘(B) CLOSELY HELD REIT.—For purposes
of subparagraph (A), the term ‘closely held real
estate investment trust’ means a real estate in-
vestment trust with respect to which 5 or fewer
persons own (after application of subsections
(d)(5) and (l)(3)(B) of section 856) 50 percent or
more (by vote or value) of the stock or beneficial
interests in the trust.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to estimated tax payments due on
or after September 15, 1999.
SEC. 1317. PROHIBITED ALLOCATIONS OF S CORPORATION
STOCK HELD BY AN ESOP.
(a) IN GENERAL.—Section 409 (relating to qualifica-
tions for tax credit employee stock ownership plans) is
amended by redesignating subsection (p) as subsection (q)
and by inserting after subsection (o) the following new sub-
section:
‘‘(p) PROHIBITED ALLOCATION OF SECURITIES IN AN
S CORPORATION.—
‘‘(1) IN GENERAL.—An employee stock ownership
plan holding employer securities consisting of stock in
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an S corporation shall provide that no portion of the
assets of the plan attributable to (or allocable in lieu
of) such employer securities may, during a nonalloca-
tion year, accrue (or be allocated directly or indi-
rectly under any plan of the employer meeting the re-
quirements of section 401(a)) for the benefit of any
disqualified individual.
‘‘(2) FAILURE TO MEET REQUIREMENTS.—If a
plan fails to meet the requirements of paragraph
(1)—
‘‘(A) the plan shall be treated as having dis-
tributed to any disqualified individual the
amount allocated to the account of such indi-
vidual in violation of paragraph (1) at the time
of such allocation,
‘‘(B) the provisions of section 4979A shall
apply, and
‘‘(C) the statutory period for the assessment
of any tax imposed by section 4979A shall not
expire before the date which is 3 years from the
later of—
‘‘(i) the allocation of employer securi-
ties resulting in the failure under para-
graph (1) giving rise to such tax, or
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‘‘(ii) the date on which the Secretary is
notified of such failure.
‘‘(3) NONALLOCATION
YEAR.—For purposes of
this subsection—
‘‘(A) IN
GENERAL.—The term ‘nonalloca-
tion year’ means any plan year of an employee
stock ownership plan if, at any time during such
plan year—
‘‘(i) such plan holds employer securi-
ties consisting of stock in an S corporation,
and
‘‘(ii) disqualified individuals own at
least 50 percent of the number of out-
standing shares of stock in such S corpora-
tion.
‘‘(B) ATTRIBUTION
RULES.—For purposes
of subparagraph (A)—
‘‘(i) IN GENERAL.—The rules of section
318(a) shall apply for purposes of deter-
mining ownership, except that—
‘‘(I) in applying paragraph (1)
thereof, the members of an individual’s
family shall include members of the
family described in paragraph (4)(D),
and
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‘‘(II) paragraph (4) thereof shall
not apply.
‘‘(ii) DEEMED-OWNED
SHARES.—Not-
withstanding the employee trust exception
in section 318(a)(2)(B)(i), disqualified indi-
viduals shall be treated as owning deemed-
owned shares.
‘‘(4) DISQUALIFIED INDIVIDUAL.—For purposes
of this subsection—
‘‘(A) IN GENERAL.—The term ‘disqualified
individual’ means any individual who is a par-
ticipant or beneficiary under the employee stock
ownership plan if—
‘‘(i) the aggregate number of deemed-
owned shares of such individual and the
members of the individual’s family is at
least 20 percent of the number of out-
standing shares of stock in the S corpora-
tion constituting employer securities of such
plan, or
‘‘(ii) if such individual is not described
in clause (i), the number of deemed-owned
shares of such individual is at least 10 per-
cent of the number of outstanding shares of
stock in such corporation.
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‘‘(B) TREATMENT OF FAMILY MEMBERS.—
In the case of a disqualified individual described
in subparagraph (A)(i), any member of the indi-
vidual’s family with deemed-owned shares shall
be treated as a disqualified individual if not oth-
erwise a disqualified individual under subpara-
graph (A).
‘‘(C) DEEMED-OWNED
SHARES.—For pur-
poses of this paragraph—
‘‘(i) IN GENERAL.—The term ‘deemed-
owned shares’ means, with respect to any
participant or beneficiary under the em-
ployee stock ownership plan—
‘‘(I) the stock in the S corporation
constituting employer securities of such
plan which is allocated to such partici-
pant or beneficiary under the plan,
and
‘‘(II) such participant’s or bene-
ficiary’s share of the stock in such cor-
poration which is held by such trust
but which is not allocated under the
plan to employees.
‘‘(ii) 
INDIVIDUAL’S
SHARE
OF
UNALLOCATED
STOCK.—For purposes of
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clause (i)(II), an individual’s share of
unallocated S corporation stock held by the
trust is the amount of the unallocated stock
which would be allocated to such individual
if the unallocated stock were allocated to in-
dividuals in the same proportions as the
most recent stock allocation under the plan.
‘‘(D) MEMBER OF FAMILY.—For purposes of
this paragraph, the term ‘member of the family’
means, with respect to any individual—
‘‘(i) the spouse of the individual,
‘‘(ii) an ancestor or lineal descendant
of the individual or the individual’s spouse,
‘‘(iii) a brother or sister of the indi-
vidual or the individual’s spouse and any
lineal descendant of the brother or sister,
and
‘‘(iv) the spouse of any person de-
scribed in clause (ii) or (iii).
‘‘(5) 
DEFINITIONS.—For 
purposes 
of 
this
subsection—
‘‘(A) 
EMPLOYEE
STOCK
OWNERSHIP
PLAN.—The term ‘employee stock ownership
plan’ has the meaning given such term by sec-
tion 4975(e)(7).
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‘‘(B) EMPLOYER
SECURITIES.—The term
‘employer security’ has the meaning given such
term by section 409(l).
‘‘(6) REGULATIONS.—The Secretary shall pre-
scribe such regulations as may be necessary to carry
out the purposes of this subsection, including regula-
tions providing for the treatment of any stock option,
restricted stock, stock appreciation right, phantom
stock unit, performance unit, or similar instrument
granted by an S corporation as stock or not stock.’’.
(b) EXCISE TAX.—
(1) IN
GENERAL.—Section 4979A(b) (defining
prohibited allocation) is amended by striking ‘‘and’’
at the end of paragraph (1), by striking the period at
the end of paragraph (2) and inserting ‘‘, and’’, and
by adding at the end the following new paragraph:
‘‘(3) any allocation of employer securities which
violates the provisions of section 409(p).’’.
(2) LIABILITY.—Section 4979A(c) (defining li-
ability for tax) is amended by adding at the end the
following new sentence: ‘‘In the case of a prohibited
allocation described in subsection (b)(3), such tax
shall be paid by the S corporation the stock in which
was allocated in violation of section 409(p).’’.
(c) EFFECTIVE DATES.—
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(1) IN
GENERAL.—The amendments made by
this section shall apply to plan years beginning after
December 31, 2000.
(2) EXCEPTION
FOR
CERTAIN
PLANS.—In the
case of any—
(A) employee stock ownership plan estab-
lished after July 14, 1999, or
(B) employee stock ownership plan estab-
lished on or before such date if employer securi-
ties held by the plan consist of stock in a cor-
poration with respect to which an election under
section 1362(a) of the Internal Revenue Code of
1986 is not in effect on such date,
the amendments made by this section shall apply to
plan years ending after July 14, 1999.
SEC. 1318. MODIFICATION OF ANTI-ABUSE RULES RELATED
TO ASSUMPTION OF LIABILITY.
(a) IN GENERAL.—Section 357(b)(1) (relating to tax
avoidance purpose) is amended—
(1) by striking ‘‘the principal purpose’’ and in-
serting ‘‘a principal purpose’’, and
(2) by striking ‘‘on the exchange’’ in subpara-
graph (A).
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transfer shall be allocated among the rights re-
tained by the transferor and the rights trans-
ferred on the basis of their respective fair market
values.
‘‘(2) NONRECOGNITION NOT TO APPLY TO INTAN-
GIBLE
PROPERTY
DEVELOPED
FOR
TRANSFEREE.—
This section shall not apply to a transfer of intan-
gible property developed by the transferor or any re-
lated person if such development was pursuant to an
arrangement with the transferee.’’.
(b) TRANSFERS TO PARTNERSHIPS.—Subsection (d) of
section 721 is amended to read as follows:
‘‘(d) TRANSFERS OF INTANGIBLE PROPERTY.—
‘‘(1) IN GENERAL.—Rules similar to the rules of
section 351(h) shall apply for purposes of this section.
‘‘(2) TRANSFERS TO FOREIGN PARTNERSHIPS.—
For regulatory authority to treat intangibles trans-
ferred 
to 
a 
partnership 
as 
sold, 
see 
section
367(d)(3).’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to transfers on or after the date of the
enactment of this Act.
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quirements of subparagraph (A) if such interests
were stock.
‘‘(2) QUALIFIED ENTITY.—For purposes of para-
graph (1), the term ‘qualified entity’ means—
‘‘(A) any real estate investment trust, and
‘‘(B) any partnership in which one real es-
tate investment trust owns at least 50 percent of
the capital and profits interests in the partner-
ship.
‘‘(3) ATTRIBUTION RULES.—For purposes of this
paragraphs (1) and (2)—
‘‘(A) IN
GENERAL.—Rules similar to the
rules of subsections (d)(5) and (h)(3) shall apply.
‘‘(B) STAPLED ENTITIES.—A group of enti-
ties which are stapled entities (as defined in sec-
tion 269B(c)(2)) shall be treated as 1 person.
‘‘(4) EXCEPTION FOR CERTAIN NEW REITS.—
‘‘(A) IN GENERAL.—The term ‘controlled en-
tity’ shall not include an incubator REIT.
‘‘(B) 
INCUBATOR
REIT.—A 
corporation
shall be treated as an incubator REIT for any
taxable year during the eligibility period if it
meets all the following requirements for such
year:
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‘‘(i) The corporation elects to be treated
as an incubator REIT.
‘‘(ii) The corporation has only voting
common stock outstanding.
‘‘(iii) Not more than 50 percent of the
corporation’s real estate assets consist of
mortgages.
‘‘(iv) From not later than the begin-
ning of the last half of the second taxable
year, at least 10 percent of the corporation’s
capital is provided by lenders or equity in-
vestors who are unrelated to the corpora-
tion’s largest shareholder.
‘‘(v) The corporation annually in-
creases the value of its real estate assets by
at least 10 percent.
‘‘(vi) The directors of the corporation
adopt a resolution setting forth an intent to
engage in a going public transaction.
No election may be made with respect to any
REIT if an election under this subsection was in
effect for any predecessor of such REIT.
‘‘(C) ELIGIBILITY PERIOD.—
‘‘(i) IN GENERAL.—The eligibility pe-
riod (for which an incubator REIT election
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can be made) begins with the REIT’s second
taxable year and ends at the close of the
REIT’s third taxable year, except that the
REIT may, subject to clauses (ii), (iii), and
(iv), elect to extend such period for an addi-
tional 2 taxable years.
‘‘(ii) GOING PUBLIC TRANSACTION.—A
REIT may not elect to extend the eligibility
period under clause (i) unless it enters into
an agreement with the Secretary that if it
does not engage in a going public trans-
action by the end of the extended eligibility
period, it shall pay Federal income taxes
for the 2 years of the extended eligibility pe-
riod as if it had not made an incubator
REIT election and had ceased to qualify as
a REIT for those 2 taxable years.
‘‘(iii) RETURNS, INTEREST, AND
NO-
TICE.—
‘‘(I) RETURNS.—In the event the
corporation ceases to be treated as a
REIT by operation of clause (ii), the
corporation shall file any appropriate
amended returns reflecting the change
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in status within 3 months of the close
of the extended eligibility period.
‘‘(II) INTEREST.—Interest shall be
payable on any tax imposed by reason
of clause (ii) for any taxable year but,
unless there was a finding under sub-
paragraph (D), no substantial under-
payment penalties shall be imposed.
‘‘(III) NOTICE.—The corporation
shall, at the same time it files its re-
turns under subclause (I), notify its
shareholders and any other persons
whose tax position is, or may reason-
ably be expected to be, affected by the
change in status so they also may file
any appropriate amended returns to
conform their tax treatment consistent
with the corporation’s loss of REIT
status.
‘‘(IV) REGULATIONS.—The Sec-
retary shall provide appropriate regu-
lations setting forth transferee liability
and other provisions to ensure collec-
tion of tax and the proper administra-
tion of this provision.
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‘‘(iv) Clauses (ii) and (iii) shall not
apply if the corporation allows its incu-
bator REIT status to lapse at the end of the
initial 2-year eligibility period without en-
gaging in a going public transaction if the
corporation is not a controlled entity as of
the beginning of its fourth taxable year. In
such a case, the corporation’s directors may
still be liable for the penalties described in
subparagraph (D) during the eligibility pe-
riod.
‘‘(D) SPECIAL PENALTIES.—If the Secretary
determines that an incubator REIT election was
filed for a principal purpose other than as part
of a reasonable plan to undertake a going public
transaction, an excise tax of $20,000 shall be im-
posed on each of the corporation’s directors for
each taxable year for which an election was in
effect.
‘‘(E) GOING
PUBLIC
TRANSACTION.—For
purposes of this paragraph, a going public trans-
action means—
‘‘(i) a public offering of shares of the
stock of the incubator REIT;
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‘‘(ii) a transaction, or series of trans-
actions, that results in the stock of the incu-
bator REIT being regularly traded on an
established securities market and that re-
sults in at least 50 percent of such stock
being held by shareholders who are unre-
lated to persons who held such stock before
it began to be so regularly traded; or
‘‘(iii) any transaction resulting in
ownership of the REIT by 200 or more per-
sons (excluding the largest single share-
holder) who in the aggregate own at least 50
percent of the stock of the REIT.
For the purposes of this subparagraph, the rules
of paragraph (3) shall apply in determining the
ownership of stock.
‘‘(F) DEFINITIONS.—The term ‘established
securities market’ shall have the meaning set
forth in the regulations under section 897.’’.
(c) CONFORMING AMENDMENT.—Paragraph (2) of sec-
tion 856(h) is amended by striking ‘‘and (6)’’ each place
it appears and inserting ‘‘, (6), and (7)’’.
(d) EFFECTIVE DATE.—
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(1) IN
GENERAL.—The amendments made by
this section shall apply to taxable years ending after
July 14, 1999.
(2) EXCEPTION FOR EXISTING CONTROLLED EN-
TITIES.—The amendments made by this section shall
not apply to any entity which is a controlled entity
(as defined in section 856(l) of the Internal Revenue
Code of 1986, as added by this section) as of July 14,
1999, which is a real estate investment trust for the
taxable year which includes such date, and which has
significant business assets or activities as of such
date. For purposes of the preceding sentence, an enti-
ty shall be treated as such a controlled entity on July
14, 1999, if it becomes such an entity after such date
in a transaction—
(A) made pursuant to a written agreement
which was binding on such date and at all times
thereafter, or
(B) described on or before such date in a fil-
ing with the Securities and Exchange Commis-
sion required solely by reason of the transaction.
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SEC. 1321. DISTRIBUTIONS TO A CORPORATE PARTNER OF
STOCK IN ANOTHER CORPORATION.
(a) IN GENERAL.—Section 732 (relating to basis of
distributed property other than money) is amended by add-
ing at the end the following new subsection:
‘‘(f) CORRESPONDING ADJUSTMENT TO BASIS OF AS-
SETS OF A DISTRIBUTED CORPORATION CONTROLLED BY
A CORPORATE PARTNER.—
‘‘(1) IN GENERAL.—If—
‘‘(A) a corporation (hereafter in this sub-
section referred to as the ‘corporate partner’) re-
ceives a distribution from a partnership of stock
in another corporation (hereafter in this sub-
section referred to as the ‘distributed corpora-
tion’),
‘‘(B) the corporate partner has control of
the distributed corporation immediately after the
distribution or at any time thereafter, and
‘‘(C) the partnership’s adjusted basis in
such stock immediately before the distribution ex-
ceeded the corporate partner’s adjusted basis in
such stock immediately after the distribution,
then an amount equal to such excess shall be applied
to reduce (in accordance with subsection (c)) the basis
of property held by the distributed corporation at
such time (or, if the corporate partner does not con-
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trol the distributed corporation at such time, at the
time the corporate partner first has such control).
‘‘(2) EXCEPTION
FOR
CERTAIN
DISTRIBUTIONS
BEFORE CONTROL ACQUIRED.—Paragraph (1) shall
not apply to any distribution of stock in the distrib-
uted corporation if—
‘‘(A) the corporate partner does not have
control of such corporation immediately after
such distribution, and
‘‘(B) the corporate partner establishes to the
satisfaction of the Secretary that such distribu-
tion was not part of a plan or arrangement to
acquire control of the distributed corporation.
‘‘(3) LIMITATIONS ON BASIS REDUCTION.—
‘‘(A) IN GENERAL.—The amount of the re-
duction under paragraph (1) shall not exceed the
amount by which the sum of the aggregate ad-
justed bases of the property and the amount of
money of the distributed corporation exceeds the
corporate partner’s adjusted basis in the stock of
the distributed corporation.
‘‘(B) REDUCTION
NOT
TO
EXCEED
AD-
JUSTED
BASIS
OF
PROPERTY.—No reduction
under paragraph (1) in the basis of any prop-
erty shall exceed the adjusted basis of such prop-
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erty (determined without regard to such reduc-
tion).
‘‘(4) GAIN
RECOGNITION
WHERE
REDUCTION
LIMITED.—If the amount of any reduction under
paragraph (1) (determined after the application of
paragraph (3)(A)) exceeds the aggregate adjusted
bases of the property of the distributed corporation—
‘‘(A) such excess shall be recognized by the
corporate partner as long-term capital gain, and
‘‘(B) the corporate partner’s adjusted basis
in the stock of the distributed corporation shall
be increased by such excess.
‘‘(5) CONTROL.—For purposes of this subsection,
the term ‘control’ means ownership of stock meeting
the requirements of section 1504(a)(2).
‘‘(6) INDIRECT DISTRIBUTIONS.—For purposes of
paragraph (1), if a corporation acquires (other than
in a distribution from a partnership) stock the basis
of which is determined in whole or in part by ref-
erence to subsection (a)(2) or (b), the corporation
shall be treated as receiving a distribution of such
stock from a partnership.
‘‘(7) SPECIAL RULE FOR STOCK IN CONTROLLED
CORPORATION.—If the property held by a distributed
corporation is stock in a corporation which the dis-
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tributed corporation controls, this subsection shall be
applied to reduce the basis of the property of such
controlled corporation. This subsection shall be re-
applied to any property of any controlled corporation
which is stock in a corporation which it controls.
‘‘(8) REGULATIONS.—The Secretary shall pre-
scribe such regulations as may be necessary to carry
out the purposes of this subsection, including regula-
tions to avoid double counting and to prevent the
abuse of such purposes.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to distributions made after July 14,
1999.
TITLE XIV—TECHNICAL
CORRECTIONS
SEC. 1401. AMENDMENTS RELATED TO TAX AND TRADE RE-
LIEF EXTENSION ACT OF 1998.
(a) AMENDMENT RELATED TO SECTION 1004(b) OF
THE ACT.—Subsection (d) of section 6104 is amended by
adding at the end the following new paragraph:
‘‘(6) APPLICATION TO NONEXEMPT CHARITABLE
TRUSTS AND NONEXEMPT PRIVATE FOUNDATIONS.—
The organizations referred to in paragraphs (1) and
(2) of section 6033(d) shall comply with the require-
ments of this subsection relating to annual returns
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filed under section 6033 in the same manner as the
organizations referred to in paragraph (1).’’.
(b) AMENDMENT RELATED TO SECTION 4003 OF THE
ACT.—Subsection (b) of section 4003 of the Tax and Trade
Relief Extension Act of 1998 is amended by inserting
‘‘(7)(A)(i)(II),’’ after ‘‘(5)(A)(ii)(I),’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect as if included in the provisions of
the Tax and Trade Relief Extension Act of 1998 to which
they relate.
SEC. 1402. AMENDMENTS RELATED TO INTERNAL REVENUE
SERVICE RESTRUCTURING AND REFORM ACT
OF 1998.
(a) AMENDMENT RELATED TO 1103 OF THE ACT.—
Paragraph (6) of section 6103(k) is amended—
(1) by inserting ‘‘and an officer or employee of
the Office of Treasury Inspector General for Tax Ad-
ministration’’ after ‘‘internal revenue officer or em-
ployee’’, and
(2) by striking ‘‘INTERNAL
REVENUE’’ in the
heading and inserting ‘‘CERTAIN’’.
(b) AMENDMENT RELATED TO SECTION 3509 OF THE
ACT.—Subparagraph (A) of section 6110(g)(5) is amended
by inserting ‘‘, any Chief Counsel advice,’’ after ‘‘technical
advice memorandum’’.
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(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect as if included in the provisions of
the Internal Revenue Service Restructuring and Reform Act
of 1998 to which they relate.
SEC. 1403. AMENDMENTS RELATED TO TAXPAYER RELIEF
ACT OF 1997.
(a) AMENDMENT RELATED TO SECTION 302 OF THE
ACT.—The last sentence of section 3405(e)(1)(B) is amend-
ed by inserting ‘‘(other than a Roth IRA)’’ after ‘‘indi-
vidual retirement plan’’.
(b) AMENDMENTS RELATED TO SECTION 1072 OF THE
ACT.—
(1) Clause (ii) of section 415(c)(3)(D) and sub-
paragraph (B) of section 403(b)(3) are each amended
by striking ‘‘section 125 or’’ and inserting ‘‘section
125, 132(f)(4), or’’.
(2) Paragraph (2) of section 414(s) is amended
by striking ‘‘section 125, 402(e)(3)’’ and inserting
‘‘section 125, 132(f)(4), 402(e)(3)’’.
(c) AMENDMENT RELATED TO SECTION 1454 OF THE
ACT.—Subsection (a) of section 7436 is amended by insert-
ing before the period at the end of the first sentence ‘‘and
the proper amount of employment tax under such deter-
mination’’.
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(d) EFFECTIVE DATE.—The amendments made by this
section shall take effect as if included in the provisions of
the Taxpayer Relief of 1997 to which they relate.
SEC. 1404. OTHER TECHNICAL CORRECTIONS.
(a) AFFILIATED
CORPORATIONS
IN
CONTEXT
OF
WORTHLESS SECURITIES.—
(1) Subparagraph (A) of section 165(g)(3) is
amended to read as follows:
‘‘(A) the taxpayer owns directly stock in
such corporation meeting the requirements of sec-
tion 1504(a)(2), and’’.
(2) Paragraph (3) of section 165(g) is amended
by striking the last sentence.
(3) The amendments made by this subsection
shall apply to taxable years beginning after December
31, 1984.
(b) REFERENCE TO CERTAIN STATE PLANS.—
(1) Subparagraph (B) of section 51(d)(2) is
amended—
(A) by striking ‘‘plan approved’’ and insert-
ing ‘‘program funded’’, and
(B) by striking ‘‘(relating to assistance for
needy families with minor children)’’.
(2) The amendment made by paragraph (1) shall
take effect as if included in the amendments made by
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section 1201 of the Small Business Job Protection Act
of 1996.
(c) AMOUNT OF IRA CONTRIBUTION OF LESSER EARN-
ING SPOUSE.—
(1) Clause (ii) of section 219(c)(1)(B) is amend-
ed by striking ‘‘and’’ at the end of subclause (I), by
redesignating subclause (II) as subclause (III), and
by inserting after subclause (I) the following new sub-
clause:
‘‘(II) the amount of any des-
ignated nondeductible contribution (as
defined in section 408(o)) on behalf of
such spouse for such taxable year,
and’’.
(2) The amendment made by paragraph (1) shall
take effect as if included in section 1427 of the Small
Business Job Protection Act of 1996.
(d) MODIFIED ENDOWMENT CONTRACTS.—
(1) Paragraph (2) of section 7702A(a) is amend-
ed by inserting ‘‘or this paragraph’’ before the period.
(2) Clause (ii) of section 7702A(c)(3)(A) is
amended by striking ‘‘under the contract’’ and insert-
ing ‘‘under the old contract’’.
(3) The amendments made by this subsection
shall take effect as if included in the amendments
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made by section 5012 of the Technical and Miscella-
neous Revenue Act of 1988.
(e) LUMP-SUM DISTRIBUTIONS.—
(1) Clause (ii) of section 401(k)(10)(B) is
amended by adding at the end the following new sen-
tence: ‘‘Such term includes a distribution of an annu-
ity contract from—
‘‘(I) a trust which forms a part of
a plan described in section 401(a) and
which is exempt from tax under section
501(a), or
‘‘(II) an annuity plan described
in section 403(a).’’.
(2) The amendment made by paragraph (1) shall
take effect as if included in section 1401 of the Small
Business Job Protection Act of 1996.
(f) TENTATIVE CARRYBACK ADJUSTMENTS OF LOSSES
FROM SECTION 1256 CONTRACTS.—
(1) Subsection (a) of section 6411 is amended by
striking ‘‘section 1212(a)(1)’’ and inserting ‘‘sub-
section (a)(1) or (c) of section 1212’’.
(2) The amendment made by paragraph (1) shall
take effect as if included in the amendments made by
section 504 of the Economic Recovery Tax Act of
1981.
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SEC. 1405. CLERICAL CHANGES.
(1) Subsection (f) of section 67 is amended by
striking ‘‘the last sentence’’ and inserting ‘‘the second
sentence’’.
(2) The heading for paragraph (5) of section
408(d) is amended to read as follows:
‘‘(5) DISTRIBUTIONS OF EXCESS CONTRIBUTIONS
AFTER DUE DATE FOR TAXABLE YEAR AND CERTAIN
EXCESS ROLLOVER CONTRIBUTIONS.—’’.
(3) The heading for subparagraph (B) of section
529(e)(3) is amended by striking ‘‘UNDER GUARAN-
TEED PLANS’’.
(4)(A) Subsection (e) of section 678 is amended
by striking ‘‘an electing small business corporation’’
and inserting ‘‘an S corporation’’.
(B) Clause (v) of section 6103(e)(1)(D) is
amended to read as follows:
‘‘(v) if the corporation was an S cor-
poration, any person who was a shareholder
during any part of the period covered by
such return during which an election under
section 1362(a) was in effect, or’’.
(5) Subparagraph (B) of section 995(b)(3) is
amended by striking ‘‘the Military Security Act of
1954 (22 U.S.C. 1934)’’ and inserting ‘‘section 38 of
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the International Security Assistance and Arms Ex-
port Control Act of 1976 (22 U.S.C. 2778)’’.
(6) Subparagraph (B) of section 4946(c)(3) is
amended by striking ‘‘the lowest rate of compensation
prescribed for GS–16 of the General Schedule under
section 5332’’ and inserting ‘‘the lowest rate of basic
pay for the Senior Executive Service under section
5382’’.
SEC. 1406. TECHNICAL CORRECTIONS TO SAVER ACT.
Section 517 of the Employee Retirement Income Secu-
rity Act of 1974 (29 U.S.C. 1147) is amended—
(1) in subsection (a), by striking ‘‘2001 and
2005 on or after September 1 of each year involved’’
and inserting ‘‘2001, 2005, and 2009 in the month of
September of each year involved’’;
(2) in subsection (b), by adding at the end the
following new sentence: ‘‘To effectuate the purposes of
this paragraph, the Secretary may enter into a coop-
erative agreement, pursuant to the Federal Grant and
Cooperative Agreement Act of 1977 (31 U.S.C. 6301
et seq.), with the American Savings Education Coun-
cil.’’;
(3) in subsection (e)(2)—
(A) by striking ‘‘Committee on Labor and
Human Resources’’ in subparagraph (B) and in-