H. R. 2488—202 
‘‘(I) the amount of such premiums 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 sec-
tion 6033 shall apply to returns 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 purposes of this title other than sub-
chapter B of chapter 42. 
‘‘(G) SPECIAL RULE WHERE STATE REQUIRES SPECIFICA-
TION
OF
CHARITABLE
GIFT
ANNUITANT
IN
CONTRACT.—In 
the case of an obligation 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 chari-
table gift annuity to be exempt from insurance regulation 
by such State, that each beneficiary under the charitable 
gift annuity be named as a beneficiary under an annuity 
contract issued by an insurance company authorized to 
transact business in such State, the requirements of clauses 
(i) and (ii) of subparagraph (D) shall be treated as met 
if— 
‘‘(i) such State law requirement was in effect on 
February 8, 1999, 
‘‘(ii) each such beneficiary under the charitable 
gift annuity is a bona fide resident of such State at 
the time the obligation to pay a charitable gift annuity 
is entered into, and 
‘‘(iii) the only persons entitled to payments under 
such contract are persons entitled to payments as bene-
ficiaries under such obligation on the date such obliga-
tion is entered into. 
‘‘(H) MEMBER OF FAMILY.—For purposes of this para-
graph, an individual’s family consists of the individual’s 
grandparents, the grandparents of such individual’s spouse, 
the lineal descendants 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 sec-
tion, the amendment made by this section shall apply to trans-
fers made after February 8, 1999. 
(2) EXCISE TAX.—Except as provided in paragraph (3) of 
this subsection, section 170(f )(10)(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. 
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H. R. 2488—203 
(3) REPORTING.—Clause (iii) of such section 170(f )(10)(F) 
shall apply to premiums paid after February 8, 1999 (deter-
mined as if the tax imposed by such section applies to premiums 
paid after such date). 
SEC. 1511. RESTRICTION ON USE OF REAL ESTATE INVESTMENT 
TRUSTS TO AVOID ESTIMATED TAX PAYMENT REQUIRE-
MENTS. 
(a) IN GENERAL.—Subsection (e) of section 6655 (relating to 
estimated tax by corporations) is amended by adding at the end 
the following new paragraph: 
‘‘(5) TREATMENT OF CERTAIN REIT DIVIDENDS.— 
‘‘(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 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 subpara-
graph (A), the term ‘closely held real estate investment 
trust’ means a real estate investment trust with respect 
to which five 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 subsection (a) 
shall apply to estimated tax payments due on or after September 
15, 1999. 
SEC. 1512. 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 inserting ‘‘a 
principal purpose’’, and 
(2) by striking ‘‘on the exchange’’ in subparagraph (A). 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply to assumptions of liability after July 14, 1999. 
SEC. 1513. ALLOCATION OF BASIS ON TRANSFERS OF INTANGIBLES 
IN CERTAIN NONRECOGNITION TRANSACTIONS. 
(a) TRANSFERS
TO CORPORATIONS.—Section 351 (relating to 
transfer to corporation controlled by transferor) is amended by 
redesignating subsection (h) as subsection (i) and by inserting after 
subsection (g) the following new subsection: 
‘‘(h) TREATMENT
OF TRANSFERS
OF INTANGIBLE PROPERTY.— 
‘‘(1) TRANSFERS OF LESS THAN ALL SUBSTANTIAL RIGHTS. 
‘‘(A) IN GENERAL.—A transfer of an interest in intan-
gible property (as defined in section 936(h)(3)(B)) shall 
be treated under this section as a transfer of property 
even if the transfer is of less than all of the substantial 
rights of the transferor in the property. 
‘‘(B) ALLOCATION OF BASIS.—In the case of a transfer 
of less than all of the substantial rights of the transferor 
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H. R. 2488—204 
in the intangible property, the transferor’s basis imme-
diately before the transfer shall be allocated among the 
rights retained by the transferor and the rights transferred 
on the basis of their respective fair market values. 
‘‘(2) NONRECOGNITION NOT TO APPLY TO INTANGIBLE PROP-
ERTY DEVELOPED FOR TRANSFEREE.—This section shall not apply 
to a transfer of intangible property developed by the transferor 
or any related 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 transferred 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. 
SEC. 1514. 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 adding at the end 
the following new subsection: 
‘‘(f ) CORRESPONDING ADJUSTMENT TO BASIS OF ASSETS OF A 
DISTRIBUTED
CORPORATION
CONTROLLED
BY
A
CORPORATE 
PARTNER.— 
‘‘(1) IN GENERAL.—If— 
‘‘(A) a corporation (hereafter in this subsection referred 
to as the ‘corporate partner’) receives a distribution from 
a partnership of stock in another corporation (hereafter 
in this subsection 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 exceeded 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 control the distributed corporation at such 
time, at the time the corporate partner first has such control). 
‘‘(2) EXCEPTION FOR CERTAIN DISTRIBUTIONS BEFORE CON-
TROL ACQUIRED.—Paragraph (1) shall not apply to any distribu-
tion of stock in the distributed 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 satisfac-
tion of the Secretary that such distribution was not part 
of a plan or arrangement to acquire control of the distrib-
uted corporation. 
‘‘(3) LIMITATIONS ON BASIS REDUCTION.— 
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H. R. 2488—205 
‘‘(A) IN GENERAL.—The amount of the reduction under 
paragraph (1) shall not exceed the amount by which the 
sum of the aggregate adjusted 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 ADJUSTED BASIS OF 
PROPERTY.—No reduction under paragraph (1) in the basis 
of any property shall exceed the adjusted basis of such 
property (determined without regard to such reduction). 
‘‘(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 (by reason 
of being distributed from a partnership) in whole or in part 
by reference 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 CORPORA-
TION.—If the property held by a distributed corporation is stock 
in a corporation which the distributed corporation controls, 
this subsection shall be applied to reduce the basis of the 
property of such controlled corporation. This subsection shall 
be reapplied to any property of any controlled corporation which 
is stock in a corporation which it controls. 
‘‘(8) REGULATIONS.—The Secretary shall prescribe such 
regulations as may be necessary to carry out the purposes 
of this subsection, including regulations to avoid double 
counting and to prevent the abuse of such purposes.’’. 
(b) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in paragraph (2), the 
amendment made by this section shall apply to distributions 
made after July 14, 1999. 
(2) PARTNERSHIPS IN EXISTENCE ON JULY 14, 1999.—In the 
case of a corporation which is a partner in a partnership as 
of July 14, 1999, the amendment made by this section shall 
apply to distributions made to such partner from such partner-
ship after the date of the enactment of this Act. 
SEC. 1515. PROHIBITED ALLOCATIONS OF S CORPORATION STOCK 
HELD BY AN ESOP. 
(a) IN GENERAL.—Section 409 (relating to qualifications for 
tax credit employee stock ownership plans) is amended by redesig-
nating subsection (p) as subsection (q) and by inserting after sub-
section (o) the following new subsection: 
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