311
ment company in exchange solely for stock in
such company, and
‘‘(B) such stock is distributed by such
common trust fund to participants in such com-
mon trust fund in exchange solely for their in-
terests in such common trust fund,
no gain or loss shall be recognized by such common
trust fund by reason of such transfer or distribution,
and no gain or loss shall be recognized by any par-
ticipant in such common trust fund by reason of
such exchange.
‘‘(2) BASIS RULES.—
‘‘(A) 
REGULATED
INVESTMENT
COM-
PANY.—The basis of any asset received by a
regulated investment company in a transfer re-
ferred to in paragraph (1)(A) shall be the same
as it would be in the hands of the common
trust fund.
‘‘(B) PARTICIPANTS.—The basis of any
stock in a regulated investment company which
is received in an exchange referred to in para-
graph (1)(B) shall be the same as that of the
property exchanged.
‘‘(3) TREATMENT OF ASSUMPTIONS OF LIABIL-
ITY.—
312
‘‘(A) IN GENERAL.—In determining wheth-
er the transfer referred to in paragraph (1)(A)
is in exchange solely for stock in the regulated
investment company, the assumption by such
company of a liability of the common trust
fund, and the fact that any property trans-
ferred by the common trust fund is subject to
a liability, shall be disregarded.
‘‘(B) SPECIAL RULE WHERE ASSUMED LI-
ABILITIES EXCEED BASIS.—
‘‘(i) IN GENERAL.—If in any transfer
referred to in paragraph (1)(A) the as-
sumed liabilities exceed the aggregate ad-
justed bases (in the hands of the common
trust fund) of the assets transferred to the
regulated investment company—
‘‘(I) notwithstanding paragraph
(1), gain shall be recognized to the
common trust fund on such transfer
in an amount equal to such excess,
‘‘(II) the basis of the assets re-
ceived by the regulated investment
company in such transfer shall be in-
creased by the amount so recognized,
and
313
‘‘(III) any adjustment to the
basis of a participant’s interest in the
common trust fund as a result of the
gain so recognized shall be treated as
occurring immediately before the ex-
change referred to in paragraph
(1)(B).
‘‘(ii) 
ASSUMED
LIABILITIES.—For
purposes of clause (i), the term ‘assumed
liabilities’ means the aggregate of—
‘‘(I) any liability of the common
trust fund assumed by the regulated
investment company in connection
with the transfer referred to in para-
graph (1)(A), and
‘‘(II) any liability to which prop-
erty so transferred is subject.
‘‘(4) COMMON TRUST FUND MUST MEET DIVER-
SIFICATION RULES.—This subsection shall not apply
to any common trust fund which would not meet the
requirements of section 368(a)(2)(F)(ii) if it were a
corporation. For purposes of the preceding sentence,
Government securities shall not be treated as securi-
ties of an issuer in applying the 25-percent and 50-
percent test and such securities shall not be excluded
314
for purposes of determining total assets under clause
(iv) of section 368(a)(2)(F).’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to transfers after the date of
the enactment of this Act.
Subtitle D—Tax-Exempt Bond
Provisions
SEC. 631. REPEAL OF $100,000 LIMITATION ON UNSPENT
PROCEEDS UNDER 1-YEAR EXCEPTION FROM
REBATE.
Subclause (I) of section 148(f)(4)(B)(ii) (relating to
additional period for certain bonds) is amended by striking
‘‘the lesser of 5 percent of the proceeds of the issue or
$100,000’’ and inserting ‘‘5 percent of the proceeds of the
issue’’.
SEC. 632. EXCEPTION FROM REBATE FOR EARNINGS ON
BONA FIDE DEBT SERVICE FUND UNDER
CONSTRUCTION BOND RULES.
Subparagraph (C) of section 148(f)(4) is amended by
adding at the end thereof the following new clause:
‘‘(xvii) TREATMENT
OF
BONA
FIDE
DEBT
SERVICE
FUNDS.—If the spending
requirements of clause (ii) are met with re-
spect to the available construction proceeds
of a construction issue, then paragraph (2)
315
shall not apply to earnings on a bona fide
debt service fund for such issue.’’
SEC. 633. AGGREGATION OF ISSUES RULES NOT TO APPLY
TO TAX OR REVENUE ANTICIPATION BONDS.
Section 150 (relating to definitions and special rules)
is amended by adding at the end thereof the following new
subsection:
‘‘(f) TAX
OR
REVENUE
ANTICIPATION
BONDS
TREATED AS SEPARATE ISSUES.—For purposes of this
part, if—
‘‘(1) all of the bonds which are part of an issue
are qualified 501(c)(3) bonds or bonds which are not
private activity bonds, and
‘‘(2) any portion of such issue consists of tax or
revenue anticipation bonds which are reasonably ex-
pected 
to 
meet 
the 
requirements 
of 
section
148(f)(4)(B)(iii),
then such portion shall, subject to appropriate allocations
specified in regulations prescribed by the Secretary, be
treated as a separate issue.’’
SEC. 634. REPEAL OF DISPROPORTIONATE PRIVATE BUSI-
NESS USE TEST.
(a) IN GENERAL.—Subsection (b) of section 141 (re-
lating to private business tests) is amended by striking