Source: https://www.law.cornell.edu/uscode/text/26/1042
Timestamp: 2019-04-22 14:18:45+00:00

Document:
then the gain (if any) on such sale which would be recognized as long-term capital gain shall be recognized only to the extent that the amount realized on such sale exceeds the cost to the taxpayer of such qualified replacement property.
the total value of all outstanding stock of the corporation (other than stock described in section 1504(a)(4)).
The taxpayer files with the Secretary the written statement described in subparagraph (B).
consenting to the application of sections 4978 and 4979A with respect to such employer or cooperative.
The taxpayer’s holding period with respect to the qualified securities is at least 3 years (determined as of the time of the sale).
a transfer pursuant to an option or other right to acquire stock to which section 83, 422, or 423 applied (or to which section 422 or 424 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) applied).
some combination of clauses (i) and (ii).
The term “replacement period” means the period which begins 3 months before the date on which the sale of qualified securities occurs and which ends 12 months after the date of such sale.
is not the corporation which issued the qualified securities which such security is replacing or a member of the same controlled group of corporations (within the meaning of section 1563(a)(1)) as such corporation.
For purposes of clause (i), income which is described in section 954(c)(3) (as in effect immediately before the Tax Reform Act of 1986) shall not be treated as passive investment income.
The term “operating corporation” means a corporation more than 50 percent of the assets of which were, at the time the security was purchased or before the close of the replacement period, used in the active conduct of the trade or business.
an insurance company subject to tax under subchapter L.
then all such corporations shall be treated as 1 corporation.
For purposes of clause (i), the term “control” has the meaning given such term by section 304(c). In determining control, there shall be disregarded any qualified replacement property of the taxpayer with respect to the section 1042 sale being tested.
For purposes of this paragraph, the term “security” has the meaning given such term by section 165(g)(2), except that such term shall not include any security issued by a government or political subdivision thereof.
No sale of securities by an underwriter to an employee stock ownership plan or eligible worker-owned cooperative in the ordinary course of his trade or business as an underwriter, whether or not guaranteed, shall be treated as a sale for purposes of subsection (a).
An election under subsection (a) shall be filed not later than the last day prescribed by law (including extensions thereof) for filing the return of tax imposed by this chapter for the taxable year in which the sale occurs.
Subsection (a) shall not apply to any gain on the sale of any qualified securities which is includible in the gross income of any C corporation.
the denominator of which is the total cost of all such items of property.
Any reduction in basis under this subsection shall not be taken into account for purposes of section 1278(a)(2)(A)(ii) (relating to definition of market discount).
If a taxpayer disposes of any qualified replacement property, then, notwithstanding any other provision of this title, gain (if any) shall be recognized to the extent of the gain which was not recognized under subsection (a) by reason of the acquisition by such taxpayer of such qualified replacement property.
then the taxpayer shall be treated as having disposed of such qualified replacement property at such time.
in any transaction to which section 1042(a) applies.
such deficiency may be assessed before the expiration of such 3-year period notwithstanding the provisions of any other law or rule of law which would otherwise prevent such assessment.
This section shall apply to the sale of stock of a qualified refiner or processor to an eligible farmers’ cooperative.
For purposes of this section, the term “eligible farmers’ cooperative” means an organization to which part I of subchapter T applies and which is engaged in the marketing of agricultural or horticultural products.
paragraphs (2)(D) and (7) of subsection (c) shall not apply.
The date of the enactment of the Revenue Reconciliation Act of 1990, referred to in subsec. (c)(1)(B)(ii), is the date of enactment of Pub. L. 101–508, which was approved Nov. 5, 1990.
The Tax Reform Act of 1986, referred to in subsec. (c)(4)(A), is Pub. L. 99–514, which was approved Oct. 22, 1986.
1996—Subsec. (c)(1)(A). Pub. L. 104–188, § 1316(d)(3), substituted “domestic C corporation” for “domestic corporation”.
Subsec. (c)(1)(B)(ii). Pub. L. 104–188, § 1704(t)(50), provided that section 11801(c)(9)(H) of Pub. L. 101–508 shall be applied as if “section 1042(c)(1)(B)” appeared instead of “section 1042(c)(2)(B)”. See 1990 Amendment note below.
Subsec. (c)(4)(A)(i). Pub. L. 104–188, § 1311(b)(3), substituted “section 1362(d)(3)(C)” for “section 1362(d)(3)(D)”.
Subsec. (c)(4)(B)(ii)(I). Pub. L. 104–188, § 1616(b)(13), struck out “or 593” after “section 581”.
1990—Subsec. (c)(1)(B)(ii). Pub. L. 101–508, which directed the amendment of subsec. (c)(2)(B)(ii) by substituting “section 83, 422, or 423 applied (or to which section 422 or 424 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) applied)” for “section 83, 422, 422A, 423, or 424 applies”, was executed to subsec. (c)(1)(B)(ii). See 1996 Amendment note above.
1989—Subsec. (b)(4). Pub. L. 101–239 added par. (4).
1988—Subsec. (b)(3), (4). Pub. L. 100–647, § 1018(t)(4)(F), made technical correction to Pub. L. 99–514, § 1854(a)(3)(B), see 1986 Amendment notes below.
Subsec. (c)(4)(A). Pub. L. 100–647, § 1018(t)(4)(D), inserted “(as in effect immediately before the Tax Reform Act of 1986)” after “section 954(c)(3)” in last sentence.
Subsec. (c)(4)(B)(i). Pub. L. 100–647, § 1018(t)(4)(E), substituted “replacement period” for “placement period”.
1986—Pub. L. 99–514, § 1854(a)(11), which directed that “employee” be inserted before “stock” in section catchline was executed by making the insertion before “stock” the second time that term appears as the probable intent of Congress.
Subsec. (a). Pub. L. 99–514, § 1854(a)(1), substituted “the taxpayer or executor elects in such form as the Secretary may prescribe” for “the taxpayer elects” in par. (1) and inserted “which would be recognized as long-term capital gain” in concluding provisions.
Subsec. (b)(3). Pub. L. 99–514, § 1854(a)(3)(B), as amended by Pub. L. 100–647, § 1018(t)(4)(F), redesignated par. (4) as (3) and struck out former par. (3) which related to plans maintained for benefit of employees.
Subsec. (b)(3)(B). Pub. L. 99–514, § 1854(f)(3)(B), amended subpar. (B) similar to amendment by section 1854(a)(9)(B) of Pub. L. 99–514, inserting reference to section 4979A.
Pub. L. 99–514, § 1854(a)(9)(B), substituted “sections 4978 and 4979A” for “section 4978(a)”.
Subsec. (b)(4). Pub. L. 99–514, § 1854(a)(3)(B), as amended by Pub. L. 100–647, § 1018(t)(4)(F), redesignated par. (4) as (3).
Subsec. (c). Pub. L. 99–514, § 1899A(26), substituted “this section—” for “this section.—” in introductory provision.
Subsec. (c)(1). Pub. L. 99–514, § 1854(a)(4), substituted “stock outstanding that is” for “securities outstanding that are” in subpar. (A), redesignated subpar. (C) as (B), and struck out former subpar. (B) which read as follows: “at the time of the sale described in subsection (a)(1), have been held by the taxpayer for more than 1 year, and”.
Subsec. (c)(5). Pub. L. 99–514, § 1854(a)(10), substituted “sold” for “acquired” in heading, and in text substituted “sale of securities” for “acquisition of securities” and inserted “to an employee stock ownership plan or eligible worker-owned cooperative”.
Subsec. (c)(7). Pub. L. 99–514, § 1854(a)(6)(A), added par. (7).
Subsec. (d). Pub. L. 99–514, § 1854(a)(7), inserted last sentence.
Subsecs. (e), (f). Pub. L. 99–514, § 1854(a)(8)(A), added subsec. (e) and redesignated former subsec. (e) as (f).
Amendment by section 1316(d)(3) of Pub. L. 104–188 applicable to taxable years beginning after Dec. 31, 1997, see section 1316(f) of Pub. L. 104–188, set out as a note under section 170 of this title.
Amendment by section 1311(b)(3) of Pub. L. 104–188 applicable to taxable years beginning after Dec. 31, 1996, see section 1317(a) of Pub. L. 104–188, set out as a note under section 641 of this title.
Amendment by section 1616(b)(13) of Pub. L. 104–188 applicable to taxable years beginning after Dec. 31, 1995, see section 1616(c) of Pub. L. 104–188, set out as a note under section 593 of this title.
Amendment by section 1854(a)(1), (2)(A), (4), (5)(A), (7), (10), (11) of Pub. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title.
Amendment by section 1854(a)(3)(B) of Pub. L. 99–514 applicable to sales of securities after Oct. 22, 1986, except that a taxpayer or executor may elect to have section 1042(b)(3) of the Internal Revenue Code of 1954 (as in effect before the amendment by section 1854(a)(3)(B) of Pub. L. 99–514) apply to sales before Oct. 22, 1986, as if section 1042(b)(3) included the last sentence of section 409(n)(1) of this title (as added by section 1854(a)(3)(A) of Pub. L. 99–514), see section 1854(a)(3)(C) of Pub. L. 99–514, as amended, set out as a note under section 409 of this title.
The amendment made by subparagraph (A) [amending this section] shall apply to sales after March 28, 1985, except that such amendment shall not apply to sales made before July 1, 1985, if made pursuant to a binding contract in effect on March 28, 1985, and at all times thereafter.
a final purchase agreement was entered into on November 5, 1985.
Amendment by section 1854(a)(9)(B) of Pub. L. 99–514 applicable to sales of securities after Oct. 22, 1986, see section 1854(a)(9)(D) of Pub. L. 99–514, set out as an Effective Date note under section 4979A of this title.
Amendment by section 1854(f)(3)(B) of Pub. L. 99–514 effective Oct. 22, 1986, see section 1854(f)(4)(A) of Pub. L. 99–514, set out as a note under section 409 of this title.
Pub. L. 105–34, title IX, § 968, Aug. 5, 1997, 111 Stat. 895, amending this section and enacting provisions set out as a note above, was subject to line item veto by the President, Cancellation No. 97–2, signed Aug. 11, 1997, 62 F.R. 43267, Aug. 12, 1997. For decision holding line item veto unconstitutional, see Clinton v. City of New York, 524 U.S. 417, 118 S.Ct. 2091, 141 L.Ed.2d 393 (1998).
The requirement that section 1042(b) of the Internal Revenue Code of 1954 [now 1986] shall be applied with regard to section 318(a)(4) of such Code shall apply to sales after May 6, 1986.
  So in original. Probably should be “paragraph (1),”.

References: § 1316
 § 1704
 § 1311
 § 1616
 § 1018
 § 1854
 § 1018
 § 1018
 § 1854
 § 1854
 § 1854
 § 1018
 § 1854
 § 1854
 § 1854
 § 1018
 § 1899
 § 1854
 § 1854
 § 1854
 § 1854
 § 1854
 § 968
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