An Act to amend section 341 of the Internal Revenue Code of 1954, relating to collapsible corporations, and to amend section 543(a)(2) of such Code, relating to the inclusion of rents in personal holding company income
PL 88-484 (H.R.7301), enacted 08/22/1964

596 
PUBLIC LAW 88-484-AUG. 22, 1964 
[78 STAT. 
Public Law 88-484 
August 22, 1964 
AN A C T 
[ . R. 7301] 
rji^j aiueiid section 341 of the Internal Revenue Code of 1954, relating to collapsible 
corporations, and to amend section 543(a)(2) of such Code, relating to the 
inclusion of rents in personal holding company income. 
Taxes. 
Collapsible cor-
Be it eimcted hy the Senate and House of Representatives 
of the 
United States of America in Congress assembled, That (a) section 341 
poVaturnsV"""''"'' of the Internal Revenue Code of 1954 (relating to collapsible corpora-
68A Stat. 107; 
tions) is amended by striking out "except as provided in subsection 
72 tat. 1615. 
(d)," in subsection (a) and inserting in lieu thereof "except as other-
wise provided in this section," and by adding after subsection (e) the 
following new subsection: 
"(f) 
CERTAIN SALES or 
STOCK OF CONSENTING CORPORATIONS.— 
"(1) I N GENERAL.—Subsection (a) (1) shall not apply to a sale 
of stock of a corporation (other than a sale to the issuing corpo-
ration) if such corporation (hereinafter in this subsection referred 
to as 'consenting corporation') consents (at such time and in such 
manner as the Secretary or-his delegate may by regulations pre-
scribe) to have the provisions of paragraph (2) apply. 
Such 
consent shall apply w^th respect to each sale of stock of such 
corporation made within the 6-month period beginning with the 
date on which such consent is filed. 
"(2) RECOGNITION OF GAIN.—Except as provided in paragraph 
(8), if a subsection (f) asset (as defined in paragraph (4)) 
is disposed of at any time by a consenting corporation (or, if 
paragraph (3) applies, by a transferee corporation), then the 
amount by w^hich— 
"(A) in the case of a sale, exchange, or involuntary con-
version, the amount realized, or 
"(B) in the case of any other disposition, the fair market 
value of such asset, 
exceeds the adjusted basis of such asset shall be treated as 
gain from the sale or exchange of such asset. Such gain shall 
be recognized notwithstanding any other provision of this sub-
title, but only to the extent such gain is not recognized under 
any other provision of this subtitle. 
"(3) 
EXCEFITON FOR CERTAIN TAX-FREE TRANSACTIONS.—If 
the 
basis of a subsection (f) asset in the hands of a transferee is 
determined by reference to its basis in the hands of the transferor 
by reason of the application of section 332, 351, 361, 371(a), 
68A Stat. 102; 
or 374(a), then the amount of gain taken into account by the 
26 use 332, 
transferor under paragraph (2) shall not exceed the amount of 
351, 361, 371, 374. 
gain Tecoguized to the transferor on the transfer of such asset 
(determined w^ithout regard to this subsection). This paragraph 
shall apply only if the transferee— 
"(A) is not an organization which is exempt from tax 
imposed by this chapter, and 
"(B) agrees (at such time and in such manner as the 
Secretary or his delegate may by regulations prescribe) 
to have the provisions of paragraph (2) apply to any dis-
position by it of such subsection (f) asset. 
"(4) SUBSECTION (f) 
ASSET DEFINED.—For purposes of this 
subsection— 
"(A) I N GENERAL.—The term 'subsection (f) asset' means 
anv property which, as of the date of any sale of stock 
referred to in paragraph (1), is not a capital asset and is 
property owned by, or subject to an option to acquire held by, 
the consenting corporation. 
For purposes of this sub-
paragraph, land or any interest in real property (other than 
78 STAT. ] 
PUBLIC LAW 88-484-AUG. 22, 1964 
597 
a security interest), and unrealized receivables or fees (as 
defined in subsection (b)(4)), shall be treated as property 
which is not a capital asset. 
"(B) PROPERTy UNDER CONSTRUCTION.—If manufacture, 
construction, or production with respect to any property 
described in subparagraph (A) has commenced before any 
date of sale described therein, the term 'subsection (f) 
asset' includes the property resulting from such manufacture, 
construction, or production. 
"(C) SPECIAL RULE FOR LAND,—In the case of land or any 
interest in real property (other than a security interest) 
described in subparagraph (A), the term 'subsection (f) 
asset' includes any improvements resulting from construction 
with respect to such property if such construction is com-
menced (by the consenting corporation or by a transferee 
corporation which has agreed to the application of para-
graph (2)) within 2 years after the date of any sale 
described in subparagraph (A). 
"(5) 5-YEAR LIMITATION A
S T
O SHAREHOLDER.—Paragraph (1) 
shall not apply to the sale of stock of a corporation by a share-
holder if, during the 5-year period ending on the date of such 
sale, such shareholder (or any related person within the mean-
ing of subsection (e) (8) (A)) sold any stock of another consent-
ing corporation within any 6-month period beginning on a 
date on which a consent was filed under paragraph (1) by such 
other corporation. 
"(6) SPECIAL RULE FOR STOCK OWNERSHIP IN OTHER CORPORA-
TIONS.—If a corporation (hereinafter in this paragraph referred 
to as 'owning corporation') owns 5 percent or more in value of 
the outstanding stock of another corporation on the date of any 
sale of stock of the owning corporation during a 6-month period 
with respect to which a consent under paragraph (1) was filed 
by the owning corporation, such consent shall not be valid with 
respect to such sale unless such other corporation has (within 
the 6-month period ending on the date of such sale) filed a valid 
consent under paragraph (1) with respect to sales of its stock. 
For purposes of applymg paragraph (4) to such other corpora-
tion, a sale of stock of the owning corporation to which para-
graph (1) applies shall be treated as a sale of stock of such other 
corporation. In the case of a chain of corporations connected 
by the 5-percent ownership requirements of this paragraph, rules 
similar to the rules of the two preceding sentences shall be 
applied. 
"(7) ADJUSTMENTS TO BASIS.—The Secretary or his delegate 
shall prescribe such regulations as he may deem necessary to 
provide for adjustments to the basis of property to reflect gain 
recognized under paragraph (2)." 
(b) (1) Subsections (b) and (d) of section 301 (relating to amount 
distributed), and paragraph (3) of section 312(c) (relating to adjust-
ments of earnings and profits), of the Internal Revenue Code of 1954 
^^^l^^*" ^'*' 
are each amended by striking out "section 311" and inserting in lieu 
^^ 
301.312. 
tliereof "section 311, under section 341 (f),". 
fe'star ^035 
(2) Subparagraphs (A) and (B) of section 453(d) (4) of such Code 
26 us^c 453.^" 
(relating to distribution of installment obligations in certain corpo-
rate liquidations) are each amended by inserting "section 341(f) or'' 
before "section 1245(a)". 
SEC. 2. The amendments made by the first section of this Act shall 
Effective date. 
apply with respect to transactions after the date of the enactment of 
this Act in taxable years ending after such date. 
598 
PUBLIC LAW 88-485-AUG. 22, 1964 
[78 STAT. 
Personal hold-
ing company in-
come. 
Rents. 
Ante, p. 81. 
26 u s e 543. 
SEC. 3. (a) Section 543(a) (2) of the Internal Revenue Code of 1954 
(relating to rents) is amended by adding at the end thereof the fol-
lowing new sentence: "For purposes of applying this paragraph, 
royalties received for the use of, or for the privilege of using, a patent, 
invention, model, or d e s i ^ (whether or not patented), secret formula 
or process, or any other similar property right shall be treated as rent, 
if such property right is also used by the corporation receiving such 
royalties in the manufacture or production of tangible personal prop-
erty held for lease to customers, and if the amount (computed without 
regard to this sentence) constituting rent from such leases to customers 
meets the requirements of subparagraph (A)." 
(b) The amendment made by siibsection (a) shall apply to taxable 
years beginning after December 31,1963. 
Approved August 22, 1964. 
August 22, 1964 
[H. R. 1988] 
Public Law 88-485 
AN ACT 
To provide for the settlement of claims of certain residents of the Trust Territory 
of the Pacific Islands, 
Rongelap Atoll. 
Radiation vic-
tims, compensa-
tion. 
Appropri at io n; 
conditions for 
payment. 
Attorney fees. 
Be it enacted by the Senate and House of Representatives 
of the 
United States of America in Congress assembled, That the Congress 
hereby assumes compassionate responsibility to compensate inhabit-
ants in the Rongelap Atoll, in the Trust Territory of the Pacific 
Islands, for radiation exposures sustained by them as a result of a 
thermonuclear detonation at Bikini Atoll in the Marshall Islands on 
March 1,1954. 
SEC. 2. There is authorized to be appropriated for such purpose out 
of the Treasury of the United States the sum of $950,000 to be 
expended by the Secretary of the Interior (hereinafter referred to as 
the "Secretary") in the manner hereinafter provided. After deduct-
ing the amount provided for in section 5 hereof, the Secretary shall 
pay the remainder in equal amounts to each of the affected inhabit-
ants of Rongelap, except that (a) with respect to each such inhabitant 
who has died before receipt of such payment, the Secretary shall pay 
such sum to the heirs or legatees of such inhabitant, and (b) with 
respect to any such inhabitant who is less than twenty-one years of 
age or who has been adjudged incompetent or insane, payment shall 
be made, in the discretion of the Secretary, to a parent, relative, other 
person, or institution for his benefit. 
SEC. 3. The Secretary shall give advice concerning prudent financial 
management to each person receiving a payment pursuant to this Act, 
to the end that each such person will have information as to methods of 
conserving his funds and as to suitable objects for which such funds 
may be expended. 
SEC. 4. A payment made under the provisions of this Act shall be 
in full settlement and discharge of all claims against the United States 
arising out of the thermonuclear detonation on March 1,1954. 
SEC. 5. The Secretary is authorized to pay reasonable attorney fees 
for legal services rendered on behalf of the people of Rongelap prior 
to the date of enactment of this Act. 
Such fees shall be paid out of 
the funds authorized to be appropriated in section 2 of this Act, but 
the total of such fees paid shall not exceed 5 per centum of the appro-
priated funds. 
SEC. 6. The decisions of the Secretary in carrying out the provisions 
of this Act shall be final and not subject to review. 
Approved August 22, 1964.