An Act relating to recognition of gain or loss in certain railroad reorganizations and to amend section 108 (b) of the Internal Revenue Code of 1954
PL 84-628 (H.R.7247), enacted 06/29/1956

402 
PUBLIC LAW 628-JUNE 29, 1956 
[70 ST A T . 
carrying out the study and investigation required by this section. 
Each such report shall be printed as a House document of the session 
of the (vongress to which the report is made. 
(e) FUNDS FOR STUDY AND INVESTIGATION.—There are hereby au-
thorized to be appropriated out of the Highway Trust Fund such sums 
as may be necessary to enable the Secretary of Commerce to carry out 
the provisions of this section. 
SEC. 211. EFFECTIVE DATE OF TITLE. 
This title shall take effect on the date of its enactment, except that the 
amendments made by sections 202, 203, 204, and 205 shall take effect 
on July 1,1956. 
TITLE III—SEPARABILITY 
SEC. 301. SEPARABILITY. 
If any section, subsection, or other provision of this Act or the appli-
cation thereof to any person or circumstance is held invalid, the re-
mainder of this Act and the application of such section, subsection, or 
other provision to other persons or circumstances shall not be affected 
thereby. 
Approved June 29, 1956. 
June 29, 1956 
[H. R. 7247] 
Public Law 628 
CHAPTER 
463 
AN ACT 
Relating to recognition of gain or loss in certain railroad reorganizations and 
to amend section 108 (b) of the Internal Revenue Code of 1954. 
Be it enacted hy the Senate and House of Representatives 
of the 
minu/^^^'^^"* f7mj5e6? States of America in Congress assembled^ That part IV of sub-
68A*stat. 121. 
chapter C of chapter 1 of the Internal Revenue Code of 1954 is 
26 use 371-373. j^^j-g^^y amended by adding at the end thereof the following new 
section: 
"SEC. 374. GAIN OR LOSS NOT RECOGNIZED IN CERTAIN RAILROAD 
REORGANIZATIONS. 
"(a) EXCHANGES BY CORPORATIONS.— 
"(1) NONRECOGNITION or GAIN OR LOSS.—No gain or loss shall 
be recognized if property of a railroad corporation, as defined in 
section 77 (m) of the Bankruptcy Act (49 Stat. 922; 11 U. S. C. 
205), is transferred after July 31, 1955, in pursuance of an order 
of the court having jurisdiction of such corporation— 
"(A) in a receivership proceeding, or 
"(B) in a proceeding under section 77 of the Bankruptcy 
Act, 
to another railroad corporation (as defined in section 77 (m) of 
the Bankruptcy Act) organized or made use of to effectuate a 
plan of reorganization approved by the court in such proceeding, 
in exchange solely for stock or securities in such other railroad 
corporation. 
"(2) 
GAIN FROM EXCHANGES NOT SOLELY IN KIND.—If an ex-
change would be within the provisions of paragraph (1) if it 
were not for the fact that the property received in exchange con-
sists not only of stock or securities permitted by paragraph (1) 
to be received without the recognition of gain, but also of other 
property or money, then— 
70 STAT.] 
PUBLIC LAW 62&-JUNE 29, 1956 
403 
"(A) if the corporation receiving such other property or 
money distributes it in pursuance of the plan of reorganiza-
tion, no gain to the corporation shall be recognized from 
the exchange, but 
"(B) if the corporation receiving such other property or 
money does not distribute it in pursuance of the plan of re-
organization, the gain, if any, to the corporation shall be rec-
ognized, but in an amount not in excess of the sum of such 
money and the fair market value of such other property so 
received, which is not so distributed. 
"(3) Loss F
R
O
M EXCHANGES NOT SOLELY IN KIND.—If an ex-
change would be within the provisions of paragraph (1) if it 
were not for the fact that the property received in exchange con-
sists not only of property permitted by such paragraph to be re-
ceived without the recognition of gain or loss, but also of other 
property or money, then no loss from the exchange shall be rec-
ognized. 
"(b) BASIS.—If the property of a railroad corporation (as defined 
in section 77 (m) of the Bankruptcy Act) was acquired after July 31, 
1955, in pursuance of an order of the court having jurisdiction of 
such corporation— 
"(1) in a receivership proceeding, or 
"(2) in a proceeding under section 77 of the Bankruptcy Act, 
and the acquiring corporation is a railroad corporation (as defined 
in section 77 (m) of the Bankruptcy Act) organized or made use of 
to effectuate a plan of reorganization approved by the court in such 
proceeding, the basis shall be the same as it would be in the hands 
of the railroad corporation whose property was so acquired, increased 
in the amount of gain recognized under subsection (a) (2) to the 
transferor on such transfer. 
"(c) ASSUMPTION OF LIABILITIES.—In the case of a transaction in-
volving an assumption of a liability or the acquisition of property 
subject to a liability, the rules provided in section 357 shall apply." 
26^icf*3sV.^'' 
SEC. 2. Section 357 of such Code is hereby amended— 
(1) by deleting "or 371" wherever appearing in subsections 
(a) and (b) thereof, and inserting in lieu thereof "371, or 374", 
and 
(2) by deleting from subsection (c) (2) (B) "371" and in-
serting in lieu thereof "371 or 374". 
SEO. 3. Section 373 is hereby amended— 
f 
I1jicf*37i''* 
(1) by deleting from subsection (a) "transferred in pursuance" 
and inserting in lieu thereof "transferred before August 1, 1955, 
in pursuance", and 
(2) by deleting "December 31, 1938", and inserting in lieu 
thereof "December 31, 1938, and before August 1, 1955,". 
SEC. 4. The table of sections for part IV of subchapter C of chapter 
1 of the Internal Revenue Code of 1954 is hereby amended by adding 
at the end thereof the following: 
"Sec. 374. Gain or loss not recognized in certain railroad reorgan-
izations." 
SEC. 5. Section 108 (b) of the Internal Revenue Code of 1954 (re- 
J^^lc^'iol?' 
lating to income of a railroad corporation from discharge of indebted-
ness) is hereby amended by striking out "December 31, 1955" and 
inserting in lieu thereof "December 31,1957". 
Approved June 29, 1956.