An Act to amend the Internal Revenue Code of 1954 so as to provide that a distribution of stock made to an individual (or certain corporations) pursuant to an order enforcing the antitrust laws shall not be treated as a dividend distribution but shall be treated as a return of capital; and to provide that the amount of such a distribution made to a corporation shall be the fair market value of the distribution
PL 87-403 (H.R.8847), enacted 02/02/1962

PUBLIC LAW 87-403-FEB. 2, 1962 
[76 STAT. 
February 2, 1962 
[H. R. 8847] 
Public Law 87-403 
AN ACT 
To amend the Internal Revenue Code of 1954 so as to provide that a distribution 
of stock made to an individual (or certain corporations) pursuant to an order 
enforcing the antitrust laws shall not be treated as a dividend distribution 
but shall be treated as a return of capital; and to provide that the amount of 
such a distribution made to a corporation shall be the fair market value of 
the distribution. 
Stock, 
antitrust 
distribution. 
Income tax treat-
ment. 
68A Stat. 295; 
70 Stat. 139. 
2 6 u s e 
110 1-
1103. 
Be It enacted hy the Senate and House of Representatives 
of the 
United States of America in Congress assembled^ That (a) subchapter 
O of chapter 1 of the Internal Revenue Code of 1954 (relating to gain 
or loss on disposition of property) is amended by adding at the end 
thereof the following new part: 
TART 
IX—DISTRIBUTIONS 
PURSUANT 
TO 
ENFORCING THE ANTITRUST LAWS 
ORDERS 
"Sec. 1111. Distribution of stock pursuant to order enforcing the 
antitrust laws. 
"SEC. 1111. DISTRIBUTION OF STOCK PURSUANT TO ORDER ENFORC-
ING THE ANTITRUST LAWS. 
68A Stat. 84, 95, 
98. 
26 u s e 301,312, 
316. 
" (a) GENERAL RULE.—Notwithstanding sections 301, 312, and 316, a 
distribution of divested stock (as defined in subsection (e)), to a quali-
fying shareholder (as defined in subsection (b)), to which section 301 
(c) (1) would, but for this section, apply, shall be a distribution which 
is not out of the earnings and profits of the distributing corporation 
for purposes of this subtitle. 
Definitions. 
"(b) QUALIFYING SHAREHOLDER.—For purposes of this sectiou, the 
term 'qualifying shareholder' means any shareholder other than a 
corporation which may be allowed a deduction under section 243, 244, 
26 use 243-245. or 245 wdth respect to dividends received. 
"(c) SPECIAL RULES.— 
"(1) DISTRIBUTIONS TO AVOID FEDERAL INCOME TAX.—Subsection 
(a) shall not apply to any transaction one of the principal pur-
poses of which is the distribution of the earnings and profits of the 
distributing corporation or of the corporation whose stock is dis-
tributed, or both. 
"(2) STOCK.—For purposes of this section, the term 'stock' 
includes rights to fractional shares. 
"(d) DEFINITION OF ANTITRUST ORDER.—For purposes of this sec-
tion, the term 'antitrust order' means, in the case of any corporation, 
a final judgment rendered after January 1, 1961, by a court with 
respect to such corporation in a court proceeding under the Sherman 
71 Stat. 163. 
Act (26 Stat. 209; 15 U.S.C. 1-7) or the Clayton Act (38 Stat. 730; 15 
73 Stat. 243. 
U.S.C. 12-27), or both, to which the United States is a party, if such 
proceeding was commenced on or before January 1, 1959. 
"(e) DEFINITION OF DIVESTED STOCK.—For purposes of this section, 
the term 'divested stock' means stock meeting the following require-
ments : 
"(1) the stock is the subject of an antitrust order entered after 
January 1, 1961, which— 
" (A) directs the distributing corporation to divest itself of 
such stock by distributing it to its shareholders (or requires 
such distribution as an alternative to other action by any 
person); 
"(B) specifies and itemizes the stock to be divested; and 
76 STAT. ] 
PUBLIC LAW 87-403-FEB. 2, 1962 
I 
"(C) fixes the period of time within which the distributing 
corporation must divest itself of all stock to be disposed of by 
it by reason of the suit, and such period expires not later than 
3 years from the date on which such order becomes final 
(appeal time having run or appeal having been completed); 
and 
"(2) the court finds— 
"(A) that the divestiture of such stock, in the manner 
described in paragraph (1) (A), is necessary or appropriate 
to effectuate the policies of the Sherman Act, or the Clayton 
Act, or both; 
is use i-?, 12-
"(B) that the application of subsection (a) is required to 27-
reach an equitable antitrust order in such suit or proceeding; 
and 
"(C) that the period of time for the complete divestiture 
fixed in the order is the shortest period within which such 
divestiture can be executed with due regard to the circum-
stances of the particular case; 
but no stock shall be divested stock if the court finds that its 
divestiture is required because of an intentional violation of the 
Sherman Act, or the Clayton Act, or both." 
(b) The table of parts for subchapter O of chapter 1 of the Internal 
Revenue Code of 1954 is amended oy adding at the end thereof the 
following: 
"Part IX. Distributions pursuant to orders enforcing the antitrust 
laws." 
(c) The amendments made by this section shall apply only with 
Effective date, 
respect to distributions made after the date of the enactment of this 
Act. 
SEC. 2. (a) Section 301 of the Internal Revenue Code of 1954 (relat- 
26 use 301. 
ing to distributions of property) is amended by redesignating sub-
section (f) as subsection (g) and inserting after subsection (e) the 
following new subsection: 
"(f) 
SPECIAL RULES FOR DISTRIBUTIONS OF ANTITRUST STOCK TO 
CORPORATIONS.— 
"(1) DEFINITION OF ANTITRUST STOCK.—For purposes of this 
subsection, the term 'antitrust stock' means stock received, by a 
••Antitrust 
corporation which is a party to a suit described in section 1111 (d) ^*^'^ie!p. 4. 
(relating to definition of antitrust order), in a distribution made 
after September 6, 1961, either pursuant to the terms of, or in 
anticipation of, an antitrust order (as defined in subsection (d) 
of section 1111). 
"(2) 
AMOUNT 
DISTRIBUTED.—Notwithstanding 
subsection 
(b) (1) (but subject to subsection (b) (2)), for purposes of this 
section the amount of a distribution of antitrust stock received 
by a corporation shall be the fair market value of such stock. 
"(3) BASIS.—Notwithstanding subsection (d), the basis of 
antitrust stock received by a corporation in a distribution to 
which subsection (a) applies shall be the fair market value of 
such stock decreased by so much of the deduction for dividends 
received under the provisions of section 243, 244, or 245 as is, 26 use 243-245 
under regulations prescribed by the Secretary or his delegate, 
attributable to the excess, if any, of— 
"(A) the fair market value of the stock, over 
"(B) the adjusted basis (in the hands of the distributing 
corporation immediately before the distribution) of the 
stock, increased by the amount of gain which is recognized 
to the distributing corporation by reason of the distribution." 
5 
PUBLIC LAW 87-403-FEB. 2, 1962 
[76 STAT. 
Effective date. 
(b) The amendments made by this section shall apply only with 
respect to distributions made after the date of the enactment of this 
Act. 
26 use 312. 
SEC. 3. (a) Section 312 of the Internal Revenue Code of 1954 
(relating to the effect on earnings and profits) is amended by adding 
at the end thereof the following new subsection: 
"(k) SPECIAL ADJUSTMENT ON DISPOSITION OF ANTITRUST STOCK 
RECEIVED AS A DIVIDEND.—If a corporation received antitrust stock (as 
26'u's8' ^' 
defined in section 301(f)) in a distribution to which section 301 
^°^' 
applied, and the amount of the distribution determined under section 
301(f) (2) exceeded the basis of the stock determined under section 
301(f) (3), then proper adjustment shall be made, under regulations 
prescribed by the Secretary or his delegate, to the earnings and profits 
of such corporation at the time such stock (or other property the basis 
of which is determined by reference to the basis of such stock) is 
disposed of by such corporation." 
(b) Subsection (b) of section 535 of the Internal Revenue Code 
26 use 535. 
of 1954 (relating to accumulated taxable income) is amended by 
adding at the end thereof the following new paragraphs: 
" (9) DISTRIBUTIONS OF DIVESTED STOCK.—There shall be allowed 
as a deduction the amount of any dividend distribution received 
i4nte, p. 4. 
of divcsted stock (as defined in subsection (e) of section 1111), 
minus the taxes imposed by this subtitle attributable to such 
receipt, but only if the stock with respect to which the distribution 
is made was owned by the distributee on September 6, 1961, or 
was owned by the distributee for at least 2 years prior to the date 
on which the antitrust order (as defined in subsection (d) of 
section 1111) was entered. 
" ( 1 0 ) 
S P E C I A L A D J U S T M E N T ON D I S P O S I T I O N OF ANTITRUST STOCK 
RECEIVED AS A DIVIDEND. 
I f 
"(A) a corporation received antitrust stock (as defined 
in section 301(f)) in a distribution to which section 301 
applied, 
"(B) the amount of the distribution determined under 
section 301(f) (2) exceeded the basis of the stock determined 
' under section 301(f) (3), and 
"(C) paragraph (9) did not apply in respect of such 
distribution, 
then proper adjustment shall be made, under regulations pre-
scribed by the Secretary or his delegate, if such stock (or other 
property the basis of which is determined by reference to the 
basis of such stock) is sold or exchanged." 
74 Stat 77. 
(c) Sectiou 543 of the Internal Revenue Code of 1954 (relating to 
26 use 543. 
personal holding company income) is amended (1) by adding at the 
end of paragraph (1) of subsection (a) the following new sentence: 
"This paragraph shall not apply to a dividend distribution of divested 
stock (as defined in subsection (e) of section 1111) but only if the 
stock with respect to which the distribution is made was owned by the 
distributee on September 6, 1961, or was owned by the distributee for 
at least 2 years prior to the date on which the antitrust order (as defined 
Ante, p. 4. 
in subsectiou (d) of section 1111) was entered."; and (2) by adding 
at the end thereof the following new subsection: 
"(d) SPECIAL ADJUSTMENT ON DISPOSITION OF ANTITRUST STOCK 
RECEIVED AS A DIVIDEND.—If— 
"(1) a corporation received antitrust stock (as defined in sec-
tion 301 (f)) in a distribution to which section 301 applied, 
"(2) the amount of the distribution determined under section 
301(f) (2) exceeded the basis of the stock determined under sec-
tion 301(f)(3), and 
76 STAT. ] 
PUBLIC LAW 87-403-FEB. 2, 1962 
"(3^ such distribution was includible in personal holding com-
pany income under subsection (a) (1), 
then proper adjustment shall be made, under regulations prescribed 
by the Secretary or his delegate, to amounts includible in personal 
holding company income under subsection (a) (2) with respect to such 
stock (or other property the basis of which is determined by reference 
to the basis of such stock)." 
(d) Subsection (b) of section 545 of the Internal Eevenue Code of 
1954 (relating to undistributed personal holding company income) is 
26 use S45. 
amended by adding at the end thereof the following new paragraphs: 
" (10) DISTRIBUTIONS or DIVESTED STOCK.—There shall be allowed 
as a deduction the amount of any income attributable to the re-
ceipt of a distribution of divested stock (as defined in subsection 
(e) of section 1111), minus the taxes imposed by this subtitle 
Ante, p. 4. 
attributable to such receipt, but only if the stock with respect to 
which the distribution is made was owned by the distributee on 
September 6, 1961, or was owned by the distributee for at least 
2 years prior to the date on which the antitrust order (as defined 
in subsection (d) of section 1111) was entered. 
Ante, p. 4. 
"(11) 
SPECIAL, ADJUSTMENT ON DISPOSITION or ANTITRUST STOCK 
RECEIVED AS A DIVIDEND. 
I f 
"(A) a corporation received antitrust stock (as defined in 
section 301 (f)) in a distribution to which section 301 applied, 
Ante, p. s. 
"(B) the amount of the distribution determined under 
26 use 301. 
section 301(f) (2) exceeded the basis of the stock determined 
under section 301 (f) (3), and 
"(C) Paragraph (10) did not apply in respect of 'such 
distribution, 
then proper adjustment shall be made, under regulations pre-
scribed by the Secretary or his delegate, if such stock (or other 
property the basis of which is determined by reference to the basis 
of such stock) is sold or exchanged." 
(e) Subsection (b) of section 556 of the Internal Revenue Code of 
1954 (relating to undistributed foreign personal holding company 
26 use sse. 
income) is amended by adding at the end thereof the following new 
paragraphs: 
" (7) DISTRIBUTIONS or DIVESTED STOCK.—There shall be allowed 
as a deduction the amount of any income attributable to the re-
ceipt of a distribution of divested stock (as defined in subsection 
(e) of section 1111), minus the taxes imposed by this subtitle at-
tributable to such receipt, -but only if the stock with respect to 
which the distribution is made was owned by the distributee on 
September 6, 1961, or was owned by the distributee for at least 2 
years prior to the date on which the antitrust order (as defined in 
subsection (d) of section 1111) was entered. 
"(8) 
SPECIAL ADJUSTMENT ON DISPOSITION OF ANTITRUST STOCK 
RECEIVED AS A DIVIDEND.—IF 
"(A) a corporation received antitrust stock (as defined 
in section 301(f)) in a distribution to which section 301 
applied, 
"(B) the amount of the distribution determined under 
section 301(f) (2) exceeded the basis of the stock determined 
under section 301(f)(3), and 
"(C) paragraph (7) did not apply in respect of such 
distribution, 
then proper adjustment shall be made, under regulations pre-
scribed by the Secretary or his delegate, if such stock (or other 
Eroperty the basis of which is determined by reference to the 
asis of such stock) is sold or exchanged." 
PUBLIC LAW 87-404-FEB. 13, 1962 
[76 STAT. 
68A Stat. 198. 
26 use 561. 
26 use 562. 
Ante, p. S. 
26 use 301. 
Effective date. 
(f) Subsection (b) of section 561 of the Internal Revenue Code of 
1954 (relating to deduction for dividends paid) is amended to read 
as follows: 
"(b) 
SPECIAL RULES APPLICABLE.— 
" (1) In determining the deduction for dividends paid, the rules 
provided in section 562 (relating to rules applicable in determin-
ing dividends eligible for dividends paid deduction) and section 
663 (relating to dividends paid after the close of the taxable year) 
shall be apj^icable. 
"(2) I f a corporation received antitrust stock (as defined in 
section 301(f) in a distribution to which section 301 applied and 
such corporation distributes such stock (or other property the 
basis of which is determined by reference to the basis of such 
stock) to its shareholders, proper adjustment shall be made, under 
regulations prescribed by the Secretary or his delegate, to the 
amount of the deduction provided for in subsection (a)." 
(g) The amendments made by this section shall apply only with 
respect to distributions made after the date of the enactment of this 
Act. 
Approved February 2, 1962. 
Public Law 87-404 
February 13. 1962 
JOINT RESOLUTION 
p
H
. J- Res. 612]_ Making supplemental appropi-iatlons for the Veterans Administration for the 
fiscal year ending .June 30, 1962, and for other purposes. 
Resolved hy the Senate and House of Representatives 
of the United 
suppi ementai States of America in Congress assembled^ That the following sums are 
196*2'°^'^ ations, appropriated, out of any money in the Treasury not otherwise appro-
Veterans Admin- priatecl, for the Veteraiis Administi-ation for the fiscal year ending 
istratlon. 
\ 
^ 
J 
6 
June 30. 1962, namely: 
INDEPENDENT OFFICES 
VETI^ERANS ADMINISTRATION 
READJUSTMENT BENEFITS 
For an additional amount for "Readjustment benefits," $55,000,000, 
to remain available until expended. 
38 u s e 18 
1825. 
74 Stat. 532. 
LOAN GUARANTY REVOLVING FUND 
An additional amount of not to exceed $115,247,000 shall be avail-
able in the "Ix>an guaranty revolving fund" for expenses for property 
acquisitions and other loan guaranty and insurance operations under 
chapter 37, title 38, United States Code, except administrative 
expenses, as authorized by section 1824 of such title: Provided^ That 
in addition to amounts heretofore made available, not to exceed 
$115,247,000 of the "Direct loans to veterans and reserves revolving 
fund" shall be available, during the current fiscal year, for transfer to 
said "Loan guaranty revolving fund" in such amounts as may be 
necessary to provide for the foregoing expenses. 
Approved February 13, 1962. 
,; i