PUBLIC LAW 100-647—NOV. 10, 1988	102 STAT. 3403
 (16)	Subsection (d) of section 245 of the 1986 Code is hereby
repealed.
 (17)	Paragraph (14) of section  1223 of the 1986 Code is
amended to read as follows:
"(14) CROSS REFERENCE.—
"For special holding period provision relating to certain partnership
distributions, see section 735(i>>."
(18)	Clause (ii) of section 341(e)(l)(C) of the 1986 Code is
amended—
 (A)	by striking out "sale or exchange" the first place it
appears and inserting in lieu thereof "liquidating sale or
exchange", and
 (B)	by striking out ", gain or loss on which was not
recognized to such other corporation under section 337(a),".

 (19)	Subsection (1) of section 897 of the 1986 Code is hereby
repealed.
 (20)	Paragraph (7) of section 338(h) of the 1986 Code is hereby
repealed.
(21XA) The heading of subsection (b) of section 336 of the 1986
Code is amended by striking out "in excess of basis".
(B) The heading of paragraph (2) of section 311(b) of the 1986
Code is amended by striking out "in excess of basis".
(22) Section 453B of the 1986 Code is amended by adding at
the end thereof the following new subsection:
"(h) certain liquidating distributions by S corporations.—
If—
"(1) an installment obligation is distributed by an S corpora-
tion in a complete liquidation, and
"(2) receipt of the obligation is not treated as payment for the
stock by reason of section 453(h)(l),
then, except for purposes of any tax imposed by subchapter S, no
gain or loss with respect to the distribution of the obligation shall be
recognized by the distributing corporation. Under regulations pre-
scribed by the Secretary, the character of the gain or loss to the
shareholder shall be determined in accordance with the principles of
section 1366(b)."
(f) amendments related to section 632 of the reform act.—
 (1)	Subsection (a) of section 1374 of the 1986 Code is amended
by striking out "a recognized built-in gain" and inserting in lieu
thereof "a net recognized built-in gain .
 (2)	Subsection (b) of section 1374 of the 1986 Code is amended
by striking out paragraphs (1) and (2) and inserting in lieu
thereof the following:
"(1) in general.—The amount of the tax imposed by subsec-
tion (a) shall be computed by applying the highest rate of tax
specified in section ll(b) to the net recognized built-in gain of
the S corporation for the taxable year.
"(2) NET OPERATING LOSS CARRYFORWARDS FROM C YEARS AL-
LOWED.—Notwithstanding section 1371(b)(l), any net operating
loss carryforward arising in a taxable year for which the cor-
poration was a C corporation shall be allowed for purposes of
this section as a deduction against the net recognized built-in
gain of the S corporation for the taxable year. For purposes of
determining the amount of any such loss which may be carried
to subsequent taxable years, the amount of the net recognized
built-in gain shall be treated as taxable income. Rules similar to