102 STAT. 3578

PUBLIC LAW 100-647—NOV. 10, 1988

tion is held by 1 or more tax-exempt entities (other
than a foreign person or entity).
"(II) only s-percent shareholders taken into
ACCOUNT IN CASE OF PUBLICLY TRADED STOCK.—For
purposes of subclause (I), in the case of a corpora-
tion the stock of which is publicly traded on an
established securities market, stock held by a tax-
exempt entity shall not be taken into account
unless such entity holds at least 5 percent (in
value) of the stock in such corporation. For pur-
poses of this subclause, related entities (within the
meaning of paragraph (7)) shall be treated as 1
entity.
"(Ill) section 318 to apply.—For purposes of this
clause, a tax-exempt entity shall be treated as
holding stock which it holds through application of
section 318 (determined without regard to the
50-percent limitation contained in subsection
(a)(2)(C) thereof)/'
(c)	amendment related to section 1803 of the reform act.—-
26 USC1281	(1) Subparagraph (A) of section 1803(aX8) of the Reform Act is
note-                         amended by striking out "September 27, 1985" and inserting in
lieu thereof "December 31,1985".
 (2)	Subsection (c) of section 1278 of the 1986 Code is amended
by inserting before the period ", including regulations providing
proper adjustments in the case of a bond the principal of which
may be paid in 2 or more payments".
 (3)	Section 1278(b) of the 1986 Code is amended by adding at
the end thereof the following new paragraph:
"(4) basis adjustment.—The basis of any bond in the hands
of the taxpayer shall be increased by the amount included in
gross income pursuant to this subsection."
(d)	amendments related to section 1804 of the reform act.—
26 use 311 note.	(1) Paragraph (3) of section 1804(b) of the Reform Act is
amended by striking out "Paragraph (3) of section 54" and
inserting "Paragraph (3) of section 54(d)".
(2)	Clause (i) of section 54(dX3XD) of the Tax Reform Act of
26 USC 311 note.          1984 is amended by striking out "subtitle D of title VI" and
inserting "subtitle D of title VI of the Tax Reform Act of 1986".
(3)	Clause (ii) of section 54(dX3XD) of the Tax Reform Act of
1984 (as added by section 1804(bX3) of the Tax Reform Act of
1986) is amended—
(A)	by striking put "December 9, 1968," each place it
appears and inserting in lieu thereof "December 10,1968,",
and
(B)	by striking out "October 5,1981" and inserting in lieu
thereof "March 2,1978,".
(4)	Subsection (b) of section 312 of the 1986 Code is amended
by striking out "of any property" and inserting in lieu thereof
"of any property (other than an obligation of such corporation)".
(5XA) Section 361 of the 1986 Code is amended to read as
follows:
"SEC. 361. NONRECOGNITION  OF  GAIN  OR  LOSS  TO   CORPORATIONS;
TREATMENT OF DISTRIBUTIONS.
"(a) general rule.—No gain or loss shall be recognized to a
corporation if such corporation is a party to a reorganization and