PUBLIC LAW 100-647—NOV. 10, 1988 102 STAT. 3399

"(ii) CLARIFICATION WITH SUBPARAGRAPH <B).—In
applying clause (i), there shall not be taken into ac-
count any indebtedness for interest described in
subparagraph (B)."

(19) Subparagraph (E) of section 382(1X5) of the 1986 Code is
amended by striking out so much of such subparagraph as
precedes clause (i) thereof and inserting in lieu thereof the
following:

"(E) ONLY CERTAIN STOCK TAKEN INTO ACCOUNT.—For pur-
poses of subparagraph (A)(ii), stock transferred to a creditor
shall be taken into account only to the extent such stock is
transferred in satisfaction of indebtedness and only if such
indebtedness—".

(20) Paragraph (4) of section 382(h) of the 1986 Code is
amended—

(A) by inserting before the comma at the end of subpara-
graph (A) the following: "(or to the extent the amount so
disallowed is attributable to capital losses, under rules
similar to the rules for the carrying forward of net capital
losses)", and

(B) by striking out "TREATED AS A NET OPERATING LOSS" in
the paragraph heading and inserting in lieu thereof "AL-
LOWED AS A CARRYFORWARD".

(21) Paragraph (1) of section 382(g) of the 1986 Code is
amended—

(A) by striking out "new loss corporation" and inserting
in lieu thereof "loss corporation", and

(B) by striking out "old loss corporation" and inserting in
lieu thereof "loss corporation".

(22) Paragraph (6) of section 382(h) of the 1986 Code is
amended to read as follows:

"(6) TREATMENT OF CERTAIN BUILT-IN ITEMS.—

"(A) INCOME ITEMS.—Any item of income which is prop-
erly taken into account during the recognition period but
which is attributable to periods before the change date shall
be treated as a recognized built-in gain for the taxable year
in which it is properly taken into account.

"(B) DEDUCTION ITEMS.—Any amount which is allowable
as a deduction during the recognition period but which is
attributable to periods before the change date shall be
treated as a recognized built-in loss for the taxable year for
which it is allowable as a deduction.

"(C) ADJUSTMENTS.—The amount of the net unrealized
built-in gain or loss shall be properly adjusted for amounts
treated as recognized built-in gains or losses under this

(23) Paragraph (9) of section 382(h) of the 1986 Code is
amended by striking out "is transferred" and inserting in lieu
thereof "was acquired (or is subsequently transferred)".

(24) Subsection (m) of section 382 of the 1986 Code (as
amended by paragraph (1)) is amended by striking out "and" at
the end of paragraph (3), by striking out the period at the end of
paragraph (4) and inserting in lieu thereof ", and", and by
adding at the end thereof the following:

"(5) providing, in the case of any group of corporations de-
scribed in section 1563(a) (determined by substituting '50 per-
cent' for '80 percent' each place it appears and determined