PUBLIC LAW 100-647—NOV. 10, 1988 102 STAT. 3407

registered with a domestic board of trade which is
designated as a contract market by the Commod-
ities Futures Trading Commission.

"(Ill) SECTION 1256 CONTRACT.—The term 'section
1256 contract' has the meaning given to such term
by section 1256(b)."

(7) The subsection (d) of section 1363 of the 1986 Code which
relates to distributions of appreciated property, and subsection
(e) of section 1363 of the 1986 Code, are hereby repealed.
(g) AMENDMENTS RELATED TO SECTION 633 OF THE REFORM ACT.—

(1) Subsection (b) of section 633 of the Reform Act is amended 26 USC 336 note.
to read as follows:

"(b) BUILT-IN GAINS OF S CORPORATIONS.—

"(1) IN GENERAL.—The amendments made by section 632
(other than subsection (b) thereof) shall apply to taxable years
beginning after December 31, 1986, but only in cases where the
return for the taxable year is filed pursuant to an S election
made after December 31,1986.

"(2) APPLICATION OF PRIOR LAW.—In the case of any taxable
year of an S corporation which begins after December 31, 1986,
and to which the amendments made by section 632 (other than
subsection (b) thereof) do not apply, paragraph (1) of section
1374(b) of the Internal Revenue Code of 1954 (as in effect on the
date before the date of the enactment of this Act) shall be
applied as if it read as follows:

" '(1) an amount equal to 34 percent of the amount by which
the net capital gain of the corporation for the taxable year
exceeds $25,000, or'".

(2) Subparagraph (B) of section 633(c)(l) of the Reform Act is
amended by striking out "50 percent or more" and inserting in
lieu thereof "more than 50 percent".

(3) Paragraph (1) of section 633(d) of the Reform Act is
amended—

(A) by striking out "this section" and inserting in lieu
thereof "this subtitle",

(B) by striking out "would be recognized and inserting in
lieu thereof "would be recognized by the liquidating cor-
poration", and

(C) by adding at the end thereof the following new sen-
tence: "Section 333 of the Internal Revenue Code of 1954 (as
in effect on the day before the date of the enactment of this
Act) shall continue to apply to any complete liquidation
described in the preceding sentence. .

(4) Subparagraph (C) of section 633(d)(2) of the Reform Act is
amended to read as follows:

"(C) any gain on an asset acquired by the qualified cor-
poration if—

"(i) the basis of such asset in the hands of the quali-
fied corporation is determined (in whole or in part) by
reference to the basis of such asset in the hands of the
person from whom acquired, and

"(ii) a principal purpose for the transfer of such asset
to the qualified corporation was to secure the benefits
of this subsection."

(5XA) Subparagraph (A) of section 633(d)(5) of the Reform Act
is amended by striking out "10 or fewer qualified persons" and
inserting in lieu thereof "a qualified group".