PUBLIC LAW 100-647—NOV. 10, 1988

102 STAT. 3409

for the period during which it was owned (or treated as
owned) by such estate or any such trust or by the
decedent.

"(D) SPECIAL HOLDING PERIOD RULES.—Any property ac- Real property.
quired by reason of the death of an individual shall be
treated as owned at all times during which such property
was owned (or treated as owned) by the decedent.

"(E) CONTROLLED GROUP OF CORPORATIONS.—All members
of the same controlled group (as defined in section 267(f)(l)
of such Code) shall be treated as 1 corporation for purposes
of determining whether any of such corporations met the
requirement of paragraph (5)(B) and for purposes of deter-
mining the applicable percentage with respect to any of
such corporations. For purposes of the preceding sentence,
an S corporation shall not be treated as a member of a
controlled group unless such corporation was a C corpora-
tion for its taxable year which includes August 1,1986, or it
was not described for such taxable year in paragraph (1) or
(2) of section 1374(c) of such Code (as in effect on the day
before the date of the enactment of this Act)/'

(6) Subsection (d) of section 633 of the Reform Act is amended 26 use 336 note.
by adding at the end thereof the following new paragraph:

"(9) APPLICATION TO NONLIQUIDATING DISTRIBUTIONS.—The
provisions of this subsection shall also apply in the case of any
distribution (not in complete liquidation) made by a qualified
corporation before January 1, 1989, without regard to whether
such corporation is completely liquidated."

(7) Paragraph (8) of the section 633(d) of the Reform Act is
amended by striking out "becomes an S corporation for a tax-
able year beginning before January 1, 1989 and inserting in
lieu thereof "makes an election to be an S corporation under
section 1362 of such Code before January 1, 1989, without
regard to whether such corporation is completely liquidated".

(8) Section 633 of the Reform Act is amended by redesignating
the subsections following the first subsection (d) as subsections
(e), (f), and (g), respectively.

(9) Subsection (fX2) of section 633 of the Reform Act (as so
redesignated) is amended by striking out "May 9, 1929" and
inserting in lieu thereof "May 9, 1929 (or any direct or indirect
subsidiary of such corporation)".

(10) Paragraph (3) of section 633(f) of the Reform Act (as so
redesignated) is amended by striking out "of such Code)" in the
last sentence thereof and inserting in lieu thereof "of such
Code".

(11) Subclause (I) of section 633(f)(4)(A)(i) of the Reform Act (as Massachusetts.
so redesignated) is amended by striking out "binding on the

selling corporation to sell substantially all its assets" and insert-
ing in lieu thereof "to sell substantially all of the assets of a
selling corporation organized under the laws of Massachusetts
on October 20,1976,".

(12) Subparagraph (A) of section 633(f)(5) of the Reform Act (as
so redesignated) is amended to read as follows:

"(A) a voting trust established not later than December
31, 1987, shall qualify as a trust permitted as a shareholder
of an S corporation and shall be treated as only 1 share-
holder if the holders of beneficial interests in such voting
trust are—