Sec. 3423. Nonrecognition for derivative transactions by a corporation with respect to its stock
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Section 1032 is amended to read as follows: Except as otherwise provided in this section or section 76, section 1032 derivative items of a corporation shall not be taken into account in determining such corporation’s liability for tax under this subtitle. If— a corporation acquires its stock, and such acquisition is part of a plan (or series of related transactions) pursuant to which the corporation enters into a forward contract with respect to its stock, such corporation shall include amounts in income as if the excess of the amount to be received under the forward contract over the fair market value of the stock as of the date the corporation entered into the forward contract were original issue discount on a debt instrument acquired on such date.
The preceding sentence shall apply only to the extent that the amount of stock involved in the forward contract does not exceed the amount acquired as described in subparagraph (A). If a corporation enters into a forward contract with respect to its stock within the 60-day period beginning on the date which is 30 days before the date that the corporation acquires its stock, such acquisition shall be treated as pursuant to a plan described in paragraph (1)(B) unless it is established that entering into such contract and such acquisition are not pursuant to a plan or series of related transactions. 1032 derivative items For purposes of this section, the term section 1032 derivative item means any item of income, gain, loss, or deduction if— such item arises out of the rights or obligations under any derivative (as defined in section 486) to the extent such derivative relates to the corporation’s stock (or is attributable to any transfer or extinguishment of any such right or obligation), or such item arises under any other contract or position but only to the extent that such item reflects (or is determined by reference to) changes in the value of such stock or distributions thereon.
Such term shall not include any deduction with respect to which section 83(h) applies and shall not include any deduction for any item which is in the nature of compensation for services rendered. For purposes of this subparagraph, de minimis relationships, as determined by the Secretary, shall be disregarded. Any reference in this section to stock shall be treated as including a reference to treasury stock. The Secretary shall prescribe such regulations or other guidance as may be appropriate to carry out the purposes of this section, including regulations or other guidance which— treat the portion of an instrument which is described in subsection (c)(1) separately from the portion of such instrument which is not so described, and treat section 1032 derivative items as contributions to the capital of the corporation to the extent that the application of this section would be inconsistent with the purposes of section 76(b). .
The item relating to section 1032 in the table of sections for part III of subchapter O of chapter 1 is amended to read as follows: Sec. 1032. Derivative transactions by a corporation with respect to its stock. . The amendments made by this section shall apply to transactions entered into after the date of the enactment of this Act.