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TITLE 26-INTERNAL REVENUE CODE 75 percent requirement of the preceding sentence, stock which, at the decedent's death, represents the surviving spouse's in- terest in property held by the decedent and the surviving spouse as community property shall be treated as having been included in determining the value of the decedent's gross estate. (3) Relationship of shareholder to estate tax Subsection (a) shall apply to a distribution by a corporation only to the extent that the interest of the shareholder is reduced directly (or through a binding obligation to contrib- ute) by any payment of an amount described in paragraph (1) or (2) of subsection (a). (4) Additional requirements for distributions made more than 4 years after decedent's death In the case of amounts distributed more than 4 years after the date of the decedent's death, subsection (a) shall apply to a distribu- tion by a corporation only to the extent of the lesser of- (A) the aggregate of the amounts referred to in paragraph (1) or (2) of subsection (a) which remained unpaid immediately before the distribution, or (B) the aggregate of the amounts referred to in paragraph (1) or (2) of subsection (a) which are paid during the 1-year period be- ginning on the date of such distribution. (c) Stock with substituted basis If- (1) a shareholder owns stock of a corpora- tion (referred to in this subsection as "new stock") the basis of whi.'h is determined by reference to the basis of stock of a corpora- tion (referred to in this subsection as "old stock"), (2) the old stock was included (for Federal estate tax purposes) in determining the gross estate of a decedent, and (3) subsection (a) would apply to a distribu- tion of property to such shareholder in re- demption of the old stock, then, subject to the limitation specified in sub- section (b), subsection (a) shall apply in respect of a distribution in redemption of the new stock. (d) Special rules for generation-skipping transfers Under regulations prescribed by the Secre- tary, where stock in a corporation is subject to tax under section 2601 as a result of a genera- tion-skipping transfer (within the meaning of section 2611(a)), which occurs at or after the death of the deemed transferor (within the meaning of section 2612)- (1) the stock shall be deemed to be included in the gross estate of the deemed transferor; (2) taxes of the kind referred to in subsec- tion (a)(1) which are imposed because of the generation-skipping transfer shall be treated as imposed because of the deemed transfer- or's death (and for this purpose the tax im- posed by section 2601 shall be treated as an estate tax); (3) the period of distribution shall be mea- sured from the date of the generation-skip- ping transfer; and (4) the relationship of stock to the dece- dent's estate shall be measured with refer- ence solely to the amount of the generation- skipping transfer. (Aug. 16, 1954, ch. 736, 68A Stat. 88; Oct. 4, 1976, Pub. L. 94-455, title XX, §§2004(e), 2006(b)(4), 90 Stat. 1871, 1889.) AMENDMENTS 1976-Subsec. (b)(1)(C). Pub. L. 94-455, § 2004(e)(1), added subsec. (b)(l)(C). Subsec. (b)(2)(A). Pub. L. 94-455, § 2004(e)(2)(A), substituted provisions limiting the applicability of subsec. (a) to corporate distributions in which the value of the corporate stock included in decedent's gross estate exceeds 50 percent of the gross estate over deductions allowed under sections 2053 and 2054 for provisions limiting the applicability of subsec. (a) to corporate distributions in which the value of the cor- porate stock included in decedent's gross estate is either more than 35 percent of the gross estate or 50 percent of the taxable estate. Subsec. (b)(2)(B). Pub. L. 94-455, § 2004(e)(2)(B), substituted "the 50 percent requirement" for "the 35 percent and 50 percent requirements". Subsecs. (b)(3), (4). Pub. L. 94-455, § 2004(e)(3), added pars. (3) and (4). Subsec. (c). Pub. L. 94-455, § 2004(e)(4), substituted "limitation specified in subsection (b)" for "limitation specified in subsection (b)(1)". Subsec. d). Pub. L. 94-455, § 2006(b)(4), added subsec. (d). EFFECTIVE DATE OF 1976 AMENDMENT Amendment of subsecs. (b) and (c) by section 2004(e)(1). (2), (3), (4) of Pub. L. 94-455 applicable to estates of decedents dying after Dec. 31, 1976, see sec- tion 2004(g) of Pub. L. 94-455, set out as an Effective Date note under section 6166 of this title. For effective date of amendment of subsec. (d) by section 2006(b)(4) of Pub. L. 94-455, see section 2006(c) of Pub. L. 94-455, set out as an Effective Date note under section 2601 of this title. CROSS REFERENCES Distributions in redemption of stock, see section 302 of this title. Earnings and profits, special rule for certain re- demptions, see section 312 of this title. Redemption through use of related corporations, see section 304 of this title. Special limitations on net operating loss carryovers, exception for decrease resulting from redemption to pay death taxes, see section 382 of this title. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 302, 304, 311, 312, 382. 537, 1248, 6166, 6166A of this title. § 304. Redemption through use of related corpora- tions (a) Treatment of certain stock purchases (1) Acquisition by related corporation (other than subsidiary) For purposes of sections 302 and 303, if- (A) one or more persons are in control of each of two corporations, and (B) in return for property, one of the cor- porations acquires stock in the other corpo- ration from the person (or persons) so in control, then (unless paragraph (2) applies) such property shall be treated as a distribution in redemption of the stock of the corporation acquiring such stock. In any such case, the stock so acquired shall be treated as having been transferred by the person from whom acquired, and as having been received by the § 304 Page 234