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TITLE 26-INTERNAL REVENUE CODE For purposes of subparagraphs (B), (C), and (D), an offer shall be treated as an offer only if it was in writ- ing and not revocable by its express terms. "(3) The amendments made by subsections (a) and (b) [adding subsec. (d) of this section and amending sections 301(bl(l)(B)(ii), (d)(2)(B), and 312(c)(3) of this title] shall not apply to a distribution by a corpo- ration of specific property In redemption of stock out- standing on November 30, 1969, If- "(A) every holder of such stock on such date had the right to demand redemption of his stock in such specific property, and "(B) the corporation had such specific property on hand on such date in a quantity sufficient to redeem all of such stock. For purposes of the preceding sentence, stock shall be considered to have been outstanding on November 30, 1969, If It could have been acquired on such date through the exercise of an existing right of conversion contained in other stock held on such date. "(4) The amendments made by subsections (a) and (b) [adding subsec. (d), of this section and amending sections 301(b)(1)(B)(ii), (d)(2)(B), and 312(c)(3) of this title] shall not apply to a distribution by a corpo- ration of property (held on December 1, 1969, by the distributing corporation or a corporation which was a wholly owned subsidiary of the distributing corpora- tion on such date) in redemption of stock outstanding on November 30, 1969, which is redeemed and canceled before July 31, 1971, If- "(A) such redemption is pursuant to a resolution adopted before November 1, 1969, by the Board of Directors authorizing the redemption of a specific amount of stock constituting more than 10 percent of the outstanding stock of the corporation at the time of the adoption of such resolution; and "(B) more than 40 percent of the stock authorized to be redeemed pursuant to such resolution was re- deemed before December 30, 1969, and more than one-half of the stock so redeemed was redeemed with property other than money. "(5) The amendments made by subsections (a) and (b) [adding subsec. (d) of this section and amending sections 301(b)(1)(B)(ii), (d)(2)(B) and 312(c)(3) of this title] shall not apply to a distribution of stock, by a corporation organized prior to December 1, 1969, for the principal purpose of providing an equity participa- tion plan for employees of the corporation whose stock is being distributed (hereinafter referred to as the 'employer corporation') if- "(A) the stock being distributed was owned by the distributing corporation on November 30, 1969, "(B) the stock being redeemed was acquired before January 1, 1973, pursuant to such equity participa- tion plan by the shareholder presenting such stock for redemption (or by a predecessor of such share- holder), "(C) the employment of the shareholder present- ing the stock for redemption (or the predecessor of such shareholder) by the employer corporation com- menced before January 1, 1971, "(D) at least 90 percent in value of the assets of the distributing corporation on November 30, 1969, consisted of common stock of the employer corpora- tion, and "CE) at least 50 percent of the outstanding voting stock of the employer corporation is owned by the distributing norporation at any time within the nine- year period ending one year before the date of such distribution." CROSS REFERENcEs Corporate- Liquidations, gain or loss on sales or exchanges with certain liquidations, see section 337 of this title, Organizations, nonrecognition of gain or loss to corporations, see section 361 of this title. Distributions of property, corporate distributees, see section 301 of this title, Effect on earnings and profits, adjustment shall be made for any gain recognized under subscetion (b) or (c) of this section, see section 312 of this title. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 301, 312, 995 of this title. § 312. Effect on earnings and profits (a) General rule Except as otherwise provided in this section, on the distribution of property by a corporation with respect to its stock, the earnings and prof- its of the corporation (to the extent thereof) shall be decreased by the sum of- (1) the amount of money, (2) the principal amount of the obligations of such corporation, and (3) the adjusted basis of the other property, so distributed. (b) Certain inventory assets (1) In general On the distribution by a corporation, with respect to Its stock, of inventory assets (as de- fined in paragraph (2)(A)) the fair market value of which exceeds the adjusted basis thereof, the earnings and profits of the corpo- ration- (A) shall be increased by the amount of such excess; and (B) shall be decreased by whichever of the following is the lesser: (i) the fair market value of the inven- tory assets distributed, or (ii) the earnings and profits (as in- creased under subparagraph (A)). (2) Definitions (A) Inventory assets For purposes of paragraph (1), the term "inventory assets" means- (i) stock in trade of the corporation, or other property of a kind which would properly be included in the inventory of the corporation if on hand at the close of the taxable year; (ii) property held by the corporation primarily for sale to customers in the or- dinary course of its trade or business; and (iII) unrealized receivables or fees, except receivables from sales or ex- changes of assets other than assets de- scribed in this subparagraph. (B) Unrealized receivables or fees For purposes of subparagraph (A)(iii), the term "unrealized receivables or fees" means, to the extent not previously includi- ble in income under the method of account- ing used by the corporation, any rights (contractual or otherwise) to payment for- (I) goods delivered, or to be delivered, to the extent that the proceeds therefrom would be treated as amounts received from the sale or exchange of property other than a capital asset, or (it) services rendered or to be rendered. (c) Adjustments for liabilities, etc. In making the adjustments to the earnings and profits of a corporation under subsection (a) or (b), proper adjustment shall be made for- Page 241 § 312