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TITLE 26-INTERNAL REVENUE CODE Ing stock of the corporation, would be property gain from the sale or exchange of which would under any provision of this chapter be considered in whole or in part as ordinary income; and (iv) property (unless included under clause (i), (1i), or (iii)) which consists of a copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property, or any interest in any such property, if the property was created in whole or in part by the personal efforts of, or (in the case of a letter, memoran- dum, or similar property) was prepared, or produced in whole or in part for, any individual who owns more than 5 percent in value of the stock of the corporation. The determination as to whether property of the corporation in the hands of the cor- poration is, or in the hands of a shareholder would be, property gain from the sale or ex- change of which would under any provision of this chapter be considered in whole or in part as ordinary income; shall be made as if all property of the corporation had been sold or exchanged to one person in one transaction. (B) For purposes of paragraph (3), the term "subsection (e) asset" means, with re- spect to property held by any corporation, property described in clauses (i), (ii), (iII), and (iv) of subparagraph (A), except that clauses (I) and (iII) shall apply in respect of any shareholder who owns more than 5 per- cent in value of the outstanding stock of the corporation (in lieu of any shareholder who owns more than 20 percent in value of such stock). (6) Net unrealized appreciation defined (A) For purposes of this subsection, the term "net unrealized appreciation" means, with respect to the assets of a corporation, the amount by which- (i) the unrealized appreciation in such assets on which there is unrealized appre- ciation, exceeds (ii) the unrealized depreciation in such assets on which there is unrealized depre- ciation. (B) For purposes of subparagraph (A) and paragraph (5)(A), the term "unrealized ap- preciation" means, with respect to any asset, the amount by which- (I) the fair market value of such asset, exceeds (ii) the adjusted basis for determining gain from the sale or other disposition of such asset. (C) For purposes of subparagraph (A) and paragraph (5)(A), the term "unrealized de- preciation" means, with respect to any asset, the amount by which- (I) the adjusted basis for determining gain from the sale or other disposition of such asset, exceeds (it) the fair market value of such asset. (D) For purposes of this paragraph (but not paragraph (5)(A)), in the case of any asset on the sale or exchange of which only a portion of the gain would under any pro- vision of this chapter be considered as ordi- nary income, there shall be. taken into ac- count only an amount of the unrealized ap- preciation in such asset which is equal to such portion of the gair. (7) Net worth defined For purposes of this subsection, the net worth of a corporation, as of any day, is the amount by which- (A)(i) the fair market value of all its assets at the close of such day, plus (ii) the amount of any distribution in complete liquidation made by it on or before such day, exceeds (B) all its liabilities at the close of such day. For purposes of this paragraph, the net worth of a corporation as of any day shall not take into account any increase in net worth during the one-year period ending on such day to the extent attributable to any amount received by it for stock, or as a contribution to capital or as paid-in surplus, if it appears that there was not a bona fide business pur- pose for the transaction in respect of which such amount was received. (8) Related person defined For purposes of paragraphs (1) and (4), the following persons shall be considered to be re- lated to a shareholder: (A) If the shareholder is an individual- (i) his spouse, ancestors, and lineal de- scendants, and (ii) a corporation which is controlled by such shareholder. (B) If the shareholder is a corporation- (1) a corporation which controls, or is controlled by, the shareholder, and (ii) if more than 50 percent in value of the outstanding stock of the shareholder is owned by any person, a corporation more than 50 percent in value of the out- standing stock of which is owned by the same person. For purposes of determining the ownership of stock in applying subparagraphs (A) and (B), the rules of section 267(c) shall apply, except that the family of an individual shall include only his spouse, ancestors, and lineal descen- dants. For purposes of this paragraph, control means the ownership of stock possessing at least 50 percent of the total combined voting power of all classes of stock entitled to vote or at least 50 percent of the total value of shares of all classes of stock of the corporation. (9) Property used in the trade or business For purposes of this subsection, the term "property used in the trade or business" means property described in section 1231(b), without regard to any holding period therein provided. (10) Ownership of stock For purposes of this subsection (other than paragraph (8)), the ownership of stock shall be determined in the manner prescribed in subsection (d). Page 256