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TITLE 26-INTERNAL REVENUE CODE (11) Corporations and shareholders not meeting re- quirements In determining whether or not any corpora- tion is a collapsible corporation within the meaning of subsection (b), the fact that such corporation, or such corporation with respect to any of its shareholders, does not meet the requirements of paragraph (1), (2), (3), or (4) of this subsection shall not be taken into ac- count, and such determination, in the case of a corporation which does not meet such re- quirements, shall be made as if this subsec- tion had not been enacted. (12) Nonapplication of section 1245(a)' For purposes of this subsection, the deter- mination of whether gain from the sale or ex- change of property would under any provi- sion of this chapter be considered as ordinary income, shall be made without regard to the application of sections 617(d)(1), 1245(a), 1250(a), 1251(c), 1252(a) and 1254(a). (f) Certain sales of stock of consenting corporations (1) In general Subsection (a)(1) shall not apply to a sale of stock of a corporation (other than a sale to the issuing corporation) if such corporation (hereinafter in this subsection referred to as "consenting corporation") consents (at such time and in such manner as the Secretary may by regulations prescribe) to have the provisions of paragraph (2) apply. Such con- sent shall apply with respect to each sale of stock of such corporation made within the 6- month period beginning with the date on which such consent is filed. (2) Recognition of gain Except as provided in paragraph (3), if a subsection (f) asset (as defined in paragraph (4)) is disposed of at any time by a consenting corporation (or, if paragraph (3) applies, by a transferee corporation), then the amount by which- (A) in the case of a sale, exchange, or in- voluntary conversion, the amount realized, or (B) in the case of any other disposition, the fair market value of such asset, exceeds the adjusted basis of such asset shall be treated as gain from the sale or exchange of such asset. Such gain shall be recognized notwithstanding any other provision of this subtitle, but only to the extent such gain is not recognized under any other provision of this subtitle. (3) Exception for certain tax-free transactions If the basis of a subsection f) asset in the hands of a transferee is determined by refer- ence to its basis in the hands of the transfer- or by reason of the application of section 332, 351, 361, 371(a), or 374(a), then the amount of gain taken into account by the transferor under paraaph (2) shall not exceed the amount of gain recognized to the transferor on the transfer of such asset (determined without regard to this subsection). This para- graph shall apply only if the transferee- (A) is not an organization which is exempt from tax imposed by this chapter, and 'Paragraph amended without amendment to para- graph catchline to reflect change. (B) agrees (at such time and in such manner as the Secretary may by regula- tions prescribe) to have the provisions of paragraph (2) apply to any disposition by it of such subsection (f) asset. (4) Subsection (f) asset defined For purposes of this subsection- (A) In general The term "subsection (f) asset" means any property which, as of the date of any sale of stock referred to in paragraph (1), Is not a capital asset and is property owned by, or subject to an option to acquire held by, the consenting corporation. For pur- poses of this subparagraph, land or any in- terest in real property (other than a securi- ty interest), and unrealized receivables or fees (as defined in subsection (b)(4)), shall be treated as property which is not a capital asset. (B) Property under construction If manufacture, construction, or produc- tion with respect to any property described in subparagraph (A) has commenced before any date of sale described therein, the term "subsection (f) asset" includes the property resulting from such manufacture, construc- tion, or production. (C) Special rule for land In the case of land or any interest in real property (other than a security interest) de- scribed in subparagraph (A), the term "sub- section (f) asset" includes any improve- ments resulting from construction with re- spect to such property if such construction is commenced (by the consenting corpora- tion or by a transferee corporation which has agreed to the application of paragraph (2)) within 2 years after the date of any sale described in subparagraph (A). (5) 5-year limitation as to shareholder Paragraph (1) shall not apply to the sale of stock of a corporation by a shareholder if, during the 5-year period ending on the date of such sale, such shareholder (or any related person within the meaning of subsection (e)(8)(A)) sold any stock of another consent- ing corporation within any 6-month period beginning on a date on which a consent was filed under paragraph (1) by such other cor- poration. (6) Special rule for stock ownership in other corpo. rations If a corporation (hereinafter in this para- graph referred to as "owning corporation") owns 5 percent or more in value of the out- standing stock of another corporation on the date of any sale of stock of the owning corpo- ration during a 6-month period with respect to which a consent under paragraph (1) was filed by the owning corporation, such consent shall not be valid with respect to such sale unless such other corporation has (within the 6-month period ending on the date of such sale) filed a valid consent under paragraph (1) with respect to sales of its stock. For purposes of applying paragraph (4) to such other cor- poration, a sale of stock of the owning corpo- ration to which paragraph (1) applies shall be treated as a sale of stock of such other corpo- Page 257 § 341