Page 272

TITLE 26-INTERNAL REVENUE CODE reorganization approved by the court in such proceeding, in exchange solely for stock or se- curities in such other railroad corporation. (2) Gain from exchanges not solely in kind If an exchange would be within the provi- sions of paragraph (1) if it were not for the fact that the property received in exchange consists not only of stock or securities permit- ted by paragraph (1) to be received without the recognition of gain, but also of other property or money, then- (A) if the corporatlon receiving such other property or money distributes it in pursuance of the plan of reorganization, no gain to the corporation shall be recognized from the exchange, but (B) if the corporation receiving such other property or money does not distribute it in pursuance of the plan of reorganiza- tion, the gain, if any, to the corporation shall be recognized, but in an amount not in excess of the sum of such money and the fair market value of such other property so received, which is not so distributed. (3) Loss from exchanges not solely in kind If an exchange would be within the provi- sions of paragraph (1) if it were not for the fact that the property received in exchange consists not only of property permitted by such paragraph to be received without the recognition of gain or loss, but also of other property or money, then no loss from the ex- change shall be recognized. (b) Basis (1) Railroad corporations If the property of a railroad corporation, as defined in section 77(m) of the Bankruptcy Act (11 U.S.C. 205(m)), was acquired after De- cember 31, 1938, in pursuance of an order of the court having jurisdiction of such corpora- tion- (A) in a receivership proceeding, or (B) in a proceeding under section 77 of the Bankruptcy Act, and the acquiring corporation is a railroad corporation (as defined in section 77(m) of the Bankruptcy Act) organized or made use of to effectuate a plan of reorganization ap- proved by the court in such proceeding, the basis shall be the same as it would be in the. hands of the railroad corporation whose prop- erty was so acquired, increased in the amount of gain recognized under subsection (a)(2) to the transferor on such transfer. (2) Property acquired by stre', suburban, or inter- urban electric railway corporation If the property of any street, suburban, or interurban electric railway corporation en- gaged as a common carrier in the transporta- tion of persons or property in interstate com- merce was acquired after December 31, 1934, in pursuance of an order of the court having jurisdiction of such corporation in a proceed- ing under section 77 of the Bankruptcy Act (11 U.S.C. 501 and following), and the acquir- ing corporation is a street, suburban, or inter- urban electric railway engaged as a common carrier in the transportation of persons or property in interstate commerce, organized or made use of to effectuate a plan of reorgani- zation approved by the court in such proceed- ing, then, notwithstanding the provisions of section 270 of the Bankruptcy Act (11 U.S.C. 670) the basis shall be the same as it would be in the hands of the corporation whose proper- ty was so acquired. (c) Exchanges under the final system plan for Con- Rail (1) In general No gain or loss shall be recognized if, in order to carry out the final system plan, rail properties of a transferor railroad corpora- tion are transferred to the Consolidated Rail Corporation (or any subsidiary thereof) pur- suant to an order of the special court under section 303 or 305(d) of the Regional Rail Re- organization Act of 1973 in exchange solely for stock of the Consolidated Rail Corpora- tion, securities of such Corporation, certifi- cates of value of the United States Railway Association, or any combination thereof. (2) Exchanges not solely in kind If paragraph (1) would apply to an ex- change if it were not for the fact that the property received in exchange consists not only of property permitted by paragraph (1) to be received without the recognition of gain or loss, but also of other property or money, then rules similar to the rules set forth in paragraph (2) or (3) of subsection (a) (which- ever is appropriate) shall be applied. (3) Basis The basis of the property transferred to the Consolidated Rail Corporation (or any subsid- iary thereof) in an exchange to which para- graph (1) or (2) applies shall be determined under rules similar to the rules set forth in subsection (b)(1). (4) Denial of net operating loss carryovers to Con- Rail Neither the Consolidated Rail Corporation nor any subsidiary thereof shall succeed to any net operating loss carryover of any trans- feror railroad corporation. (5) Definitions For purposes of this subsection- (A) Rail properties The term "rail properties" means rail properties within the meaning of paragraph (12) of section 102 of the Regional Rail Re- organization Act of 1973. (B) Transferor railroad corporation The term "transferor railroad corpora- tion" means a corporation which, on March 11, 1976, was- (I) a railroad in reorganization (within the meaning of paragraph (14) of section 102 of the Regional Rail Reorganization Act of 1973) in the region (within the meaning of paragraph (15) of such section 102), or (ii) a corporation leased, operated, or controlled by such a railroad in reorgani- zation. (C) Final system plan The term "final system plan" means the final system plan (within the meaning of paragraph (6) of section 102 of such Act). Page 272