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TITLE 26-INTERNAL REVENUE CODE (B) Sale of subsidiary or assets (i) A payment of the balance to the credit of an employee of a corporation (hereinafter referred to as the employer corporation) which is a subsidiary corpo- ration (within the meaning of section 425(f)) or which is a member of a con- trolled group of corporations (within the meaning of section 1563(a), determined by substituting "50 percent" for "80 percent" each place it appears therein) in connec- tion with the liquidation, sale, or other means of terminating the parent-subsid- iary or controlled group relationship of the employer corporation with the parent corporation or controlled group, or (ii) a payment of the balance to the credit of an employee of a corporation (hereinafter referred to as the acquiring corporation) in connection with the sale or other transfer to the acquiring corpora- tion of all or substantially all of the assets used by the previous employer of the em- ployee (hereinafter referred to as the sell- ing corporation) in a trade or buisness conducted by the selling corporation, shall be treated as a payment or distribu- tion on account of the termination of the plan with respect to such employee if the employees of the employer corporation or the acquiring corporation (whichever ap- plies) are not active participants in such plan at the time of such payment or distri- bution. For purposes of this subparagraph, in no event shall a payment or distribution be deemed to be in connection with a sale or other transfer of assets, or a liquidation, sale, or other means of terminating such parent-subsidiary or controlled group rela- tionship, if such payment or distribution is made later than the end of the second cal- endar year after the calendar year in which occurs such sale or other transfer of assets, or such liquidation, sale, or other means of terminating such parent-subsidiary or con- trolled group relationship. (b) Taxability of beneficiary of nonexempt trust Contributions to an employees' trust made by an employer during a taxable year of the em- ployer which ends within or with a taxable year of the trust for which the trust is not exempt from tax under section 501(a) shall be included in the gross income of the employee in accor- dance with section 83 (relating to property transferred in connection with performance of services), except that the value of the employ- ee's interest in the trust shall be substituted for the fair market value of the property for pur- poses of applying such section. The amount ac- tually distributed or made available to any dis- tributee by any such trust shall be taxable to him in the year in which so distributed or made available, under section 72 (relating to annu- ities), except that distributions of income of such trust before the annuity starting date (as defined in section 72(c)(4)) shall be included in the gross income of the employee without regard to section 72(e)(1) (relating to amount not received as annuities). A beneficiary of any such trust shall not be considered the owner of any portion of such trust under subpart E of part I of subchapter J (relating to grantors and others treated as substantial owners). (c) Taxability of beneficiary of certain foreign situs trusts For purposes of subsections (a) and (b), a stock bonus, pension, or profit-sharing trust which would qualify for exemption from tax under section 501(a) except for the fact that it is a trust created or organized outside the United States shall be treated as if it were a trust exempt from tax under section 501(a). [(d) Repealed. Pub. L. 94-455, title XIX, § 1901(a) (57)(B), Oct. 4, 1976, 90 Stat. 1773] (c) Tax on lump sum distributions (1) Imposition of separate tax on lump sum distri. butions (A) Separate tax There is hereby imposed a tax (in the amount determined under subparagraph (B)) on the ordinary income portion of a lump sum distribution. (B) Amount of tax The amount of tax imposed by subpara- graph (A) for any taxable year shall be an amount equal to the amount of the initial separate tax for such taxable year multi- plied by a fraction, the numerator of which is the ordinary income portion of the lump sum distribution for the taxable year and the denominator of which is the total tax- able amount of such distribution for such year. (C) Initial separate tax The initial separate tax for any taxable, year is an amount equal to 10 times the tax which would be imposed by subsection (c) of section 1 if the recipient were an individ- ual referred to in such subsection and the taxable income were an amount equal to one-tenth of the excess of- (I) the total taxable amount of the lump sum distribution for the taxable year, over (ii) the minimum distribution allowance. (D) Minimum distribution allowance For purposes of this paragraph, the mini- mum distribution allowance for the taxable year is an amount equal to- (i) the lesser of $10,000 or one-half of the total taxable amount of the lump sum distribution for the taxable year, reduced (but not below zero) by (ii) 20 percent of the amount (if any) by which such total taxable amount exceeds $20,000. (E) Liability for tax The recipient shall be liable for the tax imposed by this paragraph. (2) Multiple distributions and distributions of an- nuity contracts. In the case of any recipient of a lump sum distribution for the taxable year with respect to whom during the 6-taxable-year period ending on the last day of the taxable year there has been one or more other lump sum distributions after December 31, 1973, or if the distribution (or any part hereof) is an an- § 402 Page 298