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TITLE 26-INTERNAL REVENUE CODE (B) Ownership of stock For purposes of subparagraph (A), the ownership of stock shall be determined under section 318. (f) Small DISCs (1) Adjusted taxable Income of $100,000 or less If a DISC has adjusted taxable income of $100,000 or less for a taxable year, subsection (b)(1)(E) shall not apply with respect to such year. (2) Special rule If a DISC has adjusted taxable income of more than $100,000 for a taxable year, then the amount taken into account under subsec- tion (b)(1)(E) shall be deemed to be an amount equal to the excess (if any) of- (A) the amount which would (but for this paragraph) be taken into account under subsection (b)(1)(E), over (B) twice the excess (if any) of $150,000 over the adjusted taxable income. (g) Certain transfers of DISC assets If- (1) a corporation owns, directly or indirect- ly, all of the stock of a subsidiary and a DISC, (2) the subsidiary has been engaged in the active conduct of a trade or business (within the meaning of section 355(b)) throughout the 5-year period ending on the date of the transfer and continues to be so engaged thereafter, and (3) during the taxable year of the subsid- iary in which its stock is transferred and its preceding taxable year, such trade or business gives rise to qualified export receipts of the subsidiary and the DISC, then, under such terms and conditions as the Secretary by regulations shall prescribe, trans- fers of assets, stock, or both, will be deemed to be a reorganization within the meaning of sec- tion 368, a transaction to which section 355 ap- plies, an exchange of stock to which section 351 applies, or a combination thereof. The preced- ing sentence shall apply only to the extent that the transfer or transfers involved are for the purpose of preventing the separation of the ownership of the stock in the DISC from the ownership of the trade or business which (during the base period) produced the export gross receipts of the DISC. (Added Pub. L. 92-178, title V, § 501, Dec. 10, 1971, 85 Stat. 544, and amended Pub. L. 94-455, title X, §§ 1063(a), 1065(a)(2), title XI, § 1101(a), (d)(1), title XIX, §§ 1901(b)(3)(K), 1906(b) (13)(A), Oct. 4, 1976, 90 Stat. 1650, 1654, 1655, 1658, 1793, 1834.) REFERENCES IN TEXT The Military Security Act of 1954, referred to in subseu. (b)(3)(B), probably means the Mutual Security Act of 1954, which is act Aug. 26, 1954, ch. 937, 68 Stat. 832, as amended, and which is classified generally to chapter 24 (§1750 et seq.) of Title 22, Foreign Rela- tions and Intercourse. Pub. L. 94-329, title II, § 212(b)(1), June 30, 1976, 90 Stat. 745, provided: "Sec- tion 414 of the Mutual Security Act of 1954 [22 U.S.C. 1934) is repealed. Any reference to such section shall be deemed to be a reference to section 38 of the Arms Export Control Act [22 U.S.C. 2778] and any reference to licenses issued under section 38 of the Arms Export Control Act shall be deemed to include a reference to licenses issued under section 414 of the Mutual Securi- ty Act of 1954." AMENDMENTS 1976-Subsec. (b)(1)(C). Pub. L. 94-455, §1901(b)(3)(K), substituted "ordinary income" for "gain from the sale or exchange of property which is neither a capital asset nor property described In sec- tion 1231" following "treated as". Subsec. (b)(1)(D). Pub. L. 94-455, § 1101(a)(1), added subpar. (D). Former subpar. (D) redesignated (F). Subsec. (b)(1)(E). Pub. L. 94-455, § 1101(a)(1), added subpar. (E). Former subpar. (E) redesignated (0). Subsec. (b)(1)(P). Pub. L. 94-455, §§1063(a), 1065(a)(2), 1101(a)(1), redesignated former subpar. (D) as (F) and, as redesignated, made existing provision cl. (i), added cls. (ii) and (iii), and substituted "(C), (D), and (E)" for "(C)" following "(B), and". Subsec. (b)(1)(G). Pub. L. 94-455, § ll01(a)(1), rede- signated former subpar. (E) as (G). Subsec. (b)(2)(B). Pub. L. 94-455, § 1101(a)(2), substi- tuted "more than twice the number" for "more than the number" following "no case over". Subsec. (b)(3). Pub. L. 94-455, § 1101(a)(3), added par. (3). Subsec. (c). Pub. L. 94-455, § 1101(d)(1), redesignated existing provisions as pars. (1) and (2) and, as redesig- nated, added subpar. (1)(C). Subsec. (d)(5). Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary". Subsec. Ce). Pub. L. 94-455, § 1101(a)(4), added subsec. (e). Subsec. (f). Pub. L. 94-455, §1101(a)(4), added subsec. (f). Subsec. (g). Pub. L. 94-455, § 1101(a)(4), added subsec. g). EFFECTIVE DATE OF 1976 AMkNDMENT Amendment of subsec. (b)(1)(F) by section 1063(a) of Pub. L. 94-455 applicable to participation in or cooper- ation with an international boycott more than 30 days after Oct. 4, 1976, with special provisions for existing contracts, see section 1066(a) of Pub. L. 94-455, set out as an Effective Date of 1976 Amendment note under section 908 of this title. Amendment of subsec. (b)(1)(F) by section 1065(a)(2) of Pub. L. 94-455 applicable to payments de- scribed in section 162(c) of this title made more than 30 days after Oct. 4, 1976, see section 1066(b) of Pub. L. 94-455, set out as an Effective Date of 1976 Amend- ment note under section £52 of this title. Section 1101(g)(1) of Pub. L. 94-455 provided that: "The amendments made by subsections (a) and (e) [amending subsecs. (b)(1), (2), (3), (e) to (g) of this sec- tion and section 996(a)(2) of this title] shall apply to taxable years beginning after December 31, 1975." Section 1101(g)(4) of Pub. L. 94-455 provided that: "The amendments made by subsection (d) (amending subsec. (c) of this section and section 751(c) of this title] shall apply to sales, exchanges, or other disposi- tions after December 31, 1975, in taxable years ending after such date." Amendmefit of subsec. (b)(1)(C) by section 1901(b)(3)(K) of Pub. L. 94-455 applicable with respect to taxable years beginning after Dec. 31, 1976, see sec- tion 1901(d) of Pub. L. 94-455, set out as an Effective Date of 1976 Amendment note under section 2 of this title. PRORATION OF BASE PERIOD IN CASE OF FIXED CONTRACTS Secton 1101(g)(5) of Pub. L. 94-455 provided that: "For purposes of determining adjusted base period export gross receipts (under section 995(e)(3) of the Internal Revenue Code of 1954 [subsec. (e)(3) of this section], as amended by this section), If any DISC has export gross receipts from export property by reason of paragraph (2) of section 603(b) of the Tax Reduc- tion Act of 1975, then the export gross receipts of such DISC for the taxable years of the base period shall be increased by an amount equal to the amount of gross § 995 Page 628