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TITLE 26-INTERNAL REVENUE CODE (3) Non pro rata distributions Paragraphs (1) and (2) shall apply to a dis- tribution whether or not the distribution is pro rata with respect to all of the sharehold- ers of the distributing qualified bank holding corporation. (4) Exception This subsection shall not apply to any dis- tribution by a corporation which has made any distribution pursuant to subsection (a). (5) Distributions Involving gift or compensation In the case of a distribution to which paragraph (I) or (2) applies, but which- (A) results in a gift, see section 2501, and following, or (B) has the effect of the payment of compensation, see section 61(a)(1). (c) Property acquired after May 15, 1955 (1) In general Except as provided in paragraphs (2) and (3), subsection (a) or (b) shall not apply to- (A) any property acquired by the distrib- uting corporation after May 15, 1955, unless (I) gain to such corporation with respect to the receipt of such property was not recog- nized by reason of subsection (a) or (b), or (ii) such property was received by it in ex- change for all of its stock in an exchange to which paragraph (2) or (3) applies, or (iii) such property was acquired by the distrib- uting corporation in a transaction in which gain was not recognized under section 305 (a) or section 332, or under section 354 with respect to a reorganization described in sec- tion 368(a)(1)(E) or (F), or (B) any property which was acquired by the distributing corporation in a distribu- tion with respect to stock acquired by such corporation after May 15, 1955, unless such stock was acquired by such corporation (I) in a distribution (with respect to stock held by it on May 15, 1955, or with respect to stock in respect of which all previous appli- cations of this clause are satisfied) with re- spect to which gain to it was not recognized by reason of subsection (a) or (b), or (ii) in exchange for all of its stock in an exchange to which paragrap. (2) or (3) applies, or (iii) in a transaction in which gain was not rec- ognized under section 305(a) or section 332, or under section 354 with respect to a reor- ganization described in section 368(a)(1)(E) or (P), or (C) any property acquired by the distrib- uting corporation in a transaction in which gain was not recognized under section 332, unless such property was acquired from a corporation which, if it had been a qualified bank holding corporation, could have dis- tributed such property under subsection (a)(1) or (b)(1). (2) Exchanges involving prohibited property If- (A) Any qualified bank holding corpora- tion exchanges (i) property, which, under subsection (a)(1), such corporation could distribute directly to its shareholders or se- curity holders without the recognition of gain to such shareholders or security hold- ers, and other property (except property de- scribed in subsection (b)(1)(B)(i)), for (ii) all of the stock of a second corporation created and availed of solely for the purpose of re- ceiving such property; (B) immediately after the exchange, the qualified bank holding corporation distrib- utes all of such stock in a manner pre- scribed in subsection (a)(2)(A); and (C) before such exchange, the Board has certified (with respect to the property ex- changed which consists of property which, under subsection (a)(1), such corporation could distribute directly to its shareholders or security holders without the recognition of gain) that the exchange and distribution are necessary or appropriate to effectuate section 4 of the Bank Holding Company Act of 1956. then paragraph (1) shall not apply with re- spect to such distribution. (3) Exchanges involving interests in banks If- (A) any qualified bank holding corpora- tion exchanges (I) property which, under subsection (b)(1), such corporation could distribute directly to its shareholders or se- curity holders without the recognition of gain to such shareholders or security hold- ers, and other property (except prohibited property), for (ii) all of the stock of a second corporation created and availed of solely for the purpose of receiving such property; (B) immediately after the exchange, the qualified bank holding corporation distrib- utes all of such stock in a manner pre- scribed in subsection (b)(2)(A); and (C) before such exchange, the Board has certified (with respect to the property ex- changed which consists of property which, under subsection (b)(1), such corporation could distribute directly to its shareholders or security holders without the recognition of gain) that- (i) such property is all or part of the property by reason of which such corpora- tion controls (within the meaning of sec- tion 2(a) of the Bank Holding Company Act of 1956) a bank or bank holding com- pany, or such property is part of the prop- erty by reason of which such corporation did control a bank or a bank holding com- pany before any property of the same kind was distributed under subsection (b)(1) or exchanged under this paragraph; and (ii) the exchange and distribution are necessary or appropriate to effectuate the policies of such Act, then paragraph (1) shall not apply with re- spect to such distribution. (d) Distributions to avoid Federal income tax (I) Prohibited property Subsection (a) shall not apply to a distribu- tion if, in connection with such distribution, the distributing corporation retains, or trans- fers after May 15, 1955, to any corporation, property (other than prohibited property) as part of a plan one of the principal purposes of which is the distribution of the earnings and profits of any corporation. Page 665 § 1101