CHAPTER 249

An Act to amend the Code of Virginia by adding a section numbered
58-86.6, providing special rules for the recognition of gain or loss on
sales or exchanges in connection with certain liquidations. rH 4291

Approved March 11, 1960

Be it enacted by the General Assembly of Virginia:
1. That the Code of Virginia be amended by adding a section numbered
58-86.6 as follows:

§ 58-86.6. (a) General Rule——If a corporation adopts a plan of
complete liquidation and within the twelve month period beginning on the
date of the adoption of such plan all the assets of the corporation are dis-
tributed in complete liquidation, less assets retained to meet claims, ther
no gain or loss shall be recognized to such corporation from the sale 0!
exchange by it of property within such twelve month period.

(b) Property Defined.— ; “ ;

(1) In General.—For purposes of subsection (a), the term “property
does not include— a

(A) stock in trade of the corporation, or other property of a kinc
which properly would be included in the inventory of the corporation if or
hand at the close of the taxable year, and property held by the corporatior
primarily for sale to customers in the ordinary course of its trade o1

usiness,

(B) installment obligations acquired at any time with respect to the
sale or exchange of property described in subparagraph (A) of this sub
section, and

(C) installment obligations acquired with respect to property, other
than that described in subparagraph (A), sold or exchanged before the date
of the adoption of such plan of liquidation.

(2) Nonrecognition With Respect to Inventory in Certain Cases.—
Notwithstanding paragraph (1) of this subsection, if substantially all the
property described in subparagraph (A) of such paragraph (1) which is
attributable to a trade or business of the corporation is, in accordance with
this section, sold or exchanged to one person in one transaction, then for
purposes of subsection (a) the term “property” includes—

(A) such property so sold or exchanged, and

(B) installment obligations acquired with respect to such sale or
exchange.

(c) Limitations.—This section shall not apply to any sale or ex-
change—

(1) following the adoption of a plan of complete liquidation if the
transfer of all the property under the liquidation occurs within some one
calendar month, or

(2) if eighty per centum or more of the total combined voting power
of all classes of stock entitled to vote and eighty per centum or more of the
total number of shares of all other classes of common stock of the cor-
poration are owned by another corporation.

Section not applicable to stockholders.—This section shall not
apply to any extent to the stockholders of any corporation liquidating here-
under. Distributions in liquidation are not dividends within the meaning
of the word “dividend” as used in § 58-77 (9). Distributions in liquidation
shall continue to take the same status under this chapter as heretofore.

(e) When section effective.—This section shall be in force for taxable
years beginning after December thirty-first, nineteen hundred and fifty-
nine, and for fiscal years ending in nineteen hundred sixty with respect to
sales and exchanges made after December thirty-first, nineteen hundred
and fifty-nine.