PRINTER'S NO. 2650
No. 2112 Session of 1981
INTRODUCED BY POTT, MARMION, FLECK, McVERRY AND BURD,
DECEMBER 8, 1981
REFERRED TO COMMITTEE ON FINANCE, DECEMBER 8, 1981
AN ACT
1 Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
2 act relating to tax reform and State taxation by codifying
3 and enumerating certain subjects of taxation and imposing
4 taxes thereon; providing procedures for the payment,
5 collection, administration and enforcement thereof; providing
6 for tax credits in certain cases; conferring powers and
7 imposing duties upon the Department of Revenue, certain
8 employers, fiduciaries, individuals, persons, corporations
9 and other entities; prescribing crimes, offenses and
10 penalties," exempting gains from the sale of certain real
11 estate from taxation.
12 The General Assembly of the Commonwealth of Pennsylvania
13 hereby enacts as follows:
14 Section 1. Clause (3) of subsection (a) of section 303, act
15 of March 4, 1971 (P.L.6, No.2), known as the "Tax Reform Code of
16 1971," amended June 17, 1974 (P.L.325, No.105), is amended to
17 read:
18 Section 303. Classes of Income.--(a) The classes of income
19 referred to above are as follows:
20 * * *
21 (3) Net gains or income from disposition of property. Net
22 gains or net income, less net losses, derived from the sale,
1 exchange or other disposition of property, including real or
2 personal, whether tangible or intangible as determined in
3 accordance with accepted accounting principles and practices.
4 For the purpose of this act, for the determination of the basis
5 of any property, real and personal, if acquired prior to June 1,
6 1971, the date of acquisition shall be adjusted to June 1, 1971
7 as if the property had been acquired on that date. If the
8 property was acquired after June 1, 1971, the actual date of
9 acquisition shall be used in determination of the basis.
10 The term "net gains or income" shall not include net gains or
11 income derived from the sale, exchange, or other disposition of
12 real property which was used as the principal residence of the
13 taxpayer prior to such sale, exchange or other disposition so
14 long as the net gains or income derived from the sale, exchange
15 or other disposition is reinvested in real property to be used
16 by the taxpayer as his principal residence. In order to qualify
17 for the exclusion provided herein, the reinvestment of net gains
18 or income must be made within eighteen months from the date of
19 sale, exchange or other disposition of said property.
20 The term "net gains or income" shall not include gains or
21 income derived from obligations which are statutorily free from
22 State or local taxation under any other act of the General
23 Assembly of the Commonwealth of Pennsylvania or under the laws
24 of the United States. The term "sale, exchange or other
25 disposition" shall not include the exchange of stock or
26 securities in a corporation a party to a reorganization in
27 pursuance of a plan of reorganization, solely for stock or
28 securities in such corporation or in another corporation a party
29 to the reorganization and the transfer of property to a
30 corporation by one or more persons solely in exchange for stock
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1 or securities in such corporation if immediately after the
2 exchange such person or persons are in control of the
3 corporation. For purposes of this clause, stock or securities
4 issued for services shall not be considered as issued in return
5 for property.
6 For purposes of this clause, the term "reorganization"
7 means--
8 (i) a statutory merger or consolidation;
9 (ii) the acquisition by one corporation, in exchange solely
10 for all or a part of its voting stock (or in exchange solely for
11 all or a part of the voting stock of a corporation which is in
12 control of the acquiring corporation) of stock of another
13 corporation if, immediately after the acquisition, the acquiring
14 corporation has control of such other corporation (whether or
15 not such acquiring corporation had control immediately before
16 the acquisition);
17 (iii) the acquisition by one corporation, in exchange solely
18 for all or a part of its voting stock (or in exchange solely for
19 all or a part of the voting stock of a corporation which is in
20 control of the acquiring corporation), of substantially all of
21 the properties of another corporation, but in determining
22 whether the exchange is solely for stock the assumption by the
23 acquiring corporation of a liability of the other, or the fact
24 that property acquired is subject to a liability, shall be
25 disregarded;
26 (iv) a transfer by a corporation of all or a part of its
27 assets to another corporation if immediately after the transfer
28 the transferor, or one or more of its shareholders (including
29 persons who were shareholders immediately before the transfer),
30 or any combination thereof, is in control of the corporation to
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1 which the assets are transferred;
2 (v) a recapitalization;
3 (vi) a mere change in identity, form, or place of
4 organization however effected; or
5 (vii) the acquisition by one corporation, in exchange for
6 stock of a corporation (referred to in this subclause as
7 "controlling corporation") which is in control of the acquiring
8 corporation, of substantially all of the properties of another
9 corporation which in the transaction is merged into the
10 acquiring corporation shall not disqualify a transaction under
11 subclause (i) if such transaction would have qualified under
12 subclause (i) if the merger had been into the controlling
13 corporation, and no stock of the acquiring corporation is used
14 in the transaction;
15 (viii) a transaction otherwise qualifying under subclause
16 (i) shall not be disqualified by reason of the fact that stock
17 of a corporation (referred to in this subclause as the
18 "controlling corporation") which before the merger was in
19 control of the merged corporation is used in the transaction, if
20 after the transaction, the corporation surviving the merger
21 holds substantially all of its properties and of the properties
22 of the merged corporation (other than stock of the controlling
23 corporation distributed in the transaction); and in the
24 transaction, former shareholders of the surviving corporation
25 exchanged, for an amount of voting stock of the controlling
26 corporation, an amount of stock in the surviving corporation
27 which constitutes control of such corporation.
28 For purposes of this clause, the term "control" means the
29 ownership of stock possessing at least eighty per cent of the
30 total combined voting power of all classes of stock entitled to
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1 vote and at least eighty per cent of the total number of shares
2 of all other classes of stock of the corporation.
3 For purposes of this clause, the term "a party to a
4 reorganization" includes a corporation resulting from a
5 reorganization, and both corporations, in the case of a
6 reorganization resulting from the acquisition by one corporation
7 of stock or properties of another. In the case of a
8 reorganization qualifying under subclause (i) by reason of
9 subclause (vii) the term "a party to a reorganization" includes
10 the controlling corporation referred to in such subclause (vii).
11 Notwithstanding any provisions hereof, upon every such
12 exchange or conversion, the taxpayer's base for the stock or
13 securities received shall be the same as the taxpayer's actual
14 or attributed base for the stock, securities or property
15 surrendered in exchange therefor.
16 * * *
17 Section 2. This act shall take effect in 60 days.
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