295 other than the taxable year ending with his death, such excess shall be deemed to be an overpayment of the tax imposed by this chapter for the last taxable year referred to in subparagraph (A) or (B), whichever is applicable." (c) TECHNICAL AND CONFORMING AMENDMENTS.— (1) Section 405 (e) (relating to capital gains treatment not to apply to bonds distributed by trusts) is amended (A) by striking out "CAPITAL GAINS TREATMENT" in the heading and inserting in lieu thereof "CAPITAL GAINS TREATMENT AND LIMITATION OF TAX"; (B) by striking out "Section 402 (a) (2)" and inserting in lieu thereof "Section 72 (n) and section 402 (a) (2)"; and (C) by striking out "section" and inserting in lieu thereof "sections". (2) Section 406 (c) (relating to termination of status as deemed employee not to be treated as separa tion from service for purposes of capital gain provisions) is amended (A) by striking out "PROVISIONS." in the heading and inserting in lieu thereof "PROVISIONS AND LIMITATION OF TAX."; and 20 296 (B) by striking out "section 402 (a) (2)" and inserting in lieu thereof "section 72 (n), section 402 (a) (2),". (3) Section 407 (c) (relating to termination of status as deemed employee not to be treated as separation from service for purposes of capital gain provisions) is amended (A) by striking out "PROVISIONS." in the heading and inserting in lieu thereof "PROVISIONS AND LIMITATION OF TAX."; and (B) by striking out "section 402 (a) (2)” and inserting in lieu thereof "section 72 (n), section 402 (a) (2),". (4) Section 1304 (b) (2) (relating to certain provisions inapplicable) is amended to read as follows: "(2) section 72 (n) (2) (relating to limitation of tax in case of total distribution)". SEC. 516. OTHER CHANGES IN CAPITAL GAINS TREAT MENT. (a) SALES OF TERM INTERESTS.-Section 1001 (re21 lating to determination of amount of and recognition of gain 22 or loss) is amended by adding at the end thereof the fol23 lowing new subsection: 24 25 "(e) CERTAIN TERM INTERESTS.— "(1) IN GENERAL.-In determining gain or loss 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 297 from the sale or other disposition of a term interest in property, that portion of the adjusted basis of such in terest which is determined pursuant to section 1014 or 1015 (to the extent that such adjusted basis is a portion of the entire adjusted basis of the property) shall be disregarded. “(2) TERM INTEREST IN PROPERTY DEFINED.— For purposes of paragraph (1), the term 'term interest. in property' means "(A) a life interest in property, "(B) an interest in property for a term of years, or "(C) an income interest in a trust. "(3) EXCEPTION.-Paragraph (1) shall not apply to a sale or other disposition which is a part of a transaction in which a fee interest is transferred to any person 17 or persons." 8 18 (b) CERTAIN CASUALTY LOSSES UNDER SECTION 19 1231.-Section 1231 (a) (relating to property used in the 20 trade or business and involuntary conversions) is amended 21 by striking out all that follows paragraph (1) and inserting 22 in lieu thereof the following: 23 24 25 "(2) losses (including losses not compensated for by insurance or otherwise) upon the destruction, in whole or in part, theft or seizure, or requisition or con 1 298 demnation of (A) property used in the trade or business 2 or (B) capital assets held for more than 12 months shall 3 4 be considered losses from a compulsory or involuntary conversion. 5 In the case of any involuntary conversion (subject to the pro6 visions of this subsection but for this sentence) arising from 7 fire, storm, shipwreck, or other casualty, or from theft, of any 8 property used in the trade or business or of any capital asset 9 held for more than 12 months and held for the production of 10 income, this subsection shall not apply to such conversion 11 (whether resulting in gain or loss) if, during the taxable 12 year, the recognized losses from such conversions exceed the 13 recognized gains from such conversions." 14 15 16 17 18 (c) TRANSFER OF FRANCHISES. (1) IN GENERAL.-Part IV of subchapter P of chapter 1 (relating to special rules for determining capital gains and losses) is amended by adding at the end thereof the following new section: 19 "SEC. 1252. TRANSFER OF FRANCHISES. 20 "(a) GENERAL RULE.-A transfer of a franchise shall 21 not be treated as a sale or exchange of a capital asset or of 22 property to which section 1231 applies, if the transferor re23 tains any significant power, right, or continuing interest with 24 respect to the subject matter of the franchise. 25 "(b) DEFINITIONS.-For purposes of this section 1 2 3 4 5 བ 2 7 8 9 10 11 12 13 299 "(1) FRANCHISE.-The term 'franchise' means a franchise, distributorship, or other like interest. "(2) SIGNIFICANT POWER, RIGHT, OR CONTINU ING INTEREST.-The term 'significant power, right, or continuing interest' includes, but is not limited to- "(B) a right to disapprove any subcontract made by the holder of the franchise, and "(C) a right to terminate the franchise at will. "(c) EXCEPTION.-Subsection (a) shall not apply with respect to amounts received or accrued, in connection with a transfer of a franchise, which are attributable to the trans14 fer of all substantial rights to a patent, trademark, or trade 15 name (or an undivided interest therein which includes a 16 part of all such rights), to the extent such amounts are 17 separately identified and are reasonable in amount." 18 19 (2) CLERICAL AMENDMENT.-The table of sec tions for part IV of subchapter P of chapter 1 is amended 20 by adding at the end thereof the following: 21 "Sec. 1252. Transfer of franchises." (d) EFFECTIVE DATES.-The amendments made by 22 subsections (a) and (c) shall apply with respect to sales 23 and other dispositions, and transfers, after July 25, 1969. ୮ |