§1347 Tax Treatment of Conrail Public Sale

Summary

After the public sale, Conrail will be treated for federal tax rules as if a new company bought all its assets the day after the sale for a "deemed purchase price." That price equals the gross money received times a fraction whose numerator is 100 percent and whose denominator is the percent (by value) of Conrail stock sold in the public sale. The deemed price must be divided among Conrail’s assets using the temporary rules under section 338 of the tax code as they were on October 21, 1986. The Treasury Secretary must give clear guidance so each asset’s tax basis is known, and accounts receivable and materials and supplies count as cash equivalents. No one has to include canceled Conrail debts or preferred stock as taxable income because of the public sale. Conrail cannot deduct payments made after the sale date for work done before the sale. For Conrail’s employee stock ownership plans, the limits in section 415 do not apply to stock transferred under this Act or earlier law, and the 2-year withdrawal waiting period does not apply to withdrawals tied to the public sale. Conrail means the Consolidated Rail Corporation (including companies that were its subsidiaries immediately before the sale). "Public sale" means the stock offering under the Conrail Privatization Act, and if there were more than one such offering it means the initial public offering. "Secretary" means the Secretary of the Treasury or the Secretary’s delegate.