Par. 2. Section 1.337(d)-3 is amended by revising paragraphs (c)(2), (f)(2)(ii) and (i) to read as follows:
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(c) * * *
(2) Stock of the Corporate Partner —(i) In general. With respect to a Corporate Partner, Stock of the Corporate Partner includes stock, warrants and other options to acquire stock, and similar interests (each an equity interest) in the Corporate Partner. Stock of the Corporate Partner also includes equity interests in a corporation that controls the Corporate Partner within the meaning of section 304(c), and which also has a direct or indirect equity interest in the Corporate Partner. Solely for purposes of determining whether a corporation that controls the Corporate Partner also has a direct or indirect equity interest in the Corporate Partner under this paragraph (c)(2), a direct or indirect ownership of an equity interest in the Corporate Partner includes ownership of Stock of the Corporate Partner that would be attributed to a person under section 318(a)(2) (except that the 50-percent ownership limitation in section 318(a)(2)(C) does not apply) and under section 318(a)(4) (but otherwise without regard to section 318).
(ii) Equity Interests with value attributable to Stock of the Corporate Partner. If an equity interest in an entity is not Stock of the Corporate Partner within the meaning of paragraph (c)(2)(i) of this section, then the equity interest will be treated as Stock of the Corporate Partner to the extent that the value of that equity interest is attributable to Stock of the Corporate Partner. The preceding sentence will apply only if either—
(A) The Corporate Partner is in control (within the meaning of section 304(c)) of that entity; or
(B) That entity owns directly or indirectly 5 percent or more, by vote or value, of the stock in the Corporate Partner.
(iii) Determination of value attributable to Stock of the Corporate Partner. The value of an equity interest in an entity that is attributable to Stock of the Corporate Partner under paragraph (c)(2)(ii) of this section is equal to the product of—
(A) The fair market value of the equity interest; and
(B) The lesser of—
( 1 ) The ratio of the fair market value of the Stock of the Corporate Partner owned (directly or indirectly (as defined in paragraph (c)(2)(i) of this section), by the entity to the fair market value of all the equity interests in the entity; or
( 2 ) One.
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(f) * * *
(2) * * *
(ii) Is not distributed to the Corporate Partner or a corporation that controls the Corporate Partner within the meaning of section 304(c) and owns directly or indirectly stock or other equity interests in the Corporate Partner. For purposes of this paragraph (f)(2), a direct or indirect ownership of an equity interest in the Corporate Partner means ownership of Stock of the Corporate Partner that would be attributed to a person under section 318(a)(2) (except that the 50-percent ownership limitation in section 318(a)(2)(C) does not apply) and under section 318(a)(4) (but otherwise without regard to section 318).
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(i) Effective/applicability date. The regulations in this section are effective as of the date of their publication as final regulations in the Federal Register .