Recognition of gain on transfers to swap funds

(a) Interests similar to preferred stock treated as stock Clause (vi) of section 351(e)(1)(B) is amended to read as follows: (vi) except as otherwise provided in regulations prescribed by the Secretary— (I) any interest in an entity if the return on such interest is limited and preferred, and (II) interests (not described in subclause (I)) in any entity if substantially all of the assets of such entity consist (directly or indirectly) of any assets described in subclause (I), any preceding clause, or clause (viii).. (b) Certain transfers deemed To be to investment companies Subsection (e) of section 351 is amended by adding at the end the following new paragraph: (3) Transfers of marketable securities to certain corporations A transfer of property to a corporation if— (A) such property is marketable securities (as defined in section 731(c)(2)), and (B) such corporation— (i) is registered under the Investment Company Act of 1940 as an investment company, or is exempt from registration as a investment company under section 3(c)(7) of such Act because interests in such corporation are offered to qualified purchasers within the meaning of section 2(a)(51) of such Act, or (ii) allows persons who have blocks of marketable securities with significant unrealized appreciation to diversify those holdings.. (c) Transfers to partnerships Subsection (b) of section 721 is amended to read as follows: (b) Special rule Subsection (a) shall not apply to gain realized on a transfer of property to a partnership if, were the partnership incorporated— (1) such partnership would be treated as an investment company (within the meaning of section 351), or (2) section 351 would not apply to such transfer by reason of section 351(e)(3).. (d) Effective date The amendments made by this section shall apply to transfers after the date of the enactment of this Act.