nonbusiness assets
(4) Reduction in value where substantial nonbusiness assets (A) In general If, immediately after an ownership change, the new loss corporation has substantial nonbusiness assets, the value of the old loss corporation shall be reduced by the excess (if any) of— (i) the fair market value of the nonbusiness assets of the old loss corporation, over (ii) the nonbusiness asset share of indebtedness for which such corporation is liable. (B) Corporation having substantial nonbusiness assets For purposes of subparagraph (A)— (i) In general The old loss corporation shall be treated as having substantial nonbusiness assets if at least ⅓ of the value of the total assets of such corporation consists of nonbusiness assets. (ii) Exception for certain investment entities A regulated investment company to which part I of subchapter M applies, a real estate investment trust to which part II of subchapter M applies, or a REMIC to which part IV of subchapter M applies, shall not be treated as a new loss corporation having substantial nonbusiness assets. (C) Nonbusiness assets For purposes of this paragraph, the term “nonbusiness assets” means assets held for investment. (D) Nonbusiness asset share For purposes of this paragraph, the nonbusiness asset share of the indebtedness of the corporation is an amount which bears the same ratio to such indebtedness as— (i) the fair market value of the nonbusiness assets of the corporation, bears to (ii) the fair market value of all assets of such corporation. (E) Treatment of subsidiaries For purposes of this paragraph, stock and securities in any subsidiary corporation shall be disregarded and the parent corporation shall be deemed to own its ratable share of the subsidiary’s assets. For purposes of the preceding sentence, a corporation shall be treated as a subsidiary if the parent owns 50 percent or more of the combined voting power of all classes of stock entitled to vote, and 50 percent or more of the total value of shares of all classes of stock.