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the Capital Note would be classified as a "nonadmitted asset
because it was unsecured;" thus, it would not be treated as an
asset of NALICO for purposes of computing its capital-to-premium
ratio as of December 31, 1989.
The parties agree that the transactions under scrutiny
qualify under the nonrecognition provision of section 351, except
as that section may be limited by section 357(a) and (c)(1).
They also agree that section 357(b) is not applicable, but
disagree as to the application of sections 357(a) and 357(c)(1).
SEC. 357(a) provides:
(a) General Rule.--Except as provided in
subsections (b) and (c), if--
(1) the taxpayer receives property
which would be permitted to be received under
section 351, 361, 371, or 374, without the
recognition of gain if it were the sole
consideration, and
(2) as part of the consideration,
another party to the exchange assumes a
liability of the taxpayer, or acquires from
the taxpayer property subject to a liability,
then such assumption or acquisition shall not be
treated as money or other property, and shall not
prevent the exchange from being within the provisions
of section 351, 361, 371, or 374, as the case may be.
Section 357(c)(1) provides:
(1) In General.--In the case of an exchange--
(A) to which section 351
applies, or
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