assumed liabilities
(3) Treatment of assumptions of liability (A) In general In determining whether the transfer referred to in paragraph (1)(A) is in exchange solely for stock in one or more regulated investment companies, the assumption by any such company of a liability of the common trust fund shall be disregarded. (B) Special rule where assumed liabilities exceed basis (i) In general If, in any transfer referred to in paragraph (1)(A), the assumed liabilities exceed the aggregate adjusted bases (in the hands of the common trust fund) of the assets transferred to the regulated investment company or companies— (I) notwithstanding paragraph (1), gain shall be recognized to the common trust fund on such transfer in an amount equal to such excess, (II) the basis of the assets received by the regulated investment company or companies in such transfer shall be increased by the amount so recognized, and (III) any adjustment to the basis of a participant’s interest in the common trust fund as a result of the gain so recognized shall be treated as occurring immediately before the exchange referred to in paragraph (1)(B). If the transfer referred to in paragraph (1)(A) is to two or more regulated investment companies, the basis increase under subclause (II) shall be allocated among such companies on the basis of the respective fair market values of the assets received by each of such companies. (ii) Assumed liabilities For purposes of clause (i), the term “assumed liabilities” means any liability of the common trust fund assumed by any regulated investment company in connection with the transfer referred to in paragraph (1)(A). (C) Assumption For purposes of this paragraph, in determining the amount of any liability assumed, the rules of section 357(d) shall apply.