Let's take this from the top, starting with the NFA:
The NFA originally was to include handguns as NFA weapons. Some revolver club whose name evades my memory apparently had some well-connected members that put a stop to that. The inclusion of SBRs and SBSs in the NFA was to stop people from cutting down rifles and shotguns to make ersatz handguns. They kept the work-arounds in the bill after removing handguns for some strange reason.
As it stands today, you can buy a fresh receiver that is not defined as a rifle or handgun as it was never completed. You can complete it however you like with the caveat that it cannot have a barrel less than 16 inches or an overall length less than 26 inches if completed as a rifle and cannot have a shoulder stock if completed as a handgun.
A handgun can morph into a rifle but cannot revert to a handgun if the ATF has any evidence it was ever configured as a rifle. Same for a factory-completed rifle. It can NEVER be a handgun. In fact, if you buy an undefined AR lower, build it as a handgun, and at any time attach a stock, and the ATF can prove it (pro tip: if you ever do this, DO NOT take any pictures) you have a legally defined rifle and an SBR with less than 16 inches of barrel.
NEVER FORGET THAT THE ATF IS NOT THERE FOR PUBLIC SAFETY. IT IS THERE TO NAIL YOUR ASS TO THE WALL.
The NFA originally was to include handguns as NFA weapons. Some revolver club whose name evades my memory apparently had some well-connected members that put a stop to that. The inclusion of SBRs and SBSs in the NFA was to stop people from cutting down rifles and shotguns to make ersatz handguns. They kept the work-arounds in the bill after removing handguns for some strange reason.
As it stands today, you can buy a fresh receiver that is not defined as a rifle or handgun as it was never completed. You can complete it however you like with the caveat that it cannot have a barrel less than 16 inches or an overall length less than 26 inches if completed as a rifle and cannot have a shoulder stock if completed as a handgun.
A handgun can morph into a rifle but cannot revert to a handgun if the ATF has any evidence it was ever configured as a rifle. Same for a factory-completed rifle. It can NEVER be a handgun. In fact, if you buy an undefined AR lower, build it as a handgun, and at any time attach a stock, and the ATF can prove it (pro tip: if you ever do this, DO NOT take any pictures) you have a legally defined rifle and an SBR with less than 16 inches of barrel.
NEVER FORGET THAT THE ATF IS NOT THERE FOR PUBLIC SAFETY. IT IS THERE TO NAIL YOUR ASS TO THE WALL.