26 U.S.C. § 331 — Gain or loss to shareholder in corporate liquidations

submitted 72 years ago by ch. 736 to r/title-26-INTERNAL-REVENUE-CODE · 92 words · no verdicts yet

in plain englishAI-generated · not legal advice

When a corporation completely liquidates, shareholders treat the money or property they get as payment for their stock, not as a normal dividend. The usual dividend-taxation rule in section 301 does not apply here. Section 1001 explains how to figure out the actual gain or loss.

(a) Distributions in complete liquidation treated as exchanges. Amounts a shareholder receives in a distribution from a corporation's complete liquidation are treated as full payment in exchange for the stock -- as if the shareholder sold the stock back to the corporation, not as a dividend. (b) Nonapplication of section 301. Section 301, which governs the normal tax effects on a shareholder of a corporation's property distributions, does not apply to any distribution of property in a complete liquidation, other than a distribution referred to in section 316(b)(2)(B). (c) Cross reference. For the general rule on figuring the amount of gain or loss recognized, this section points to section 1001.

the actual law source: uscode.house.gov ↗public domain

(a) Distributions in complete liquidation treated as exchanges

Amounts received by a shareholder in a distribution in complete liquidation of a corporation shall be treated as in full payment in exchange for the stock.

(b) Nonapplication of section 301

Section 301 (relating to effects on shareholder of distributions of property) shall not apply to any distribution of property (other than a distribution referred to in paragraph (2)(B) of section 316(b)) in complete liquidation.

For general rule for determination of the amount of gain or loss recognized, see section 1001.

Source credit: (Aug. 16, 1954, ch. 736, 68A Stat. 101; Pub. L. 88–272, title II, § 225(f)(2), Feb. 26, 1964, 78 Stat. 88; Pub. L. 94–455, title XIX, § 1901(b)(28)(A), Oct. 4, 1976, 90 Stat. 1799; Pub. L. 97–248, title II, § 222(a), (e)(1)(B), Sept. 3, 1982, 96 Stat. 478, 480; Pub. L. 115–141, div. U, title IV, § 401(a)(63), Mar. 23, 2018, 132 Stat. 1187.)

history & why it existsrecord from the source credit

1954Enacted · Act of Aug. 16, 1954, ch. 736
1964Amended · Pub. L. 88-272 · 78 Stat. 88
1976Amended · Pub. L. 94-455 · 90 Stat. 1799
1982Amended · Pub. L. 97-248 · 96 Stat. 478, 480
2018Amended · Pub. L. 115-141 · 132 Stat. 1187

A history note hasn’t been published yet. The record shows enactment by ch. 736 on 1954-08-16.

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