26 U.S.C. § 269 — Acquisitions made to evade or avoid income tax

(a) This subsection targets tax-motivated acquisitions. It applies in two situations. First, when a person or group gains control of a corporation. Second, when a corporation acquires another corporation's property, using that corporation's original cost basis. In either case, if the main purpose is to evade or avoid federal income tax, the Secretary may act. The evasion must involve claiming a deduction, credit, or other tax benefit the acquirer would not otherwise get. If so, the Secretary may disallow that deduction, credit, or benefit. "Control" means owning at least 50 percent of the corporation's voting stock, or 50 percent of its total stock value. (b) This subsection targets certain post-purchase liquidations. It applies when a corporation buys another in a "qualified stock purchase," skips a section 338 election, and liquidates the target within two years. If the main purpose of that liquidation is to evade or avoid federal income tax, the Secretary may act. Again, the evasion must involve claiming a benefit the acquirer would not otherwise get. The Secretary may then disallow that deduction, credit, or benefit. The terms "qualified stock purchase" and "acquisition date" mean what they mean in section 338. (c) When subsection (a) or (b) applies, the Secretary has flexibility. The Secretary may allow part of a disallowed deduction, credit, or benefit, if that will not cause tax evasion or avoidance. The Secretary may also divide income, deductions, credits, or benefits among the corporations or properties involved. The Secretary allows that division only to the extent it avoids evasion or avoidance. The Secretary may combine both of these approaches, using each in part.

The record establishes that this section was originally enacted as part of the Internal Revenue Code of 1954, chapter 736, approved August 16, 1954, appearing at 68A Stat. 80. The source credit shows subsequent amendment activity on four occasions: by Public Law 88–272 in 1964, Public Law 94–455 in 1976, Public Law 98–369 in 1984, and Public Law 113–295 in 2014. Each amendment adjusted the section's text, though the credit itself does not detail the substance of each change beyond the statutory citations provided. Historical context for the section's original purpose can be drawn from the general understanding of the 1954 Code recodification. The 1954 Internal Revenue Code was a comprehensive reorganization and modernization of federal tax law, and provisions like this one are commonly understood to reflect Congress's broader effort during that era to police corporate acquisitions undertaken principally to secure tax benefits—such as losses, credits, or other allowances—rather than for legitimate business purposes. Anti-avoidance rules targeting acquisitions "made to evade or avoid income tax" are generally understood to respond to techniques where control of a loss corporation, or its favorable tax attributes, was acquired chiefly to offset the income of a profitable enterprise. Beyond this general characterization, the record does not establish the specific legislative intent behind the section's particular mechanics, including the later amendments' individual purposes. No committee reports, sponsor statements, or specific historical episodes are documented here, and none should be inferred.