26 U.S.C. § 361 — Nonrecognition of gain or loss to corporations; treatment of distributions
submitted 72 years ago by ch. 736 to r/title-26-INTERNAL-REVENUE-CODE · 746 words · no verdicts yet
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No gain or loss shall be recognized to a corporation* if such corporation is a party to a reorganization* and exchanges property, in pursuance of the plan of reorganization, solely for stock* or securities* in another corporation a party to the reorganization.
If subsection (a) would apply to an exchange but for the fact that the property received in exchange consists not only of stock or securities permitted by subsection (a) to be received without the recognition of gain, but also of other property or money, then—
If the corporation receiving such other property or money distributes it in pursuance of the plan of reorganization, no gain to the corporation shall be recognized from the exchange, but
If the corporation receiving such other property or money does not distribute it in pursuance of the plan of reorganization, the gain, if any, to the corporation shall be recognized.
The amount of gain recognized under subparagraph (B) shall not exceed the sum of the money and the fair market value of the other property so received which is not so distributed.
If subsection (a) would apply to an exchange but for the fact that the property received in exchange consists not only of property permitted by subsection (a) to be received without the recognition of gain or loss, but also of other property or money, then no loss from the exchange shall be recognized.
For purposes of paragraph (1), any transfer of the other property or money received in the exchange by the corporation to its creditors in connection with the reorganization shall be treated as a distribution in pursuance of the plan of reorganization. The Secretary* may prescribe such regulations as may be necessary to prevent avoidance of tax through abuse of the preceding sentence or subsection (c)(3). In the case of a reorganization described in section 368(a)(1)(D) with respect to which stock or securities of the corporation to which the assets are transferred are distributed in a transaction which qualifies under section 355, this paragraph shall apply only to the extent that the sum of the money and the fair market value of other property transferred to such creditors does not exceed the adjusted bases of such assets transferred (reduced by the amount of the liabilities assumed (within the meaning of section 357(c))).
Except as provided in paragraph (2), no gain or loss shall be recognized to a corporation a party to a reorganization* on the distribution to its shareholders* of property in pursuance of the plan of reorganization.
If—
in a distribution referred to in paragraph (1), the corporation distributes property other than qualified property, and
the fair market value of such property exceeds its adjusted basis (in the hands of the distributing corporation),
then gain shall be recognized to the distributing corporation as if such property were sold to the distributee at its fair market value.
For purposes of this subsection, the term “qualified property” means—
any stock in (or right to acquire stock in) the distributing corporation or obligation of the distributing corporation, or
any stock in (or right to acquire stock in) another corporation which is a party to the reorganization or obligation of another corporation which is such a party if such stock (or right) or obligation is received by the distributing corporation in the exchange.
If any property distributed in the distribution referred to in paragraph (1) is subject to a liability or the shareholder* assumes a liability of the distributing corporation in connection with the distribution, then, for purposes of subparagraph (A), the fair market value of such property shall be treated as not less than the amount of such liability.
For purposes of this subsection, any transfer of qualified property by the corporation to its creditors in connection with the reorganization shall be treated as a distribution to its shareholders pursuant to the plan of reorganization.
Section 311 and subpart B of part II of this subchapter shall not apply to any distribution referred to in paragraph (1).
For provision providing for recognition of gain in certain distributions, see section 355(d).
Source credit: (Aug. 16, 1954, ch. 736, 68A Stat. 118; Pub. L. 99–514, title XVIII, § 1804(g)(1), Oct. 22, 1986, 100 Stat. 2805; Pub. L. 100–647, title I, § 1018(d)(5)(A), Nov. 10, 1988, 102 Stat. 3578; Pub. L. 101–508, title XI, § 11321(b), Nov. 5, 1990, 104 Stat. 1388–463; Pub. L. 108–357, title VIII, § 898(a), Oct. 22, 2004, 118 Stat. 1649; Pub. L. 109–135, title IV, § 403(jj)(1), Dec. 21, 2005, 119 Stat. 2632.)
- 1954Enacted · Act of Aug. 16, 1954, ch. 736
- 1986Amended · Pub. L. 99-514 · 100 Stat. 2805
- 1988Amended · Pub. L. 100-647 · 102 Stat. 3578
- 1990Amended · Pub. L. 101-508 · 104 Stat. 1388
- 2004Amended · Pub. L. 108-357 · 118 Stat. 1649
- 2005Amended · Pub. L. 109-135 · 119 Stat. 2632
A history note hasn’t been published yet. The record shows enactment by ch. 736 on 1954-08-16.
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