26 U.S.C. § 6213 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 63 / Section 6213: Restrictions applicable to deficiencies; petition to Tax Court
Restrictions applicable to deficiencies; petition to Tax Court
Status: in_force

(a) Time for filing petition and restriction on assessment

Within 90 days, or 150 days if the notice is addressed to a person outside the United States, after the notice of deficiency authorized in section 6212 is mailed (not counting Saturday, Sunday, or a legal holiday in the District of Columbia as the last day), the taxpayer may file a petition with the Tax Court for a redetermination of the deficiency. Except as otherwise provided in section 6851, 6852, or 6861 no assessment of a deficiency in respect of any tax imposed by subtitle A, or B, chapter 41, 42, 43, or 44 and no levy or proceeding in court for its collection shall be made, begun, or prosecuted until such notice has been mailed to the taxpayer, nor until the expiration of such 90-day or 150-day period, as the case may be, nor, if a petition has been filed with the Tax Court, until the decision of the Tax Court has become final. Notwithstanding the provisions of section 7421(a), the making of such assessment or the beginning of such proceeding or levy during the time such prohibition is in force may be enjoined by a proceeding in the proper court, including the Tax Court, and a refund may be ordered by such court of any amount collected within the period during which the Secretary is prohibited from collecting by levy or through a proceeding in court under the provisions of this subsection. The Tax Court shall have no jurisdiction to enjoin any action or proceeding or order any refund under this subsection unless a timely petition for a redetermination of the deficiency has been filed and then only in respect of the deficiency that is the subject of such petition. Any petition filed with the Tax Court on or before the last date specified for filing such petition by the Secretary in the notice of deficiency shall be treated as timely filed.

(b) Exceptions to restrictions on assessment

(1) Assessments arising out of mathematical or clerical errors

If the taxpayer is notified that, on account of a mathematical or clerical error appearing on the return, an amount of tax in excess of that shown on the return is due, and that an assessment of the tax has been or will be made on the basis of what would have been the correct amount of tax but for the mathematical or clerical error, such notice shall not be considered as a notice of deficiency for the purposes of subsection (a) (prohibiting assessment and collection until notice of the deficiency has been mailed), or of section 6212(c)(1) (restricting further deficiency letters), or of section 6512(a) (prohibiting credits or refunds after petition to the Tax Court), and the taxpayer shall have no right to file a petition with the Tax Court based on such notice, nor shall such assessment or collection be prohibited by the provisions of subsection (a) of this section. Each notice under this paragraph shall set forth the error alleged and an explanation thereof.

(2) Abatement of assessment of mathematical or clerical errors

(A) Request for abatement

Notwithstanding section 6404(b), a taxpayer may file with the Secretary within 60 days after notice is sent under paragraph (1) a request for an abatement of any assessment specified in such notice, and upon receipt of such request, the Secretary shall abate the assessment. Any reassessment of the tax with respect to which an abatement is made under this subparagraph shall be subject to the deficiency procedures prescribed by this subchapter.

(B) Stay of collection

In the case of any assessment referred to in paragraph (1), notwithstanding paragraph (1), no levy or proceeding in court for the collection of such assessment shall be made, begun, or prosecuted during the period in which such assessment may be abated under this paragraph.

(3) Assessments arising out of tentative carryback or refund adjustments

If the Secretary determines that the amount applied, credited, or refunded under section 6411 is in excess of the overassessment attributable to the carryback or the amount described in section 1341(b)(1) with respect to which such amount was applied, credited, or refunded, he may assess without regard to the provisions of paragraph (2) the amount of the excess as a deficiency as if it were due to a mathematical or clerical error appearing on the return.

(4) Assessment of amount paid

Any amount paid as a tax or in respect of a tax may be assessed upon the receipt of such payment notwithstanding the provisions of subsection (a). In any case where such amount is paid after the mailing of a notice of deficiency under section 6212, such payment shall not deprive the Tax Court of jurisdiction over such deficiency determined under section 6211 without regard to such assessment.

(5) Certain orders of criminal restitution

If the taxpayer is notified that an assessment has been or will be made pursuant to section 6201(a)(4)—

(A) such notice shall not be considered as a notice of deficiency for the purposes of subsection (a) (prohibiting assessment and collection until notice of the deficiency has been mailed), section 6212(c)(1) (restricting further deficiency letters), or section 6512(a) (prohibiting credits or refunds after petition to the Tax Court), and

(B) subsection (a) shall not apply with respect to the amount of such assessment.

(c) Failure to file petition

If the taxpayer does not file a petition with the Tax Court within the time prescribed in subsection (a), the deficiency, notice of which has been mailed to the taxpayer, shall be assessed, and shall be paid upon notice and demand from the Secretary.

(d) Waiver of restrictions

The taxpayer shall at any time (whether or not a notice of deficiency has been issued) have the right, by a signed notice in writing filed with the Secretary, to waive the restrictions provided in subsection (a) on the assessment and collection of the whole or any part of the deficiency.

(e) Suspension of filing period for certain excise taxes

The running of the time prescribed by subsection (a) for filing a petition in the Tax Court with respect to the taxes imposed by section 4941 (relating to taxes on self-dealing), 4942 (relating to taxes on failure to distribute income), 4943 (relating to taxes on excess business holdings), 4944 (relating to investments which jeopardize charitable purpose), 4945 (relating to taxes on taxable expenditures), 4951 (relating to taxes on self-dealing), or 4952 (relating to taxes on taxable expenditures), 4955 (relating to taxes on political expenditures), 4958 (relating to private excess benefit), 4971 (relating to excise taxes on failure to meet minimum funding standard), 4975 (relating to excise taxes on prohibited transactions) shall be suspended for any period during which the Secretary has extended the time allowed for making correction under section 4963(e).

(f) Coordination with title 11

(1) Suspension of running of period for filing petition in title 11 cases

In any case under title 11 of the United States Code, the running of the time prescribed by subsection (a) for filing a petition in the Tax Court with respect to any deficiency shall be suspended for the period during which the debtor is prohibited by reason of such case from filing a petition in the Tax Court with respect to such deficiency, and for 60 days thereafter.

(2) Certain action not taken into account

For purposes of the second and third sentences of subsection (a), the filing of a proof of claim or request for payment (or the taking of any other action) in a case under title 11 of the United States Code shall not be treated as action prohibited by such second sentence.

(g) Definitions

For purposes of this section—

(1) Return

The term "return" includes any return, statement, schedule, or list, and any amendment or supplement thereto, filed with respect to any tax imposed by subtitle A or B, or chapter 41, 42, 43, or 44.

(2) Mathematical or clerical error

The term "mathematical or clerical error" means—

(A) an error in addition, subtraction, multiplication, or division shown on any return,

(B) an incorrect use of any table provided by the Internal Revenue Service with respect to any return if such incorrect use is apparent from the existence of other information on the return,

(C) an entry on a return of an item which is inconsistent with another entry of the same or another item on such return,

(D) an omission of information which is required to be supplied on the return to substantiate an entry on the return,

(E) an entry on a return of a deduction or credit in an amount which exceeds a statutory limit imposed by subtitle A or B, or chapter 41, 42, 43, or 44, if such limit is expressed—

(i) as a specified monetary amount, or

(ii) as a percentage, ratio, or fraction,

and if the items entering into the application of such limit appear on such return,

(F) an omission of a correct taxpayer identification number required under section 32 (relating to the earned income credit) to be included on a return,

(G) an entry on a return claiming the credit under section 32 with respect to net earnings from self-employment described in section 32(c)(2)(A) to the extent the tax imposed by section 1401 (relating to self-employment tax) on such net earnings has not been paid,

(H) an omission of a correct TIN required under section 21 (relating to expenses for household and dependent care services necessary for gainful employment) or section 151 (relating to allowance of deductions for personal exemptions),

(I) an omission of a correct TIN required under section 24(e) (relating to child tax credit) to be included on a return,

(J) an omission of a correct TIN required under section 25A(g)(1) (relating to higher education tuition and related expenses) to be included on a return,

(K) an omission of information required by section 32(k)(2) (relating to taxpayers making improper prior claims of earned income credit) or an entry on the return claiming the credit under section 32 for a taxable year for which the credit is disallowed under subsection (k)(1) thereof,

(L) the inclusion on a return of a TIN required to be included on the return under section 21, 24, 32, 6428, or 6428A if—

(i) such TIN is of an individual whose age affects the amount of the credit under such section, and

(ii) the computation of the credit on the return reflects the treatment of such individual as being of an age different from the individual's age based on such TIN,

(M) the entry on the return claiming the credit under section 32 with respect to a child if, according to the Federal Case Registry of Child Support Orders established under section 453(h) of the Social Security Act, the taxpayer is a noncustodial parent of such child,

(N) an omission of any increase required under section 36(f) with respect to the recapture of a credit allowed under section 36,

(O) the inclusion on a return of an individual taxpayer identification number issued under section 6109(i) which has expired, been revoked by the Secretary, or is otherwise invalid,

(P) an omission of information required by section 24(g)(2) or an entry on the return claiming the credit under section 24 for a taxable year for which the credit is disallowed under subsection (g)(1) thereof,

(Q) an omission of information required by section 25A(b)(4)(B) or an entry on the return claiming the American Opportunity Tax Credit for a taxable year for which such credit is disallowed under section 25A(b)(4)(A),

(R) an omission of information or documentation required under section 25C(b)(6)(B) (relating to home energy audits) to be included on a return,

(S) an omission of a correct product identification number required under section 25C(h) (relating to credit for nonbusiness energy property) to be included on a return,

(T) an omission of a correct vehicle identification number required under section 30D(f)(9) (relating to credit for new clean vehicles) to be included on a return,

(U) an omission of a correct vehicle identification number required under section 25E(d) (relating to credit for previously-owned clean vehicles) to be included on a return, and

(V) an omission of a correct vehicle identification number required under section 45W(e) (relating to commercial clean vehicle credit) to be included on a return.

A taxpayer shall be treated as having omitted a correct TIN for purposes of the preceding sentence if information provided by the taxpayer on the return with respect to the individual whose TIN was provided differs from the information the Secretary obtains from the person issuing the TIN.

(h) Cross references

(1) For assessment as if a mathematical error on the return, in the case of erroneous claims for income tax prepayment credits, see section 6201(a)(3).

(2) For assessments without regard to restrictions imposed by this section in the case of—

(A) Recovery of foreign income taxes, see section 905(c).

(B) Recovery of foreign estate tax, see section 2016.

(3) For provisions relating to application of this subchapter in the case of certain partnership items, etc., see section 6230(a).1

(Aug. 16, 1954, ch. 736, 68A Stat. 771; Pub. L. 89–44, title VIII, §809(d)(4)(B), June 21, 1965, 79 Stat. 168; Pub. L. 91–172, title I, §101(f)(3), (j)(42), Dec. 30, 1969, 83 Stat. 524, 530; Pub. L. 93–406, title II, §1016(a)(11), Sept. 2, 1974, 88 Stat. 930; Pub. L. 94–455, title XII, §§1204(c)(6), 1206(a)–(c)(1), title XIII, §1307(d)(2)(F)(iii), title XVI, §1605(b)(6), title XIX, §§1906(a)(15), (b)(13)(A), Oct. 4, 1976, 90 Stat. 1698, 1703, 1704, 1728, 1755, 1825, 1834; Pub. L. 95–227, §4(d)(1), (2), Feb. 10, 1978, 92 Stat. 23; Pub. L. 95–600, title V, §504(b)(2), Nov. 6, 1978, 92 Stat. 2881; Pub. L. 96–223, title I, §101(f)(1)(D), (E), Apr. 2, 1980, 94 Stat. 252; Pub. L. 96–589, §6(b)(1), Dec. 24, 1980, 94 Stat. 3407; Pub. L. 96–596, §2(a)(4)(C), Dec. 24, 1980, 94 Stat. 3472; Pub. L. 97–248, title IV, §402(c)(2), Sept. 3, 1982, 96 Stat. 667; Pub. L. 98–369, title III, §305(b)(4), title IV, §474(r)(34), July 18, 1984, 98 Stat. 784, 845; Pub. L. 99–514, title XVIII, §1875(d)(2)(B)(i), Oct. 22, 1986, 100 Stat. 2896; Pub. L. 100–203, title X, §§10712(c)(1), 10713(b)(2)(D), Dec. 22, 1987, 101 Stat. 1330–467, 1330–470; Pub. L. 100–418, title I, §1941(b)(2)(B)(iv), (v), Aug. 23, 1988, 102 Stat. 1323; Pub. L. 100–647, title I, §1015(r)(3), title VI, §6243(a), Nov. 10, 1988, 102 Stat. 3573, 3749; Pub. L. 101–239, title VII, §7811(k)(1), Dec. 19, 1989, 103 Stat. 2412; Pub. L. 104–168, title XIII, §1311(c)(3), July 30, 1996, 110 Stat. 1478; Pub. L. 104–188, title I, §1615(c), Aug. 20, 1996, 110 Stat. 1853; Pub. L. 104–193, title IV, §451(c), Aug. 22, 1996, 110 Stat. 2277; Pub. L. 105–34, title I, §101(d)(2), title II, §201(b), title X, §1085(a)(3), Aug. 5, 1997, 111 Stat. 799, 803, 956; Pub. L. 105–206, title III, §§3463(b), 3464(a), title VI, §6010(p)(3), July 22, 1998, 112 Stat. 767, 817; Pub. L. 105–277, div. J, title III, §3003(a), (b), Oct. 21, 1998, 112 Stat. 2681–905; Pub. L. 107–16, title III, §303(g), June 7, 2001, 115 Stat. 56; Pub. L. 110–185, title I, §101(b)(2), Feb. 13, 2008, 122 Stat. 616; Pub. L. 111–5, div. B, title I, §1001(d), Feb. 17, 2009, 123 Stat. 312; Pub. L. 111–92, §§11(h), 12(d), Nov. 6, 2009, 123 Stat. 2991, 2992; Pub. L. 111–237, §3(b)(1), Aug. 16, 2010, 124 Stat. 2498; Pub. L. 113–295, div. A, title II, §§214(a), 221(a)(4), (5)(C), (112)(C), Dec. 19, 2014, 128 Stat. 4034, 4037, 4038, 4054; Pub. L. 114–113, div. Q, title II, §§203(e), 208(b), Dec. 18, 2015, 129 Stat. 3080, 3084; Pub. L. 115–141, div. U, title I, §101(l)(18), title IV, §401(a)(277), (278), Mar. 23, 2018, 132 Stat. 1165, 1197; Pub. L. 116–136, div. A, title II, §2201(b)(2), Mar. 27, 2020, 134 Stat. 337; Pub. L. 116–260, div. N, title II, §272(b)(2), Dec. 27, 2020, 134 Stat. 1971; Pub. L. 117–169, title I, §§13301(f)(4), (g)(2), 13401(i)(4), 13402(c), 13403(b)(2), Aug. 16, 2022, 136 Stat. 1945, 1946, 1961, 1964, 1966.)

Editorial Notes

References in Text

Section 453(h) of the Social Security Act, referred to in subsec. (g)(2)(M), is classified to section 653(h) of Title 42, The Public Health and Welfare.

Section 6230, referred to in subsec. (h)(3), was repealed by Pub. L. 114–74, title XI, §1101(a), Nov. 2, 2015, 129 Stat. 625.

Codification

Pub. L. 113–295, div. A, title II, §214(a)(2), Dec. 19, 2014, 128 Stat. 4034, which directed that subsec. (g)(2) of this section be amended by striking "and" at the end of subpar. (O), by striking the period at the end of subpar. (P) and inserting ", and", and by inserting after subpar. (P) a new subpar. (Q), effective as if included in the provisions of Pub. L. 110–185 to which the amendments relate, could not literally be executed insofar as it directed the amendments to subpars. (O) and (P) because subsec. (g)(2), at the time of enactment of Pub. L. 110–185, did not contain subpars. (N) to (P). However, the amendment was considered to be executed by making the conforming amendments to subpars. (O) and (P) as added by sections 11(h) and 12(d) of Pub. L. 111–92, to reflect the probable intent of Congress and to allow for additional amendments by Pub. L. 113–295, which presume that such conforming amendments had taken place. See 2014 Amendment notes below.

Amendments

2022—Subsec. (g)(2)(R). Pub. L. 117–169, §13301(f)(4), added subpar. (R).

Subsec. (g)(2)(S). Pub. L. 117–169, §13301(g)(2), added subpar. (S).

Subsec. (g)(2)(T). Pub. L. 117–169, §13401(i)(4), added subpar. (T).

Subsec. (g)(2)(U). Pub. L. 117–169, §13402(c), added subpar. (U).

Subsec. (g)(2)(V). Pub. L. 117–169, §13403(b)(2), added subpar. (V).

2020—Subsec. (g)(2)(L). Pub. L. 116–260 substituted "6428, or 6428A" for "or 6428" in introductory provisions.

Pub. L. 116–136 substituted "32, or 6428" for "or 32" in introductory provisions.

2018—Subsec. (g)(2)(O). Pub. L. 115–141, §401(a)(277), inserted comma at end.

Subsec. (g)(2)(P). Pub. L. 115–141, §401(a)(278), substituted "section 24(g)(2)" for "section 24(h)(2)" and "subsection (g)(1)" for "subsection (h)(1)".

Subsec. (g)(2)(Q). Pub. L. 115–141, §101(l)(18), amended subpar. (Q) generally. Prior to amendment, subpar. (Q) read as follows: "an omission of information required by section 25A(i)(8)(B) or an entry on the return claiming the credit determined under section 25A(i) for a taxable year for which the credit is disallowed under paragraph (8)(A) thereof."

2015—Subsec. (g)(2)(K). Pub. L. 114–113, §208(b)(1), inserted "or an entry on the return claiming the credit under section 32 for a taxable year for which the credit is disallowed under subsection (k)(1) thereof" before comma at end.

Subsec. (g)(2)(O). Pub. L. 114–113, §203(e), added subpar. (O).

Subsec. (g)(2)(P), (Q). Pub. L. 114–113, §208(b)(2), added subpars. (P) and (Q).

2014—Subsec. (g)(2)(L). Pub. L. 113–295, §214(a)(1), substituted "or 32" for "32, or 6428" in introductory provisions.

Subsec. (g)(2)(M). Pub. L. 113–295, §221(a)(112)(C), inserted "and" at end.

Subsec. (g)(2)(N). Pub. L. 113–295, §221(a)(112)(C), redesignated subpar. (O) as (N) and substituted period for comma at end.

Pub. L. 113–295, §221(a)(5)(C), struck out subpar. (N) which read as follows: "an omission of the reduction required under section 36A(c) with respect to the credit allowed under section 36A or an omission of the correct social security account number required under section 36A(d)(1)(B),".

Subsec. (g)(2)(O). Pub. L. 113–295, §214(a)(2), struck out "and" at end. See Codification note above.

Subsec. (g)(2)(P). Pub. L. 113–295, §221(a)(4), struck out subpar. (P) which read as follows: "an entry on a return claiming the credit under section 36 if—

"(i) the Secretary obtains information from the person issuing the TIN of the taxpayer that indicates that the taxpayer does not meet the age requirement of section 36(b)(4),

"(ii) information provided to the Secretary by the taxpayer on an income tax return for at least one of the 2 preceding taxable years is inconsistent with eligibility for such credit, or

"(iii) the taxpayer fails to attach to the return the form described in section 36(d)(4), and".

Pub. L. 113–295, §214(a)(2), substituted ", and" for period at end. See Codification note above.

Subsec. (g)(2)(Q). Pub. L. 113–295, §221(a)(112)(C), struck out subpar. (Q) which read as follows: "an omission of a correct valid identification number required under section 6428(h) (relating to 2008 recovery rebates for individuals) to be included on a return."

Pub. L. 113–295, §214(a)(2), added subpar. (Q). See Codification note above.

2010—Subsec. (b)(5). Pub. L. 111–237 added par. (5).

2009—Subsec. (g)(2)(N). Pub. L. 111–5 added subpar. (N).

Subsec. (g)(2)(O). Pub. L. 111–92, §11(h), added subpar. (O).

Subsec. (g)(2)(P). Pub. L. 111–92, §12(d), added subpar. (P).

2008—Subsec. (g)(2)(L). Pub. L. 110–185 substituted "32, or 6428" for "or 32" in introductory provisions.

2001—Subsec. (g)(2)(M). Pub. L. 107–16 added subpar. (M).

1998—Subsec. (a). Pub. L. 105–206, §3464(a), substituted ", including the Tax Court, and a refund may be ordered by such court of any amount collected within the period during which the Secretary is prohibited from collecting by levy or through a proceeding in court under the provisions of this subsection." for ", including the Tax Court." and "to enjoin any action or proceeding or order any refund" for "to enjoin any action or proceeding".

Pub. L. 105–206, §3463(b), inserted at end "Any petition filed with the Tax Court on or before the last date specified for filing such petition by the Secretary in the notice of deficiency shall be treated as timely filed."

Subsec. (g)(2). Pub. L. 105–277, §3003(a), inserted concluding provisions.

Subsec. (g)(2)(K). Pub. L. 105–206, §6010(p)(3), amended Pub. L. 105–34, §1085(a)(3). See 1997 Amendment note below.

Subsec. (g)(2)(L). Pub. L. 105–277, §3003(b), added subpar. (L).

1997—Subsec. (g)(2)(I). Pub. L. 105–34, §101(d)(2), added subpar. (I).

Subsec. (g)(2)(J). Pub. L. 105–34, §201(b), added subpar. (J).

Subsec. (g)(2)(K). Pub. L. 105–34, §1085(a)(3), as amended by Pub. L. 105–206, §6010(p)(3), added subpar. (K).

1996—Subsec. (e). Pub. L. 104–168 inserted "4958 (relating to private excess benefit)," before "4971".

Subsec. (g)(2)(F), (G). Pub. L. 104–193 added subpars. (F) and (G).

Subsec. (g)(2)(H). Pub. L. 104–188 added subpar. (H).

1989—Subsec. (h)(3), (4). Pub. L. 101–239 made technical correction to directory language of Pub. L. 100–647, §1015(r)(3), see 1988 Amendment note below.

1988—Subsec. (a). Pub. L. 100–647, §6243(a), substituted for period at end ", including the Tax Court. The Tax Court shall have no jurisdiction to enjoin any action or proceeding under this subsection unless a timely petition for a redetermination of the deficiency has been filed and then only in respect of the deficiency that is the subject of such petition."

Pub. L. 100–418, §1941(b)(2)(B)(iv), substituted "or 44" for "44, or 45".

Subsec. (g)(1), (2)(E). Pub. L. 100–418, §1941(b)(2)(B)(v), substituted "or 44" for "44, or 45".

Subsec. (h)(3), (4). Pub. L. 100–647, §1015(r)(3), as amended by Pub. L. 101–239, redesignated par. (4) as (3) and struck out former par. (3) which read as follows: "For assessment as if a mathematical error on the return, in the case of erroneous claims for credits under section 32 or 34, see section 6201(a)(4)."

1987—Subsec. (a). Pub. L. 100–203, §10713(b)(2)(D), inserted reference to section 6852.

Subsec. (e). Pub. L. 100–203, §10712(c)(1), inserted "4955 (relating to taxes on political expenditures),".

1986—Subsec. (h)(4). Pub. L. 99–514 amended par. (4) generally. Prior to amendment, par. (4) read as follows: "For provision that this subchapter shall not apply in the case of computational adjustments attributable to partnership items, see section 6230(a)."

1984—Subsec. (e). Pub. L. 98–369, §305(b)(4), substituted "section 4963(e)" for "section 4962(e)".

Subsec. (h)(3). Pub. L. 98–369, §474(r)(34), substituted "section 32 or 34" for "section 39".

1982—Subsec. (h)(4). Pub. L. 97–248 added par. (4).

1980—Subsec. (a). Pub. L. 96–223, §101(f)(1)(D), inserted reference to chapter 45.

Subsec. (e). Pub. L. 96–596 substituted "section 4962(e)" for "section 4941(e)(4), 4942(j)(2), 4943(d)(3), 4944(e)(3), 4945(i)(2), 4951(e)(4), 4952(e)(2), 4971(c)(3), or 4975(f)(6)".

Subsec. (f). Pub. L. 96–589 added subsec. (f). Former subsec. (f) redesignated (g).

Subsec. (f)(1), (2)(E). Pub. L. 96–223, §101(f)(1)(E), inserted reference to chapter 45.

Subsecs. (g), (h). Pub. L. 96–589 redesignated former subsecs. (f) and (g) as (g) and (h), respectively.

1978—Subsec. (b)(3). Pub. L. 95–600 inserted "or refund" after "carryback" in heading, and "or the amount described in section 1341(b)(1)" after "carryback" in text.

Subsec. (e). Pub. L. 95–227, §4(d)(1), inserted provisions relating to sections 4951 and 4952 of this title, and substituted "4975(f)(6)" for "4975(f)(4)".

Subsec. (f). Pub. L. 95–227, §4(d)(2), inserted references to chapters 41 and 44.

1976—Subsec. (a). Pub. L. 94–455, §§1204(c)(6), 1307(d)(2)(F)(iii), 1605(b)(6), 1906(a)(15), inserted "section 6851 or" before "section 6861" and references to chapter 41 and chapter 44 and substituted "United States" for "States of the Union and the District of Columbia".

Subsec. (b)(1). Pub. L. 94–455, §1206(a)(2), substituted in heading "Assessments arising out of mathematical or clerical errors" for "Mathematical errors" and in text inserted "or clerical" after "mathematical" in two places and inserted provision that each notice under this paragraph shall set forth the error alleged and an explanation thereof.

Subsec. (b)(2). Pub. L. 94–455, §1206(a)(2), added par. (2). Former par. (2) redesignated (3).

Subsec. (b)(3). Pub. L. 94–455, §§1206(a)(1), (c)(1), 1906(b)(13)(A), redesignated former par. (2) as (3), and as so redesignated, struck out "or his delegate" after "Secretary" and inserted "without regard to the provisions of paragraph (2)" after "he may assess" and "or clerical" after "mathematical". Former par. (3) redesignated (4).

Subsec. (b)(4). Pub. L. 94–455, §1206(a)(1), redesignated former par. (3) as (4).

Subsecs. (c) to (e). Pub. L. 94–455, §1906(b)(13)(A), struck out "or his delegate" after "Secretary".

Subsecs. (f), (g). Pub. L. 94–455, §1206(b), added subsec. (f) and redesignated former subsec. (f) as (g).

1974—Subsec. (a). Pub. L. 93–406, §1016(a)(11)(A), inserted reference to tax imposed by chapter 43.

Subsec. (e). Pub. L. 93–406, §1016(a)(11)(B)–(D), substituted "excise taxes" for "chapter 42 taxes" in heading, and in text substituted "4945 (relating to taxes on taxable expenditures), 4971 (relating to excise taxes on failure to meet minimum funding standard), 4975 (relating to excise tax on prohibited transactions)" for "or 4945 (relating to taxes on taxable expenditures)" and ", 4945(i)(2), 4971(c)(3), or 4975(f)(4)" for "or 4945(h)(2)".

1969—Subsec. (a). Pub. L. 91–172, §101(j)(42), inserted reference to chapter 42.

Subsecs. (e), (f). Pub. L. 91–172, §101(f)(3), added subsec. (e) and redesignated former subsec. (e) as (f).

1965—Subsec. (e)(3). Pub. L. 89–44 added par. (3).

Statutory Notes and Related Subsidiaries

Effective Date of 2022 Amendment

Amendment by section 13301(f)(4) of Pub. L. 117–169 applicable to property placed in service after Dec. 31, 2022, see section 13301(i)(1) of Pub. L. 117–169, set out in a note under section 25C of this title.

Amendment by section 13301(g)(2) of Pub. L. 117–169 applicable to property placed in service after Dec. 31, 2024, see section 13301(i)(3) of Pub. L. 117–169, set out in a note under section 25C of this title.

Amendment by section 13401(i)(4) of Pub. L. 117–169 applicable to vehicles placed in service after Dec. 31, 2022, see section 13401(k)(1) of Pub. L. 117–169, set out in an Effective Date of 2022 Amendment; Transition Rule note under section 30D of this title.

Amendment by section 13402(c) of Pub. L. 117–169 applicable to vehicles acquired after Dec. 31, 2022, see section 13402(e)(1) of Pub. L. 117–169, set out in an Effective Date note under section 25E of this title.

Amendment by section 13403(b)(2) of Pub. L. 117–169 applicable to vehicles acquired after Dec. 31, 2022, see section 13403(c) of Pub. L. 117–169, set out as an Effective Date note under section 45W of this title.

Effective Date of 2018 Amendment

Amendment by section 101(l)(18) of Pub. L. 115–141 effective as if included in the provision of the Protecting Americans from Tax Hikes Act of 2015, div. Q of Pub. L. 114–113, to which such amendment relates, see section 101(s) of Pub. L. 115–141, set out as a note under section 24 of this title.

Effective Date of 2015 Amendment

Amendment by section 203(e) of Pub. L. 114–113 applicable to applications for individual taxpayer identification numbers made after Dec. 18, 2015, except to the extent provided in section 6109(i)(3) of this title, see section 203(f) of Pub. L. 114–113, set out as a note under section 6109 of this title.

Amendment by section 208(b) of Pub. L. 114–113 applicable to taxable years beginning after Dec. 31, 2015, see section 208(c) of Pub. L. 114–113, set out as a note under section 24 of this title.

Effective Date of 2014 Amendment

Amendment by section 214(a) of Pub. L. 113–295 effective as if included in the provisions of the Economic Stimulus Act of 2008, Pub. L. 110–185, to which such amendment relates, see section 214(c) of Pub. L. 113–295, set out as a note under section 168 of this title.

Amendment by section 221(a)(4), (5)(C), 112(C) of Pub. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title.

Effective Date of 2010 Amendment

Amendment by Pub. L. 111–237 applicable to restitution ordered after Aug. 16, 2010, see section 3(c) of Pub. L. 111–237, set out as a note under section 6201 of this title.

Effective Date of 2009 Amendment

Pub. L. 111–92, §11(j)(4), Nov. 6, 2009, 123 Stat. 2991, provided that: "The amendments made by subsection (h) [amending this section] shall apply to returns for taxable years ending on or after April 9, 2008."

Amendment by section 12(d) of Pub. L. 111–92 applicable to returns for taxable years ending on or after Apr. 9, 2008, see section 12(e) of Pub. L. 111–92, set out as a note under section 36 of this title.

Amendment by Pub. L. 111–5 applicable to taxable years beginning after Dec. 31, 2008, see section 1001(f) of Pub. L. 111–5, set out as a note under section 6211 of this title.

Effective Date of 2001 Amendment

Amendment by Pub. L. 107–16 effective Jan. 1, 2004, see section 303(i) of Pub. L. 107–16, set out as a note under section 32 of this title.

Effective Date of 1998 Amendments

Pub. L. 105–277, div. J, title III, §3003(c), Oct. 21, 1998, 112 Stat. 2681–905, provided that: "The amendments made by this section [amending this section] shall apply to taxable years ending after the date of the enactment of this Act [Oct. 21, 1998]."

Pub. L. 105–206, title III, §3463(c), July 22, 1998, 112 Stat. 767, provided that: "Subsection (a) and the amendment made by subsection (b) [amending this section and enacting provisions set out as a note under section 6212 of this title] shall apply to notices mailed after December 31, 1998."

Pub. L. 105–206, title III, §3464(d), July 22, 1998, 112 Stat. 767, provided that: "The amendments made by this section [amending this section and section 6512 of this title] shall take effect on the date of the enactment of this Act [July 22, 1998]."

Amendment by section 6010(p)(3) of Pub. L. 105–206 effective, except as otherwise provided, as if included in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates, see section 6024 of Pub. L. 105–206, set out as a note under section 1 of this title.

Effective Date of 1997 Amendment

Amendment by section 101(d)(2) of Pub. L. 105–34 applicable to taxable years beginning after Dec. 31, 1997, see section 101(e) of Pub. L. 105–34, set out as an Effective Date note under section 24 of this title.

Amendment by section 201(b) of Pub. L. 105–34 applicable to expenses paid after Dec. 31, 1997 (in taxable years ending after such date), for education furnished in academic periods beginning after such date, see section 201(f) of Pub. L. 105–34, set out as an Effective Date note under section 25A of this title.

Amendment by section 1085(a)(3) of Pub. L. 105–34 applicable to taxable years beginning after Dec. 31, 1996, see section 1085(e)(1) of Pub. L. 105–34, set out as a note under section 32 of this title.

Effective Date of 1996 Amendments

Amendment by Pub. L. 104–193 applicable with respect to returns the due date for which (without regard to extensions) is more than 30 days after Aug. 22, 1996, see section 451(d) of Pub. L. 104–193, set out as a note under section 32 of this title.

Amendment by Pub. L. 104–188 applicable with respect to returns the due date for which, without regard to extensions, is on or after the 30th day after Aug. 20, 1996, with special rule for 1995 and 1996, see section 1615(d) of Pub. L. 104–188, set out as a note under section 21 of this title.

Amendment by Pub. L. 104–168 applicable to excess benefit transactions occurring on or after Sept. 14, 1995, and not applicable to any benefit arising from a transaction pursuant to any written contract which was binding on Sept. 13, 1995, and at all times thereafter before such transaction occurred, see section 1311(d)(1), (2) of Pub. L. 104–168, set out as a note under section 4955 of this title.

Effective Date of 1989 Amendment

Amendment by Pub. L. 101–239 effective, except as otherwise provided, as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100–647, to which such amendment relates, see section 7817 of Pub. L. 101–239, set out as a note under section 1 of this title.

Effective Date of 1988 Amendments

Amendment by section 1015(r)(3) of Pub. L. 100–647 applicable to notices of deficiencies mailed after Nov. 10, 1988, see section 1015(r)(4) of Pub. L. 100–647, set out as a note under section 6201 of this title.

Pub. L. 100–647, title VI, §6243(c), Nov. 10, 1988, 102 Stat. 3750, provided that: "The amendments made by this section [amending this section and section 7482 of this title] shall apply to orders entered after the date of the enactment of this Act [Nov. 10, 1988]."

Amendment by Pub. L. 100–418 applicable to crude oil removed from premises on or after Aug. 23, 1988, see section 1941(c) of Pub. L. 100–418, set out as a note under section 164 of this title.

Effective Date of 1987 Amendment

Amendment by section 10712(c)(1) of Pub. L. 100–203 applicable to taxable years beginning after Dec. 22, 1987, see section 10712(d) of Pub. L. 100–203, set out as an Effective Date note under section 4955 of this title.

Effective Date of 1986 Amendment

Pub. L. 99–514, title XVIII, §1875(d)(2)(C), Oct. 22, 1986, 100 Stat. 2896, provided that: "The amendments made by this paragraph [amending this section and sections 6230 and 6503 of this title] shall take effect as if included in the Tax Equity and Fiscal Responsibility Act of 1982 [Pub. L. 97–248]."

Effective Date of 1984 Amendment

Amendment by section 305(b)(4) of Pub. L. 98–369 applicable to taxable events occurring after Dec. 31, 1984, see section 305(c) of Pub. L. 98–369, set out as an Effective Date note under section 4962 of this title.

Amendment by section 474(r)(34) of Pub. L. 98–369 applicable to taxable years beginning after Dec. 31, 1983, and to carrybacks from such years, see section 475(a) of Pub. L. 98–369, set out as a note under section 21 of this title.

Effective Date of 1982 Amendment

Amendment by Pub. L. 97–248 applicable to partnership taxable years beginning after Sept. 3, 1982, with provision for the applicability of the amendment to any partnership taxable year ending after Sept. 3, 1982, if the partnership, each partner, and each indirect partner requests such application and the Secretary of the Treasury or his delegate consents to such application, see section 407(a)(1), (3) of Pub. L. 97–248, set out as a note under section 702 of this title.

Effective Date of 1980 Amendments

For effective date of amendment by Pub. L. 96–596 with respect to any first tier tax and to any second tier tax, see section 2(d) of Pub. L. 96–596, set out as an Effective Date note under section 4961 of this title.

Amendment by Pub. L. 96–589 effective Oct. 1, 1979, but not applicable to proceedings under Title 11, Bankruptcy, commenced before Oct. 1, 1979, see section 7(e) of Pub. L. 96–589, set out as a note under section 108 of this title.

Amendment by Pub. L. 96–223 applicable to periods after Feb. 29, 1980, see section 101(i) of Pub. L. 96–223, set out as a note under section 6161 of this title.

Effective Date of 1978 Amendments

Amendment by Pub. L. 95–600 applicable to tentative refund claims filed on and after Nov. 6, 1978, see section 504(c) of Pub. L. 95–600, set out as a note under section 6411 of this title.

Amendment by Pub. L. 95–227 applicable with respect to contributions, acts, and expenditures made after Dec. 31, 1977, in and for taxable years beginning after such date, see section 4(f) of Pub. L. 95–227, set out as an Effective Date note under section 192 of this title.

Effective Date of 1976 Amendment

Amendment by section 1204(c)(6) of Pub. L. 94–455 applicable with respect to action taken under section 6851, 6861, or 6862 of this title where the notice and demand takes place after Feb. 28, 1977, see section 1204(d) of Pub. L. 94–455, as amended, set out as a note under section 6851 of this title.

Pub. L. 94–455, title XII, §1206(d), Oct. 4, 1976, 90 Stat. 1704, as amended by Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The amendments made by this section [amending this section and sections 6201 and 6212 of this title] shall apply with respect to returns (within the meaning of section 6213(f)(1) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) filed after December 31, 1976."

Amendment by section 1307(d)(2)(F)(iii) of Pub. L. 94–455 effective on and after Oct. 4, 1976, see section 1307(e)(6) of Pub. L. 94–455, set out as a note under section 501 of this title.

For effective date of amendment by section 1605(b)(6) of Pub. L. 94–455, see section 1608(d) of Pub. L. 94–455, set out as a note under section 856 of this title.

Amendment by section 1906(a)(15), (b)(13)(A) of Pub. L. 94–455 effective on first day of first month which begins more than 90 days after Oct. 4, 1976, see section 1906(d)(1) of Pub. L. 94–455, set out as a note under section 6013 of this title.

Effective Date of 1974 Amendment

Amendment by Pub. L. 93–406 applicable, except as otherwise provided in section 1017(c) through (i) of Pub. L. 93–406, for plan years beginning after Sept. 2, 1974, but, in the case of plans in existence on Jan. 1, 1974, amendment by Pub. L. 93–406 applicable for plan years beginning after Dec. 31, 1975, see section 1017 of Pub. L. 93–406, set out as an Effective Date; Transitional Rules note under section 410 of this title.

Effective Date of 1969 Amendment

Amendment by Pub. L. 91–172 effective Jan. 1, 1970, see section 101(k)(1) of Pub. L. 91–172, set out as an Effective Date note under section 4940 of this title.

Effective Date of 1965 Amendment

Amendment by Pub. L. 89–44 applicable to taxable years beginning on or after July 1, 1965, see section 809(f) of Pub. L. 89–44, set out as a note under section 6420 of this title.

Plan Amendments Not Required Until January 1, 1989

For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title.

1 See References in Text note below.
26 U.S.C. § 1035 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 1035: Certain exchanges of insurance policies
Certain exchanges of insurance policies
Status: in_force

(a) General rules

No gain or loss shall be recognized on the exchange of—

(1) a contract of life insurance for another contract of life insurance or for an endowment or annuity contract or for a qualified long-term care insurance contract;

(2) a contract of endowment insurance (A) for another contract of endowment insurance which provides for regular payments beginning at a date not later than the date payments would have begun under the contract exchanged, or (B) for an annuity contract, or (C) for a qualified long-term care insurance contract;

(3) an annuity contract for an annuity contract or for a qualified long-term care insurance contract; or

(4) a qualified long-term care insurance contract for a qualified long-term care insurance contract.

(b) Definitions

For the purpose of this section—

(1) Endowment contract

A contract of endowment insurance is a contract with an insurance company which depends in part on the life expectancy of the insured, but which may be payable in full in a single payment during his life.

(2) Annuity contract

An annuity contract is a contract to which paragraph (1) applies but which may be payable during the life of the annuitant only in installments. For purposes of the preceding sentence, a contract shall not fail to be treated as an annuity contract solely because a qualified long-term care insurance contract is a part of or a rider on such contract.

(3) Life insurance contract

A contract of life insurance is a contract to which paragraph (1) applies but which is not ordinarily payable in full during the life of the insured. For purposes of the preceding sentence, a contract shall not fail to be treated as a life insurance contract solely because a qualified long-term care insurance contract is a part of or a rider on such contract.

(c) Exchanges involving foreign persons

To the extent provided in regulations, subsection (a) shall not apply to any exchange having the effect of transferring property to any person other than a United States person.

(d) Cross references

(1) For rules relating to recognition of gain or loss where an exchange is not solely in kind, see subsections (b) and (c) of section 1031.

(2) For rules relating to the basis of property acquired in an exchange described in subsection (a), see subsection (d) of section 1031.

(Aug. 16, 1954, ch. 736, 68A Stat. 309; Pub. L. 98–369, div. A, title II, §§211(b)(15), 224(a), July 18, 1984, 98 Stat. 756, 776; Pub. L. 99–514, title XVIII, §1828, Oct. 22, 1986, 100 Stat. 2851; Pub. L. 105–34, title XI, §1131(b)(1), Aug. 5, 1997, 111 Stat. 979; Pub. L. 109–280, title VIII, §844(b), Aug. 17, 2006, 120 Stat. 1010; Pub. L. 115–141, div. U, title IV, §401(a)(168), Mar. 23, 2018, 132 Stat. 1192.)

Editorial Notes

Codification

Another section 1131(b) of Pub. L. 105–34 enacted section 684 of this title.

Amendments

2018—Subsec. (a)(1). Pub. L. 115–141 struck out "or" after semicolon at end.

2006—Subsec. (a)(1). Pub. L. 109–280, §844(b)(3)(A), which directed amendment by inserting "or for a qualified long-term care insurance contract" before semicolon "at the end", was executed by making the insertion before "; or" to reflect the probable intent of Congress.

Subsec. (a)(2). Pub. L. 109–280, §844(b)(3)(B), which directed amendment by inserting ", or (C) for a qualified long-term care insurance contract" before semicolon "at the end", was executed by making the insertion before "; or" to reflect the probable intent of Congress.

Subsec. (a)(3). Pub. L. 109–280, §844(b)(3)(C), inserted "or for a qualified long-term care insurance contract" after "annuity contract".

Subsec. (a)(4). Pub. L. 109–280, §844(b)(4), added par. (4).

Subsec. (b)(2). Pub. L. 109–280, §844(b)(1), inserted at end "For purposes of the preceding sentence, a contract shall not fail to be treated as an annuity contract solely because a qualified long-term care insurance contract is a part of or a rider on such contract."

Subsec. (b)(3). Pub. L. 109–280, §844(b)(2), inserted at end "For purposes of the preceding sentence, a contract shall not fail to be treated as a life insurance contract solely because a qualified long-term care insurance contract is a part of or a rider on such contract."

1997—Subsecs. (c), (d). Pub. L. 105–34 added subsec. (c) and redesignated former subsec. (c) as (d).

1986—Subsec. (b)(1). Pub. L. 99–514 struck out "subject to tax under subchapter L" after "with an insurance company".

1984—Subsec. (b)(1). Pub. L. 98–369, §224(a), which directed the substitution of "an insurance company subject to tax under subchapter L" for "a life insurance company as defined in section 801", was executed by making such substitution for "a life insurance company as defined in section 816" to reflect the probable intent of Congress and the earlier amendment by Pub. L. 98–369, §211(b)(15), which substituted "as defined in section 816" for "as defined in section 801".

Pub. L. 98–369, §211(b)(15), substituted "section 816" for "section 801".

Statutory Notes and Related Subsidiaries

Effective Date of 2006 Amendment

Amendment by Pub. L. 109–280 applicable to contracts issued after Dec. 31, 1996, but only with respect to taxable years beginning after Dec. 31, 2009, and to exchanges occurring after Dec. 31, 2009, see section 844(g)(1), (2) of Pub. L. 109–280, set out as a note under section 72 of this title.

Effective Date of 1986 Amendment

Amendment by Pub. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title.

Effective Date of 1984 Amendment

Amendment by section 211(b)(5) of Pub. L. 98–369 applicable to taxable years beginning after Dec. 31, 1983, see section 215 of Pub. L. 98–369, set out as an Effective Date note under section 801 of this title.

Pub. L. 98–369, div. A, title II, §224(b), July 18, 1984, 98 Stat. 776, provided that: "The amendment made by subsection (a) [amending this section] shall apply to all exchanges whether before, on, or after the date of the enactment of this Act [July 18, 1984]."

Plan Amendments Not Required Until January 1, 1989

For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title.
26 U.S.C. § 355 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Subchapter C / Section 355: Distribution of stock and securities of a controlled corporation
Distribution of stock and securities of a controlled corporation
Status: in_force

(a) Effect on distributees

(1) General rule

If—

(A) a corporation (referred to in this section as the "distributing corporation")—

(i) distributes to a shareholder, with respect to its stock, or

(ii) distributes to a security holder, in exchange for its securities,

solely stock or securities of a corporation (referred to in this section as "controlled corporation") which it controls immediately before the distribution,

(B) the transaction was not used principally as a device for the distribution of the earnings and profits of the distributing corporation or the controlled corporation or both (but the mere fact that subsequent to the distribution stock or securities in one or more of such corporations are sold or exchanged by all or some of the distributees (other than pursuant to an arrangement negotiated or agreed upon prior to such distribution) shall not be construed to mean that the transaction was used principally as such a device),

(C) the requirements of subsection (b) (relating to active businesses) are satisfied, and

(D) as part of the distribution, the distributing corporation distributes—

(i) all of the stock and securities in the controlled corporation held by it immediately before the distribution, or

(ii) an amount of stock in the controlled corporation constituting control within the meaning of section 368(c), and it is established to the satisfaction of the Secretary that the retention by the distributing corporation of stock (or stock and securities) in the controlled corporation was not in pursuance of a plan having as one of its principal purposes the avoidance of Federal income tax,

then no gain or loss shall be recognized to (and no amount shall be includible in the income of) such shareholder or security holder on the receipt of such stock or securities.

(2) Non pro rata distributions, etc.

Paragraph (1) shall be applied without regard to the following:

(A) whether or not the distribution is pro rata with respect to all of the shareholders of the distributing corporation,

(B) whether or not the shareholder surrenders stock in the distributing corporation, and

(C) whether or not the distribution is in pursuance of a plan of reorganization (within the meaning of section 368(a)(1)(D)).

(3) Limitations

(A) Excess principal amount

Paragraph (1) shall not apply if—

(i) the principal amount of the securities in the controlled corporation which are received exceeds the principal amount of the securities which are surrendered in connection with such distribution, or

(ii) securities in the controlled corporation are received and no securities are surrendered in connection with such distribution.

(B) Stock acquired in taxable transactions within 5 years treated as boot

For purposes of this section (other than paragraph (1)(D) of this subsection) and so much of section 356 as relates to this section, stock of a controlled corporation acquired by the distributing corporation by reason of any transaction—

(i) which occurs within 5 years of the distribution of such stock, and

(ii) in which gain or loss was recognized in whole or in part,

shall not be treated as stock of such controlled corporation, but as other property.

(C) Property attributable to accrued interest

Neither paragraph (1) nor so much of section 356 as relates to paragraph (1) shall apply to the extent that any stock (including nonqualified preferred stock, as defined in section 351(g)(2)), securities, or other property received is attributable to interest which has accrued on securities on or after the beginning of the holder's holding period.

(D) Nonqualified preferred stock

Nonqualified preferred stock (as defined in section 351(g)(2)) received in a distribution with respect to stock other than nonqualified preferred stock (as so defined) shall not be treated as stock or securities.

(4) Cross references

(A) For treatment of the exchange if any property is received which is not permitted to be received under this subsection (including nonqualified preferred stock and an excess principal amount of securities received over securities surrendered, but not including property to which paragraph (3)(C) applies), see section 356.

(B) For treatment of accrued interest in the case of an exchange described in paragraph (3)(C), see section 61.

(b) Requirements as to active business

(1) In general

Subsection (a) shall apply only if either—

(A) the distributing corporation, and the controlled corporation (or, if stock of more than one controlled corporation is distributed, each of such corporations), is engaged immediately after the distribution in the active conduct of a trade or business, or

(B) immediately before the distribution, the distributing corporation had no assets other than stock or securities in the controlled corporations and each of the controlled corporations is engaged immediately after the distribution in the active conduct of a trade or business.

(2) Definition

For purposes of paragraph (1), a corporation shall be treated as engaged in the active conduct of a trade or business if and only if—

(A) it is engaged in the active conduct of a trade or business,

(B) such trade or business has been actively conducted throughout the 5-year period ending on the date of the distribution,

(C) such trade or business was not acquired within the period described in subparagraph (B) in a transaction in which gain or loss was recognized in whole or in part, and

(D) control of a corporation which (at the time of acquisition of control) was conducting such trade or business—

(i) was not acquired by any distributee corporation directly (or through 1 or more corporations, whether through the distributing corporation or otherwise) within the period described in subparagraph (B) and was not acquired by the distributing corporation directly (or through 1 or more corporations) within such period, or

(ii) was so acquired by any such corporation within such period, but, in each case in which such control was so acquired, it was so acquired, only by reason of transactions in which gain or loss was not recognized in whole or in part, or only by reason of such transactions combined with acquisitions before the beginning of such period.

For purposes of subparagraph (D), all distributee corporations which are members of the same affiliated group (as defined in section 1504(a) without regard to section 1504(b)) shall be treated as 1 distributee corporation.

(3) Special rules for determining active conduct in the case of affiliated groups

(A) In general

For purposes of determining whether a corporation meets the requirements of paragraph (2)(A), all members of such corporation's separate affiliated group shall be treated as one corporation.

(B) Separate affiliated group

For purposes of this paragraph, the term "separate affiliated group" means, with respect to any corporation, the affiliated group which would be determined under section 1504(a) if such corporation were the common parent and section 1504(b) did not apply.

(C) Treatment of trade or business conducted by acquired member

If a corporation became a member of a separate affiliated group as a result of one or more transactions in which gain or loss was recognized in whole or in part, any trade or business conducted by such corporation (at the time that such corporation became such a member) shall be treated for purposes of paragraph (2) as acquired in a transaction in which gain or loss was recognized in whole or in part.

(D) Regulations

The Secretary shall prescribe such regulations as are necessary or appropriate to carry out the purposes of this paragraph, including regulations which provide for the proper application of subparagraphs (B), (C), and (D) of paragraph (2), and modify the application of subsection (a)(3)(B), in connection with the application of this paragraph.

(c) Taxability of corporation on distribution

(1) In general

Except as provided in paragraph (2), no gain or loss shall be recognized to a corporation on any distribution to which this section (or so much of section 356 as relates to this section) applies and which is not in pursuance of a plan of reorganization.

(2) Distribution of appreciated property

(A) In general

If—

(i) in a distribution referred to in paragraph (1), the corporation distributes property other than qualified property, and

(ii) 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.

(B) Qualified property

For purposes of subparagraph (A), the term "qualified property" means any stock or securities in the controlled corporation.

(C) Treatment of liabilities

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.

(3) Coordination with sections 311 and 336(a)

Sections 311 and 336(a) shall not apply to any distribution referred to in paragraph (1).

(d) Recognition of gain on certain distributions of stock or securities in controlled corporation

(1) In general

In the case of a disqualified distribution, any stock or securities in the controlled corporation shall not be treated as qualified property for purposes of subsection (c)(2) of this section or section 361(c)(2).

(2) Disqualified distribution

For purposes of this subsection, the term "disqualified distribution" means any distribution to which this section (or so much of section 356 as relates to this section) applies if, immediately after the distribution—

(A) any person holds disqualified stock in the distributing corporation which constitutes a 50-percent or greater interest in such corporation, or

(B) any person holds disqualified stock in the controlled corporation (or, if stock of more than 1 controlled corporation is distributed, in any controlled corporation) which constitutes a 50-percent or greater interest in such corporation.

(3) Disqualified stock

For purposes of this subsection, the term "disqualified stock" means—

(A) any stock in the distributing corporation acquired by purchase during the 5-year period ending on the date of the distribution, and

(B) any stock in any controlled corporation—

(i) acquired by purchase during the 5-year period ending on the date of the distribution, or

(ii) received in the distribution to the extent attributable to distributions on—

(I) stock described in subparagraph (A), or

(II) any securities in the distributing corporation acquired by purchase during the 5-year period ending on the date of the distribution.

(4) 50-percent or greater interest

For purposes of this subsection, the term "50-percent or greater interest" means stock possessing at least 50 percent of the total combined voting power of all classes of stock entitled to vote or at least 50 percent of the total value of shares of all classes of stock.

(5) Purchase

For purposes of this subsection—

(A) In general

Except as otherwise provided in this paragraph, the term "purchase" means any acquisition but only if—

(i) the basis of the property acquired in the hands of the acquirer is not determined (I) in whole or in part by reference to the adjusted basis of such property in the hands of the person from whom acquired, or (II) under section 1014(a), and

(ii) the property is not acquired in an exchange to which section 351, 354, 355, or 356 applies.

(B) Certain section 351 exchanges treated as purchases

The term "purchase" includes any acquisition of property in an exchange to which section 351 applies to the extent such property is acquired in exchange for—

(i) any cash or cash item,

(ii) any marketable stock or security, or

(iii) any debt of the transferor.

(C) Carryover basis transactions

If—

(i) any person acquires property from another person who acquired such property by purchase (as determined under this paragraph with regard to this subparagraph), and

(ii) the adjusted basis of such property in the hands of such acquirer is determined in whole or in part by reference to the adjusted basis of such property in the hands of such other person,

such acquirer shall be treated as having acquired such property by purchase on the date it was so acquired by such other person.

(6) Special rule where substantial diminution of risk

(A) In general

If this paragraph applies to any stock or securities for any period, the running of any 5-year period set forth in subparagraph (A) or (B) of paragraph (3) (whichever applies) shall be suspended during such period.

(B) Property to which suspension applies

This paragraph applies to any stock or securities for any period during which the holder's risk of loss with respect to such stock or securities, or with respect to any portion of the activities of the corporation, is (directly or indirectly) substantially diminished by—

(i) an option,

(ii) a short sale,

(iii) any special class of stock, or

(iv) any other device or transaction.

(7) Aggregation rules

(A) In general

For purposes of this subsection, a person and all persons related to such person (within the meaning of section 267(b) or 707(b)(1)) shall be treated as one person.

(B) Persons acting pursuant to plans or arrangements

If two or more persons act pursuant to a plan or arrangement with respect to acquisitions of stock or securities in the distributing corporation or controlled corporation, such persons shall be treated as one person for purposes of this subsection.

(8) Attribution from entities

(A) In general

Paragraph (2) of section 318(a) shall apply in determining whether a person holds stock or securities in any corporation (determined by substituting "10 percent" for "50 percent" in subparagraph (C) of such paragraph (2) and by treating any reference to stock as including a reference to securities).

(B) Deemed purchase rule

If—

(i) any person acquires by purchase an interest in any entity, and

(ii) such person is treated under subparagraph (A) as holding any stock or securities by reason of holding such interest,

such stock or securities shall be treated as acquired by purchase by such person on the later of the date of the purchase of the interest in such entity or the date such stock or securities are acquired by purchase by such entity.

(9) Regulations

The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subsection, including—

(A) regulations to prevent the avoidance of the purposes of this subsection through the use of related persons, intermediaries, pass-thru entities, options, or other arrangements, and

(B) regulations modifying the definition of the term "purchase".

(e) Recognition of gain on certain distributions of stock or securities in connection with acquisitions

(1) General rule

If there is a distribution to which this subsection applies, any stock or securities in the controlled corporation shall not be treated as qualified property for purposes of subsection (c)(2) of this section or section 361(c)(2).

(2) Distributions to which subsection applies

(A) In general

This subsection shall apply to any distribution—

(i) to which this section (or so much of section 356 as relates to this section) applies, and

(ii) which is part of a plan (or series of related transactions) pursuant to which 1 or more persons acquire directly or indirectly stock representing a 50-percent or greater interest in the distributing corporation or any controlled corporation.

(B) Plan presumed to exist in certain cases

If 1 or more persons acquire directly or indirectly stock representing a 50-percent or greater interest in the distributing corporation or any controlled corporation during the 4-year period beginning on the date which is 2 years before the date of the distribution, such acquisition shall be treated as pursuant to a plan described in subparagraph (A)(ii) unless it is established that the distribution and the acquisition are not pursuant to a plan or series of related transactions.

(C) Certain plans disregarded

A plan (or series of related transactions) shall not be treated as described in subparagraph (A)(ii) if, immediately after the completion of such plan or transactions, the distributing corporation and all controlled corporations are members of a single affiliated group (as defined in section 1504 without regard to subsection (b) thereof).

(D) Coordination with subsection (d)

This subsection shall not apply to any distribution to which subsection (d) applies.

(3) Special rules relating to acquisitions

(A) Certain acquisitions not taken into account

Except as provided in regulations, the following acquisitions shall not be taken into account in applying paragraph (2)(A)(ii):

(i) The acquisition of stock in any controlled corporation by the distributing corporation.

(ii) The acquisition by a person of stock in any controlled corporation by reason of holding stock or securities in the distributing corporation.

(iii) The acquisition by a person of stock in any successor corporation of the distributing corporation or any controlled corporation by reason of holding stock or securities in such distributing or controlled corporation.

(iv) The acquisition of stock in the distributing corporation or any controlled corporation to the extent that the percentage of stock owned directly or indirectly in such corporation by each person owning stock in such corporation immediately before the acquisition does not decrease.

This subparagraph shall not apply to any acquisition if the stock held before the acquisition was acquired pursuant to a plan (or series of related transactions) described in paragraph (2)(A)(ii).

(B) Asset acquisitions

Except as provided in regulations, for purposes of this subsection, if the assets of the distributing corporation or any controlled corporation are acquired by a successor corporation in a transaction described in subparagraph (A), (C), or (D) of section 368(a)(1) or any other transaction specified in regulations by the Secretary, the shareholders (immediately before the acquisition) of the corporation acquiring such assets shall be treated as acquiring stock in the corporation from which the assets were acquired.

(4) Definition and special rules

For purposes of this subsection—

(A) 50-percent or greater interest

The term "50-percent or greater interest" has the meaning given such term by subsection (d)(4).

(B) Distributions in title 11 or similar case

Paragraph (1) shall not apply to any distribution made in a title 11 or similar case (as defined in section 368(a)(3)).

(C) Aggregation and attribution rules

(i) Aggregation

The rules of paragraph (7)(A) of subsection (d) shall apply.

(ii) Attribution

Section 318(a)(2) shall apply in determining whether a person holds stock or securities in any corporation. Except as provided in regulations, section 318(a)(2)(C) shall be applied without regard to the phrase "50 percent or more in value" for purposes of the preceding sentence.

(D) Successors and predecessors

For purposes of this subsection, any reference to a controlled corporation or a distributing corporation shall include a reference to any predecessor or successor of such corporation.

(E) Statute of limitations

If there is a distribution to which paragraph (1) applies—

(i) the statutory period for the assessment of any deficiency attributable to any part of the gain recognized under this subsection by reason of such distribution shall not expire before the expiration of 3 years from the date the Secretary is notified by the taxpayer (in such manner as the Secretary may by regulations prescribe) that such distribution occurred, and

(ii) such deficiency may be assessed before the expiration of such 3-year period notwithstanding the provisions of any other law or rule of law which would otherwise prevent such assessment.

(5) Regulations

The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subsection, including regulations—

(A) providing for the application of this subsection where there is more than 1 controlled corporation,

(B) treating 2 or more distributions as 1 distribution where necessary to prevent the avoidance of such purposes, and

(C) providing for the application of rules similar to the rules of subsection (d)(6) where appropriate for purposes of paragraph (2)(B).

(f) Section not to apply to certain intragroup distributions

Except as provided in regulations, this section (or so much of section 356 as relates to this section) shall not apply to the distribution of stock from 1 member of an affiliated group (as defined in section 1504(a)) to another member of such group if such distribution is part of a plan (or series of related transactions) described in subsection (e)(2)(A)(ii) (determined after the application of subsection (e)).

(g) Section not to apply to distributions involving disqualified investment corporations

(1) In general

This section (and so much of section 356 as relates to this section) shall not apply to any distribution which is part of a transaction if—

(A) either the distributing corporation or controlled corporation is, immediately after the transaction, a disqualified investment corporation, and

(B) any person holds, immediately after the transaction, a 50-percent or greater interest in any disqualified investment corporation, but only if such person did not hold such an interest in such corporation immediately before the transaction.

(2) Disqualified investment corporation

For purposes of this subsection—

(A) In general

The term "disqualified investment corporation" means any distributing or controlled corporation if the fair market value of the investment assets of the corporation is—

(i) in the case of distributions after the end of the 1-year period beginning on the date of the enactment of this subsection, 2/3 or more of the fair market value of all assets of the corporation, and

(ii) in the case of distributions during such 1-year period, ¾ or more of the fair market value of all assets of the corporation.

(B) Investment assets

(i) In general

Except as otherwise provided in this subparagraph, the term "investment assets" means—

(I) cash,

(II) any stock or securities in a corporation,

(III) any interest in a partnership,

(IV) any debt instrument or other evidence of indebtedness,

(V) any option, forward or futures contract, notional principal contract, or derivative,

(VI) foreign currency, or

(VII) any similar asset.

(ii) Exception for assets used in active conduct of certain financial trades or businesses

Such term shall not include any asset which is held for use in the active and regular conduct of—

(I) a lending or finance business (within the meaning of section 954(h)(4)),

(II) a banking business through a bank (as defined in section 581), a domestic building and loan association (within the meaning of section 7701(a)(19)), or any similar institution specified by the Secretary, or

(III) an insurance business if the conduct of the business is licensed, authorized, or regulated by an applicable insurance regulatory body.

 This clause shall only apply with respect to any business if substantially all of the income of the business is derived from persons who are not related (within the meaning of section 267(b) or 707(b)(1)) to the person conducting the business.

(iii) Exception for securities marked to market

Such term shall not include any security (as defined in section 475(c)(2)) which is held by a dealer in securities and to which section 475(a) applies.

(iv) Stock or securities in a 20-percent controlled entity

(I) In general

Such term shall not include any stock and securities in, or any asset described in subclause (IV) or (V) of clause (i) issued by, a corporation which is a 20-percent controlled entity with respect to the distributing or controlled corporation.

(II) Look-thru rule

The distributing or controlled corporation shall, for purposes of applying this subsection, be treated as owning its ratable share of the assets of any 20-percent controlled entity.

(III) 20-percent controlled entity

For purposes of this clause, the term "20-percent controlled entity" means, with respect to any distributing or controlled corporation, any corporation with respect to which the distributing or controlled corporation owns directly or indirectly stock meeting the requirements of section 1504(a)(2), except that such section shall be applied by substituting "20 percent" for "80 percent" and without regard to stock described in section 1504(a)(4).

(v) Interests in certain partnerships

(I) In general

Such term shall not include any interest in a partnership, or any debt instrument or other evidence of indebtedness, issued by the partnership, if 1 or more of the trades or businesses of the partnership are (or, without regard to the 5-year requirement under subsection (b)(2)(B), would be) taken into account by the distributing or controlled corporation, as the case may be, in determining whether the requirements of subsection (b) are met with respect to the distribution.

(II) Look-thru rule

The distributing or controlled corporation shall, for purposes of applying this subsection, be treated as owning its ratable share of the assets of any partnership described in subclause (I).

(3) 50-percent or greater interest

For purposes of this subsection—

(A) In general

The term "50-percent or greater interest" has the meaning given such term by subsection (d)(4).

(B) Attribution rules

The rules of section 318 shall apply for purposes of determining ownership of stock for purposes of this paragraph.

(4) Transaction

For purposes of this subsection, the term "transaction" includes a series of transactions.

(5) Regulations

The Secretary shall prescribe such regulations as may be necessary to carry out, or prevent the avoidance of, the purposes of this subsection, including regulations—

(A) to carry out, or prevent the avoidance of, the purposes of this subsection in cases involving—

(i) the use of related persons, intermediaries, pass-thru entities, options, or other arrangements, and

(ii) the treatment of assets unrelated to the trade or business of a corporation as investment assets if, prior to the distribution, investment assets were used to acquire such unrelated assets,

(B) which in appropriate cases exclude from the application of this subsection a distribution which does not have the character of a redemption which would be treated as a sale or exchange under section 302, and

(C) which modify the application of the attribution rules applied for purposes of this subsection.

(h) Restriction on distributions involving real estate investment trusts

(1) In general

This section (and so much of section 356 as relates to this section) shall not apply to any distribution if either the distributing corporation or controlled corporation is a real estate investment trust.

(2) Exceptions for certain distributions

(A) Distributions of a real estate investment trust by another real estate investment trust

Paragraph (1) shall not apply to any distribution if, immediately after the distribution, the distributing corporation and the controlled corporation are both real estate investment trusts.

(B) Distributions of certain taxable REIT subsidiaries

Paragraph (1) shall not apply to any distribution if—

(i) the distributing corporation has been a real estate investment trust at all times during the 3-year period ending on the date of such distribution,

(ii) the controlled corporation has been a taxable REIT subsidiary (as defined in section 856(l)) of the distributing corporation at all times during such period, and

(iii) the distributing corporation had control (as defined in section 368(c) applied by taking into account stock owned directly or indirectly, including through one or more corporations or partnerships, by the distributing corporation) of the controlled corporation at all times during such period.

A controlled corporation will be treated as meeting the requirements of clauses (ii) and (iii) if the stock of such corporation was distributed by a taxable REIT subsidiary in a transaction to which this section (or so much of section 356 as relates to this section) applies and the assets of such corporation consist solely of the stock or assets held by one or more taxable REIT subsidiaries of the distributing corporation meeting the requirements of clauses (ii) and (iii). For purposes of clause (iii), control of a partnership means ownership of at least 80 percent of the profits interest and at least 80 percent of the capital interests.

(Aug. 16, 1954, ch. 736, 68A Stat. 113; Pub. L. 94–455, title XIX, §1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 96–589, §4(e)(2), Dec. 24, 1980, 94 Stat. 3403; Pub. L. 100–203, title X, §10223(b), Dec. 22, 1987, 101 Stat. 1330–411; Pub. L. 100–647, title I, §1018(d)(5)(C), title II, §2004(k)(1), Nov. 10, 1988, 102 Stat. 3580, 3605; Pub. L. 101–508, title XI, §§11321(a), 11702(e)(2), Nov. 5, 1990, 104 Stat. 1388–460, 1388–515; Pub. L. 104–188, title I, §1704(t)(31), Aug. 20, 1996, 110 Stat. 1889; Pub. L. 105–34, title X, §§1012(a), (b)(1), 1014(c), (e)(1), (2), Aug. 5, 1997, 111 Stat. 914, 916, 921; Pub. L. 105–206, title VI, §6010(c)(2), July 22, 1998, 112 Stat. 813; Pub. L. 109–222, title II, §202, title V, §507(a), May 17, 2006, 120 Stat. 348, 358; Pub. L. 109–432, div. A, title IV, §410(a), Dec. 20, 2006, 120 Stat. 2963; Pub. L. 110–172, §4(b)(1), (2), Dec. 29, 2007, 121 Stat. 2476; Pub. L. 113–295, div. A, title II, §221(a)(50), Dec. 19, 2014, 128 Stat. 4045; Pub. L. 114–113, div. Q, title III, §311(a), Dec. 18, 2015, 129 Stat. 3090; Pub. L. 115–141, div. U, title I, §101(m), title IV, §401(a)(65), Mar. 23, 2018, 132 Stat. 1165, 1187.)

Editorial Notes

References in Text

The date of the enactment of this subsection, referred to in subsec. (g)(2)(A)(i), is the date of enactment of Pub. L. 109–222, which was approved May 17, 2006.

Amendments

2018—Subsec. (h)(2). Pub. L. 115–141, §101(m)(2)(A), substituted "distributions" for "spinoffs" in heading.

Subsec. (h)(2)(A). Pub. L. 115–141, §101(m)(2)(B), substituted "Distributions" for "Spinoffs" in heading.

Subsec. (h)(2)(B). Pub. L. 115–141, §401(a)(65), struck out "of assets" after "the stock or assets" in concluding provisions.

Pub. L. 115–141, §101(m)(2)(B), substituted "Distributions" for "Spinoffs" in heading.

Pub. L. 115–141, §101(m)(1), in concluding provisions, substituted "at least 80 percent" for "80 percent" in two places.

2015—Subsec. (h). Pub. L. 114–113 added subsec. (h).

2014—Subsec. (d)(3)(A), (B)(i), (ii)(II). Pub. L. 113–295 struck out "after October 9, 1990, and" after "acquired by purchase".

2007—Subsec. (b)(2)(A). Pub. L. 110–172, §4(b)(1), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: "it is engaged in the active conduct of a trade or business, or substantially all of its assets consist of stock and securities of a corporation controlled by it (immediately after the distribution) which is so engaged,".

Subsec. (b)(3). Pub. L. 110–172, §4(b)(2), amended par. (3) generally. Prior to amendment, par. (3) provided for special rule relating to active business requirement applicable in the case of any distribution made after May 17, 2006.

2006—Subsec. (b)(3). Pub. L. 109–222, §202, added par. (3).

Subsec. (b)(3)(A), (D). Pub. L. 109–432 struck out "and on or before December 31, 2010" after "this paragraph" in subpar. (A) and after "such date" in subpar. (D).

Subsec. (g). Pub. L. 109–222, §507(a), added subsec. (g).

1998—Subsec. (e)(3)(A). Pub. L. 105–206, §6010(c)(2)(A), substituted "shall not be taken into account in applying" for "shall not be treated as described in" in introductory provisions.

Subsec. (e)(3)(A)(iv). Pub. L. 105–206, §6010(c)(2)(B), added cl. (iv) and struck out former cl. (iv) which read as follows: "The acquisition of stock in a corporation if shareholders owning directly or indirectly stock possessing—

"(I) more than 50 percent of the total combined voting power of all classes of stock entitled to vote, and

"(II) more than 50 percent of the total value of shares of all classes of stock,

in the distributing corporation or any controlled corporation before such acquisition own directly or indirectly stock possessing such vote and value in such distributing or controlled corporation after such acquisition."

1997—Subsec. (a)(3)(C). Pub. L. 105–34, §1014(e)(1), inserted "(including nonqualified preferred stock, as defined in section 351(g)(2))" after "stock".

Subsec. (a)(3)(D). Pub. L. 105–34, §1014(c), added subpar. (D).

Subsec. (a)(4)(A). Pub. L. 105–34, §1014(e)(2), inserted "nonqualified preferred stock and" after "subsection (including".

Subsec. (e). Pub. L. 105–34, §1012(a), added subsec. (e).

Subsec. (f). Pub. L. 105–34, §1012(b)(1), added subsec. (f).

1996—Subsec. (d)(7)(A). Pub. L. 104–188 inserted "section" before "267(b)".

1990—Subsec. (c). Pub. L. 101–508, §11321(a), added subsec. (c) and struck out former subsec. (c) which read as follows:

"(1) In general.—Except as provided in paragraph (2), no gain or loss shall be recognized to a corporation on any distribution to which this section (or so much of section 356 as relates to this section) applies and which is not in pursuance of a plan of reorganization.

"(2) Distribution of appreciated property.—

"(A) In general.—If—

"(i) in a distribution referred to in paragraph (1), the corporation distributes property other than stock or securities in the controlled corporation, and

"(ii) 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.

"(B) Treatment of liabilities.—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.

"(3) Coordination with sections 311 and 336(a).—Sections 311 and 336(a) shall not apply to any distribution referred to in paragraph (1)."

Pub. L. 101–508, §11702(e)(2), amended subsec. (c) generally. Prior to amendment, subsec. (c) read as follows: "Section 311 shall apply to any distribution—

"(1) to which this section (or so much of section 356 as relates to this section) applies, and

"(2) which is not in pursuance of a plan of reorganization,

in the same manner as if such distribution were a distribution to which subpart A of part I applies; except that subsection (b) of section 311 shall not apply to any distribution of stock or securities in the controlled corporation."

Subsec. (d). Pub. L. 101–508, §11321(a), added subsec. (d).

1988—Subsec. (b)(2)(D)(i), (ii). Pub. L. 100–647, §2004(k)(1), added cls. (i) and (ii) and struck out former cls. (i) and (ii) which read as follows:

"(i) was not acquired by any distributee corporation directly (or through 1 or more corporations, whether through the distributing corporation or otherwise) within the period described in subparagraph (B), or

"(ii) was so acquired such distributee corporation within such period, but such control was so acquired only by reason of transactions in which gain or loss was not recognized in whole or in part, or only by reason of such transactions combined with acquisitions before the beginning of such period."

Subsec. (c). Pub. L. 100–647, §1018(d)(5)(C), added subsec. (c).

1987—Subsec. (b)(2)(D). Pub. L. 100–203, §10223(b)(3), inserted at end "For purposes of subparagraph (D), all distributee corporations which are members of the same affiliated group (as defined in section 1504(a) without regard to section 1504(b)) shall be treated as 1 distributee corporation."

Subsec. (b)(2)(D)(i). Pub. L. 100–203, §10223(b)(1), amended cl. (i) generally. Prior to amendment, cl. (i) read as follows: "was not acquired directly (or through one or more corporations) by another corporation within the period described in subparagraph (B), or".

Subsec. (b)(2)(D)(ii). Pub. L. 100–203, §10223(b)(2), substituted "such distributee corporation" for "by another corporation".

1980—Subsec. (a)(3). Pub. L. 96–589 designated existing provisions as subpars. (A) and (B) and added subpar. (C).

Subsec. (a)(4). Pub. L. 96–589, §4(e)(2), designated existing provisions as subpar. (A), substituted "exchange if any property" for "distribution if any property", inserted provisions excluding property to which paragraph (3)(C) applies, and added subpar. (B).

1976—Subsec. (a)(1)(D)(ii). Pub. L. 94–455 struck out "or his delegate" after "Secretary".

Statutory Notes and Related Subsidiaries

Effective Date of 2018 Amendment

Amendment by section 101(m) of Pub. L. 115–141 effective as if included in the provision of the Protecting Americans from Tax Hikes Act of 2015, div. Q of Pub. L. 114–113, to which such amendment relates, see section 101(s) of Pub. L. 115–141, set out as a note under section 24 of this title.

Effective Date of 2015 Amendment

Pub. L. 114–113, div. Q, title III, §311(c), Dec. 18, 2015, 129 Stat. 3091, provided that: "The amendments made by this section [amending this section and section 856 of this title] shall apply to distributions on or after December 7, 2015, but shall not apply to any distribution pursuant to a transaction described in a ruling request initially submitted to the Internal Revenue Service on or before such date, which request has not been withdrawn and with respect to which a ruling has not been issued or denied in its entirety as of such date."

Effective Date of 2014 Amendment

Amendment by Pub. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title.

Effective Date of 2007 Amendment

Pub. L. 110–172, §4(d), Dec. 29, 2007, 121 Stat. 2478, provided that:

"(1) In general.—Except as otherwise provided in this subsection, the amendments made by this section [amending this section and sections 911 and 954 of this title] shall take effect as if included in the provisions of the Tax Increase Prevention and Reconciliation Act of 2005 [Pub. L. 109–222] to which they relate.

"(2) Modification of active business definition under section 355.—

"(A) In general.—Except as otherwise provided in this paragraph, the amendments made by subsection (b) [amending this section] shall apply to distributions made after May 17, 2006.

"(B) Transition rule.—The amendments made by subsection (b) shall not apply to any distribution pursuant to a transaction which is—

"(i) made pursuant to an agreement which was binding on May 17, 2006, and at all times thereafter,

"(ii) described in a ruling request submitted to the Internal Revenue Service on or before such date, or

"(iii) described on or before such date in a public announcement or in a filing with the Securities and Exchange Commission.

"(C) Election out of transition rule.—Subparagraph (B) shall not apply if the distributing corporation elects not to have such subparagraph apply to distributions of such corporation. Any such election, once made, shall be irrevocable.

"(D) Special rule for certain pre-enactment distributions.—For purposes of determining the continued qualification under section 355(b)(2)(A) of the Internal Revenue Code of 1986 of distributions made on or before May 17, 2006, as a result of an acquisition, disposition, or other restructuring after such date, such distribution shall be treated as made on the date of such acquisition, disposition, or restructuring for purposes of applying subparagraphs (A) through (C) of this paragraph. The preceding sentence shall only apply with respect to the corporation that undertakes such acquisition, disposition, or other restructuring, and only if such application results in continued qualification under section 355(b)(2)(A) of such Code.

"(3) Amendment related to section 515 of the act.—The amendment made by subsection (c) [amending section 911 of this title] shall apply to taxable years beginning after December 31, 2006."

Effective Date of 2006 Amendment

Pub. L. 109–432, div. A, title IV, §410(b), Dec. 20, 2006, 120 Stat. 2963, provided that: "The amendments made by this section [amending this section] shall take effect as if included in section 202 of the Tax Increase Prevention and Reconciliation Act of 2005 [Pub. L. 109–222]."

Pub. L. 109–222, title V, §507(b), May 17, 2006, 120 Stat. 361, provided that:

"(1) In general.—The amendments made by this section [amending this section] shall apply to distributions after the date of the enactment of this Act [May 17, 2006].

"(2) Transition rule.—The amendments made by this section shall not apply to any distribution pursuant to a transaction which is—

"(A) made pursuant to an agreement which was binding on such date of enactment and at all times thereafter,

"(B) described in a ruling request submitted to the Internal Revenue Service on or before such date, or

"(C) described on or before such date in a public announcement or in a filing with the Securities and Exchange Commission."

Effective Date of 1998 Amendment

Amendment by Pub. L. 105–206 effective, except as otherwise provided, as if included in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates, see section 6024 of Pub. L. 105–206, set out as a note under section 1 of this title.

Effective Date of 1997 Amendment

Amendment by section 1012(a), (b)(1) of Pub. L. 105–34 applicable, with transition rule, to distributions after Apr. 16, 1997, except that amendment by section 1012(a) applicable to such distributions only if pursuant to a plan (or series of related transactions) which involves an acquisition described in subsec. (e)(2)(A)(ii) of this section occurring after such date, see section 1012(d) of Pub. L. 105–34, as amended, set out as a note under section 351 of this title.

Amendment by section 1014(c), (e)(1), (2) of Pub. L. 105–34 applicable, with certain exceptions, to transactions after June 8, 1997, see section 1014(f) of Pub. L. 105–34, set out as a note under section 351 of this title.

Effective Date of 1990 Amendment

Pub. L. 101–508, title XI, §11321(c), Nov. 5, 1990, 104 Stat. 1388–463, provided that:

"(1) In general.—Except as otherwise provided in this subsection, the amendments made by this section [amending this section and section 361 of this title] shall apply to distributions after October 9, 1990.

"(2) Binding contract exception.—The amendments made by this section shall not apply to any distribution pursuant to a written binding contract in effect on October 9, 1990, and at all times thereafter before such distribution.

"(3) Transitional rules.—For purposes of subparagraphs (A) and (B) of section 355(d)(3) of the Internal Revenue Code of 1986 (as amended by subsection (a)), an acquisition shall be treated as occurring on or before October 9, 1990, if—

"(A) such acquisition is pursuant to a written binding contract in effect on October 9, 1990, and at all times thereafter before such acquisition,

"(B) such acquisition is pursuant to a transaction which was described in documents filed with the Securities and Exchange Commission on or before October 9, 1990, or

"(C) such acquisition is pursuant to a transaction—

"(i) the material terms of which were described in a written public announcement on or before October 9, 1990,

"(ii) which was the subject of a prior filing with the Securities and Exchange Commission, and

"(iii) which is the subject of a subsequent filing with the Securities and Exchange Commission before January 1, 1991."

Amendment by section 11702(e)(2) of Pub. L. 101–508 effective as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100–647, to which such amendment relates, see section 11702(j) of Pub. L. 101–508, set out as a note under section 59 of this title.

Effective Date of 1988 Amendment

Amendment by section 1018(d)(5)(C) of Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.

Amendment by section 2004(k)(1) of Pub. L. 100–647 effective, except as otherwise provided, as if included in the provisions of the Revenue Act of 1987, Pub. L. 100–203, title X, to which such amendment relates, see section 2004(u) of Pub. L. 100–647, set out as a note under section 56 of this title.

Effective Date of 1987 Amendment

Amendment by Pub. L. 100–203 applicable to distributions or transfers after Dec. 15, 1987, with exceptions for certain distributee corporations and distributions covered by prior transition rule, see section 10223(d) of Pub. L. 100–203, set out as a note under section 304 of this title.

Effective Date of 1980 Amendment

Amendment by Pub. L. 96–589 applicable to bankruptcy cases or similar judicial proceedings commencing after Dec. 31, 1980, and to exchanges which occur after Dec. 31, 1980, and which do not occur in a bankruptcy case or similar judicial proceeding or in a proceeding under Title 11, Bankruptcy, commenced on or before Dec. 31, 1980, with an exception permitting the debtor to make the amendment applicable to such cases, proceedings or exchanges commencing after Sept. 30, 1979, see section 7(c), (f) of Pub. L. 96–589, set out as a note under section 108 of this title.

Termination of Tax Increase Prevention and Reconciliation Act of 2005 and Tax Relief and Health Care Act of 2006 Amendments

Pub. L. 110–172, §4(b)(3), Dec. 29, 2007, 121 Stat. 2476, provided that: "The Internal Revenue Code of 1986 shall be applied and administered as if the amendments made by section 202 of the Tax Increase Prevention and Reconciliation Act of 2005 [Pub. L. 109–222, amending this section] and by section 410 of division A of the Tax Relief and Health Care Act of 2006 [Pub. L. 109–432, amending this section] had never been enacted."
26 U.S.C. § 6316 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 64 / Section 6316: Payment by foreign currency
Payment by foreign currency
Status: in_force

The Secretary is authorized in his discretion to allow payment of taxes in the currency of a foreign country under such circumstances and subject to such conditions as the Secretary may by regulations prescribe.

(Aug. 16, 1954, ch. 736, 68A Stat. 778; Pub. L. 94–455, title XIX, §1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834.)

Editorial Notes

Amendments

1976—Pub. L. 94–455 struck out "or his delegate" after "Secretary" in two places.
26 U.S.C. § 2621 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 13 / Subchapter C / Section 2621: Taxable amount in case of taxable distribution
Taxable amount in case of taxable distribution
Status: in_force

(a) In general

For purposes of this chapter, the taxable amount in the case of any taxable distribution shall be—

(1) the value of the property received by the transferee, reduced by

(2) any expense incurred by the transferee in connection with the determination, collection, or refund of the tax imposed by this chapter with respect to such distribution.

(b) Payment of GST tax treated as taxable distribution

For purposes of this chapter, if any of the tax imposed by this chapter with respect to any taxable distribution is paid out of the trust, an amount equal to the portion so paid shall be treated as a taxable distribution.

(Added Pub. L. 94–455, title XX, §2006(a), Oct. 4, 1976, 90 Stat. 1887; amended Pub. L. 97–34, title IV, §422(e)(4), Aug. 13, 1981, 95 Stat. 316; Pub. L. 99–514, title XIV, §1431(a), Oct. 22, 1986, 100 Stat. 2720.)

Editorial Notes

Amendments

1986—Pub. L. 99–514 amended section generally, substituting provisions relating to taxable amount in case of a taxable distribution for former provisions which related generally to administration of this chapter. See section 2661 of this title.

1981—Subsec. (b). Pub. L. 97–34 substituted "Section 6166" for "Sections 6166 and 6166A" in heading and "section 6166 (relating to extension of time" for "sections 6166 and 6166A (relating to extensions of time" in text.

Statutory Notes and Related Subsidiaries

Effective Date of 1986 Amendment

Section applicable to generation-skipping transfers (within the meaning of section 2611 of this title) made after Oct. 22, 1986, except as otherwise provided, see section 1433 of Pub. L. 99–514, set out as a note under section 2601 of this title.

Effective Date of 1981 Amendment

Amendment by Pub. L. 97–34 applicable to estates of decedents dying after Dec. 31, 1981, see section 422(f)(1) of Pub. L. 97–34, set out as a note under section 6166 of this title.
26 U.S.C. § 7328 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 75 / Subchapter C / Section 7328: Cross references
Cross references
Status: in_force

(1) For the issuance of certificates of probable cause relieving officers making seizures of responsibility for damages, see 28 U. S. C. 2465.

(2) For provisions relating to forfeitures generally in connection with alcohol taxes, see chapter 51.

(3) For provisions relating to forfeitures generally in connection with tobacco taxes, see chapter 52.

(4) For provisions relating to forfeitures generally in connection with taxes on certain firearms, see chapter 53.

(Aug. 16, 1954, ch. 736, 68A Stat. 871, §7329; renumbered §7328, Pub. L. 94–455, title XIX, §1904(b)(8)(H)(i), Oct. 4, 1976, 90 Stat. 1816.)

Editorial Notes

Prior Provisions

A prior section 7328, act Aug. 16, 1954, ch. 736, 68A Stat. 871, provided for confiscation of white phosphorus matches exported or attempted to be exported, prior to repeal by Pub. L. 94–455, §1904(b)(8)(H)(i).

A prior section 7329 was renumbered section 7328 of this title.
26 U.S.C. § 453B (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 453B: Gain or loss on disposition of installment obligations
Gain or loss on disposition of installment obligations
Status: in_force

(a) General rule

If an installment obligation is satisfied at other than its face value or distributed, transmitted, sold, or otherwise disposed of, gain or loss shall result to the extent of the difference between the basis of the obligation and—

(1) the amount realized, in the case of satisfaction at other than face value or a sale or exchange, or

(2) the fair market value of the obligation at the time of distribution, transmission, or disposition, in the case of the distribution, transmission, or disposition otherwise than by sale or exchange.

any gain or loss so resulting shall be considered as resulting from the sale or exchange of the property in respect of which the installment obligation was received.

(b) Basis of obligation

The basis of an installment obligation shall be the excess of the face value of the obligation over an amount equal to the income which would be returnable were the obligation satisfied in full.

(c) Special rule for transmission at death

Except as provided in section 691 (relating to recipients of income in respect of decedents), this section shall not apply to the transmission of installment obligations at death.

(d) Exception for distributions to which section 337(a) applies

Subsection (a) shall not apply to any distribution to which section 337(a) applies.

(e) Life insurance companies

(1) In general

In the case of a disposition of an installment obligation by any person other than a life insurance company (as defined in section 816(a)) to such an insurance company or to a partnership of which such an insurance company is a partner, no provision of this subtitle providing for the nonrecognition of gain shall apply with respect to any gain resulting under subsection (a). If a corporation which is a life insurance company for the taxable year was (for the preceding taxable year) a corporation which was not a life insurance company, such corporation shall, for purposes of this subsection and subsection (a), be treated as having transferred to a life insurance company, on the last day of the preceding taxable year, all installment obligations which it held on such last day. A partnership of which a life insurance company becomes a partner shall, for purposes of this subsection and subsection (a), be treated as having transferred to a life insurance company, on the last day of the preceding taxable year of such partnership, all installment obligations which it holds at the time such insurance company becomes a partner.

(2) Special rule where life insurance company elects to treat income as not related to insurance business

Paragraph (1) shall not apply to any transfer or deemed transfer of an installment obligation if the life insurance company elects (at such time and in such manner as the Secretary may by regulations prescribe) to determine its life insurance company taxable income—

(A) by returning the income on such installment obligation under the installment method prescribed in section 453, and

(B) as if such income were an item attributable to a noninsurance business.

(3) Noninsurance business

(A) In general

For purposes of this subsection, the term "noninsurance business" means any activity which is not an insurance business.

(B) Certain activities treated as insurance businesses

For purposes of subparagraph (A), any activity which is not an insurance business shall be treated as an insurance business if—

(i) it is of a type traditionally carried on by life insurance companies for investment purposes, but only if the carrying on of such activity (other than in the case of real estate) does not constitute the active conduct of a trade or business, or

(ii) it involves the performance of administrative services in connection with plans providing life insurance, pension, or accident and health benefits.

(f) Obligation becomes unenforceable

For purposes of this section, if any installment obligation is canceled or otherwise becomes unenforceable—

(1) the obligation shall be treated as if it were disposed of in a transaction other than a sale or exchange, and

(2) if the obligor and obligee are related persons (within the meaning of section 453(f)(1)), the fair market value of the obligation shall be treated as not less than its face amount.

(g) Transfers between spouses or incident to divorce

In the case of any transfer described in subsection (a) of section 1041 (other than a transfer in trust)—

(1) subsection (a) of this section shall not apply, and

(2) the same tax treatment with respect to the transferred installment obligation shall apply to the transferee as would have applied to the transferor.

(h) Certain liquidating distributions by S corporations

If—

(1) an installment obligation is distributed by an S corporation in a complete liquidation, and

(2) receipt of the obligation is not treated as payment for the stock by reason of section 453(h)(1),

then, except for purposes of any tax imposed by subchapter S, no gain or loss with respect to the distribution of the obligation shall be recognized by the distributing corporation. Under regulations prescribed by the Secretary, the character of the gain or loss to the shareholder shall be determined in accordance with the principles of section 1366(b).

(Added Pub. L. 96–471, §2(a), Oct. 19, 1980, 94 Stat. 2252; amended Pub. L. 96–471, §2(c)(3), Oct. 19, 1980, 94 Stat. 2254; Pub. L. 97–448, title III, §302, Jan. 12, 1983, 96 Stat. 2398; Pub. L. 98–369, div. A, title I, §43(c)(2), title II, §211(b)(6), title IV, §§421(b)(3), 492(b)(3), July 18, 1984, 98 Stat. 558, 754, 794, 854; Pub. L. 99–514, title VI, §631(e)(9), title X, §1011(b)(1), title XVIII, §1842(c), Oct. 22, 1986, 100 Stat. 2274, 2389, 2853; Pub. L. 100–647, title I, §1006(e)(22), Nov. 10, 1988, 102 Stat. 3403; Pub. L. 101–508, title XI, §11702(a)(2), Nov. 5, 1990, 104 Stat. 1388–514; Pub. L. 115–97, title I, §13512(b)(1), Dec. 22, 2017, 131 Stat. 2142; Pub. L. 115–141, div. U, title IV, §401(a)(111), Mar. 23, 2018, 132 Stat. 1189.)

Editorial Notes

Prior Provisions

Provisions similar to those comprising this section were contained in former section 453 of this title.

Amendments

2018—Pub. L. 115–141 substituted "loss on disposition" for "loss disposition" in section catchline.

2017—Subsec. (e)(2)(B). Pub. L. 115–97, §13512(b)(1)(A), struck out "(as defined in section 806(b)(3))" before period at end.

Subsec. (e)(3). Pub. L. 115–97, §13512(b)(1)(B), added par. (3).

1990—Subsec. (d). Pub. L. 101–508 substituted heading for one which read: "Effect of distribution in liquidations to which section 332 applies" and amended text generally. Prior to amendment, text read as follows: "If—

"(1) an installment obligation is distributed in a liquidation to which section 332 (relating to complete liquidations of subsidiaries) applies, and

"(2) the basis of such obligation in the hands of the distributee is determined under section 334(b)(1),

then no gain or loss with respect to the distribution of such obligation shall be recognized by the distributing corporation."

1988—Subsec. (h). Pub. L. 100–647 added subsec. (h).

1986—Subsec. (d). Pub. L. 99–514, §631(e)(9), amended subsec. (d) generally, substituting "liquidations to which section 332 applies" for "certain liquidations" in heading, striking out par. (1) designation, redesignating subpars. (A) and (B) as pars. (1) and (2), and striking out former par. (2) relating to liquidations to which section 337 applies.

Subsec. (e)(2)(B). Pub. L. 99–514, §1011(b)(1), substituted "section 806(b)(3)" for "section 806(c)(3)".

Subsec. (g). Pub. L. 99–514, §1842(c), inserted "(other than a transfer in trust)".

1984—Subsec. (d)(2). Pub. L. 98–369, §492(b)(3), struck out "1251(c)," after "1250(a)," in provision following subpar. (B).

Pub. L. 98–369, §43(c)(2), substituted "1254(a), or 1276(a)" for "or 1254(a)".

Subsec. (e)(1). Pub. L. 98–369, §211(b)(6)(A), substituted "section 816(a)" for "section 801(a)".

Subsec. (e)(2). Pub. L. 98–369, §211(b)(6)(B), substituted "as not related to insurance business" for "as investment income" in heading, and in text substituted "as if such income were an item attributable to a noninsurance business (as defined in section 806(c)(3))" for "if such income would not otherwise be returnable as an item referred to in section 804(b) or as long-term capital gain, as if the income on such obligations were income specified in section 804(b)".

Subsec. (g). Pub. L. 98–369, §421(b)(3), added subsec. (g).

1983—Subsec. (d)(2). Pub. L. 97–448 substituted "under subsection (a)" for "under paragraph (1)" in second sentence.

1980—Subsec. (d). Pub. L. 96–471, §2(c)(3), inserted last sentence providing that in the case of any installment obligation which would have met the requirements of subpars. (A) and (B) of par. (2) but for sections 337(f), gain shall be recognized to such corporation by reason of such distribution only to the extent gain would have been recognized under sections 337(f) if such corporation had sold or exchanged such installment obligation on the date of such distribution.

Statutory Notes and Related Subsidiaries

Effective Date of 2017 Amendment

Pub. L. 115–97, title I, §13512(c), Dec. 22, 2017, 131 Stat. 2143, provided that: "The amendments made by this section [amending this section and sections 465, 801, 804, 805, 842, and 953 of this title and repealing section 806 of this title] shall apply to taxable years beginning after December 31, 2017."

Effective Date of 1990 Amendment

Amendment by Pub. L. 101–508 effective as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100–647, to which such amendment relates, see section 11702(j) of Pub. L. 101–508, set out as a note under section 59 of this title.

Effective Date of 1988 Amendment

Amendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.

Effective Date of 1986 Amendment

Amendment by section 631(e)(9) of Pub. L. 99–514 applicable to any distribution in complete liquidation, and any sale or exchange, made by a corporation after July 31, 1986, unless such corporation is completely liquidated before Jan. 1, 1987, any transaction described in section 338 of this title for which the acquisition date occurs after Dec. 31, 1986, and any distribution, not in complete liquidation, made after Dec. 31, 1986, with exceptions and special and transitional rules, see section 633 of Pub. L. 99–514, set out as an Effective Date note under section 336 of this title.

Pub. L. 99–514, title X, §1011(c)(1), Oct. 22, 1986, 100 Stat. 2389, provided that: "The amendments made by this section [amending this section and sections 465, 801, 804 to 806, 813, and 815 of this title, enacting provisions set out as a note under section 801 of this title, and amending provisions set out as a note under section 806 of this title] shall apply to taxable years beginning after December 31, 1986."

Amendment by section 1842(c) of Pub. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title.

Effective Date of 1984 Amendment

Amendment by section 43(c)(2) of Pub. L. 98–369 applicable to taxable years ending after July 18, 1984, see section 44 of Pub. L. 98–369, set out as an Effective Date note under section 1271 of this title.

Amendment by section 211(b)(6) of Pub. L. 98–369 applicable to taxable years beginning after Dec. 31, 1983, see section 215 of Pub. L. 98–369, set out as an Effective Date note under section 801 of this title.

Amendment by section 421(b)(3) of Pub. L. 98–369 applicable to transfers after July 18, 1984, in taxable years ending after such date, subject to election to have amendment apply to transfers after 1983 or to transfers pursuant to existing decrees, see section 421(d) of Pub. L. 98–369, set out as an Effective Date note under section 1041 of this title.

Amendment by section 492(b)(3) of Pub. L. 98–369 applicable to taxable years beginning after Dec. 31, 1983, see section 492(d) of Pub. L. 98–369, set out as a note under section 170 of this title.

Effective Date of 1983 Amendment

Amendment by Pub. L. 97–448 applicable to dispositions made after Oct. 19, 1980, in taxable years ending after such date, see section 311(a) of Pub. L. 97–448, set out as a note under section 453 of this title.

Effective Date of 1980 Amendment

For effective date of amendment by Pub. L. 96–471, see section 6(a)(6) of Pub. L. 96–471, set out as an Effective Date note under section 453 of this title.

Effective Date

For effective date, see section 6(a)(1), (5) of Pub. L. 96–471, set out as a note under section 453 of this title.

Repeal of Modification of Installment Method

Pub. L. 106–573, §2, Dec. 28, 2000, 114 Stat. 3061, provided that:

"(a) In General.—Subsection (a) of section 536 of the Ticket to Work and Work Incentives Improvement Act of 1999 (relating to modification of installment method and repeal of installment method for accrual method taxpayers) [Pub. L. 106–170, amending this section] is repealed effective with respect to sales and other dispositions occurring on or after the date of the enactment of such Act [Dec. 17, 1999].

"(b) Applicability.—The Internal Revenue Code of 1986 shall be applied and administered as if that subsection (and the amendments made by that subsection) had not been enacted."

Plan Amendments Not Required Until January 1, 1989

For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title.

Treatment of Elections Under Section 453B(e)(2)

Pub. L. 98–369, div. A, title II, §217(b), July 18, 1984, 98 Stat. 762, as amended by Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that: "If an election is made under section 453B(e)(2) before January 1, 1984, with respect to any installment obligation, any income from such obligation shall be treated as attributable to a noninsurance business (as defined in [former] section 806(c)(3) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954])."
26 U.S.C. § 357 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Subchapter C / Section 357: Assumption of liability
Assumption of liability
Status: in_force

(a) General rule

Except as provided in subsections (b) and (c), if—

(1) the taxpayer receives property which would be permitted to be received under section 351 or 361 without the recognition of gain if it were the sole consideration, and

(2) as part of the consideration, another party to the exchange assumes a liability of the taxpayer,

then such assumption shall not be treated as money or other property, and shall not prevent the exchange from being within the provisions of section 351 or 361, as the case may be.

(b) Tax avoidance purpose

(1) In general

If, taking into consideration the nature of the liability and the circumstances in the light of which the arrangement for the assumption was made, it appears that the principal purpose of the taxpayer with respect to the assumption described in subsection (a)—

(A) was a purpose to avoid Federal income tax on the exchange, or

(B) if not such purpose, was not a bona fide business purpose,

then such assumption (in the total amount of the liability assumed pursuant to such exchange) shall, for purposes of section 351 or 361 (as the case may be), be considered as money received by the taxpayer on the exchange.

(2) Burden of proof

In any suit or proceeding where the burden is on the taxpayer to prove such assumption is not to be treated as money received by the taxpayer, such burden shall not be considered as sustained unless the taxpayer sustains such burden by the clear preponderance of the evidence.

(c) Liabilities in excess of basis

(1) In general

In the case of an exchange—

(A) to which section 351 applies, or

(B) to which section 361 applies by reason of a plan of reorganization within the meaning of 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,

if the sum of the amount of the liabilities assumed exceeds the total of the adjusted basis of the property transferred pursuant to such exchange, then such excess shall be considered as a gain from the sale or exchange of a capital asset or of property which is not a capital asset, as the case may be.

(2) Exceptions

Paragraph (1) shall not apply to any exchange—

(A) to which subsection (b)(1) of this section applies, or

(B) which is pursuant to a plan of reorganization within the meaning of section 368(a)(1)(G) where no former shareholder of the transferor corporation receives any consideration for his stock.

(3) Certain liabilities excluded

(A) In general

If a taxpayer transfers, in an exchange to which section 351 applies, a liability the payment of which either—

(i) would give rise to a deduction, or

(ii) would be described in section 736(a),

then, for purposes of paragraph (1), the amount of such liability shall be excluded in determining the amount of liabilities assumed.

(B) Exception

Subparagraph (A) shall not apply to any liability to the extent that the incurrence of the liability resulted in the creation of, or an increase in, the basis of any property.

(d) Determination of amount of liability assumed

(1) In general

For purposes of this section, section 358(d), section 358(h), section 361(b)(3), section 362(d), section 368(a)(1)(C), and section 368(a)(2)(B), except as provided in regulations—

(A) a recourse liability (or portion thereof) shall be treated as having been assumed if, as determined on the basis of all facts and circumstances, the transferee has agreed to, and is expected to, satisfy such liability (or portion), whether or not the transferor has been relieved of such liability; and

(B) except to the extent provided in paragraph (2), a nonrecourse liability shall be treated as having been assumed by the transferee of any asset subject to such liability.

(2) Exception for nonrecourse liability

The amount of the nonrecourse liability treated as described in paragraph (1)(B) shall be reduced by the lesser of—

(A) the amount of such liability which an owner of other assets not transferred to the transferee and also subject to such liability has agreed with the transferee to, and is expected to, satisfy; or

(B) the fair market value of such other assets (determined without regard to section 7701(g)).

(3) Regulations

The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subsection and section 362(d). The Secretary may also prescribe regulations which provide that the manner in which a liability is treated as assumed under this subsection is applied, where appropriate, elsewhere in this title.

(Aug. 16, 1954, ch. 736, 68A Stat. 116; June 29, 1956, ch. 463, §2, 70 Stat. 403; Pub. L. 95–600, title III, §365(a), Nov. 6, 1978, 92 Stat. 2854; Pub. L. 96–222, title I, §103(a)(12), Apr. 1, 1980, 94 Stat. 213; Pub. L. 96–589, §4(h)(2), Dec. 24, 1980, 94 Stat. 3405; Pub. L. 101–508, title XI, §11801(c)(8)(F), Nov. 5, 1990, 104 Stat. 1388–524; Pub. L. 106–36, title III, §3001(a)(1), (b)(1), (d)(2)–(5), June 25, 1999, 113 Stat. 181–184; Pub. L. 106–554, §1(a)(7) [title III, §309(b)], Dec. 21, 2000, 114 Stat. 2763, 2763A–638; Pub. L. 108–357, title VIII, §898(b), Oct. 22, 2004, 118 Stat. 1649; Pub. L. 109–135, title IV, §403(jj)(2), Dec. 21, 2005, 119 Stat. 2632.)

Editorial Notes

Amendments

2005—Subsec. (d)(1). Pub. L. 109–135 inserted "section 361(b)(3)," after "section 358(h),".

2004—Subsec. (c)(1)(B). Pub. L. 108–357 inserted "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" after "section 368(a)(1)(D)".

2000—Subsec. (d)(1). Pub. L. 106–554 inserted "section 358(h)," after "section 358(d)," in introductory provisions.

1999—Subsec. (a). Pub. L. 106–36, §3001(d)(2), struck out "or acquisition" after "assumption" in concluding provisions.

Subsec. (a)(2). Pub. L. 106–36, §3001(a)(1), struck out ", or acquires from the taxpayer property subject to a liability" before comma at end.

Subsec. (b). Pub. L. 106–36, §3001(d)(2), (3), struck out "or acquisition" after "assumption" wherever appearing and struck out "or acquired" after "liability assumed" in concluding provisions of par. (1).

Subsec. (c)(1). Pub. L. 106–36, §3001(d)(4), struck out ", plus the amount of the liabilities to which the property is subject," after "liabilities assumed" in concluding provisions.

Subsec. (c)(3)(A). Pub. L. 106–36, §3001(d)(5), struck out "or to which the property transferred is subject" after "liabilities assumed" in concluding provisions.

Subsec. (d). Pub. L. 106–36, §3001(b)(1), added subsec. (d).

1990—Subsecs. (a), (b)(1). Pub. L. 101–508, §11801(c)(8)(F)(i), substituted "351 or 361" for "351, 361, 371, or 374" wherever appearing.

Subsec. (c)(2). Pub. L. 101–508, §11801(c)(8)(F)(ii), inserted "or" at end of subpar. (A), redesignated subpar. (C) as (B), and struck out former subpar. (B) which read as follows: "to which section 371 or 374 applies, or".

1980—Subsec. (c)(2)(C). Pub. L. 96–589 added subpar. (C).

Subsec. (c)(3)(A). Pub. L. 96–222 struck out requirement that only taxpayers who compute taxable income under the cash receipts and disbursements method of accounting are eligible to exclude certain liabilities in determining the amount of gain realized on a transfer to a controlled corporation and the requirement that the excluded liability must be an account payable.

1978—Subsec. (c)(3). Pub. L. 95–600 added par. (3).

1956—Subsec. (a). Act June 29, 1956, §2(1), substituted "371, or 374" for "or 371" in two places.

Subsec. (b). Act June 29, 1956, §2(1), substituted "371, or 374" for "or 371".

Subsec. (c)(2)(B). Act June 29, 1956, §2(2), substituted "371 or 374" for "371".

Statutory Notes and Related Subsidiaries

Effective Date of 2005 Amendment

Amendment by Pub. L. 109–135 effective as if included in the provision of the American Jobs Creation Act of 2004, Pub. L. 108–357, to which such amendment relates, see section 403(nn) of Pub. L. 109–135, set out as a note under section 26 of this title.

Effective Date of 2004 Amendment

Pub. L. 108–357, title VIII, §898(c), Oct. 22, 2004, 118 Stat. 1649, provided that: "The amendments made by this section [amending this section and section 361 of this title] shall apply to transfers of money or other property, or liabilities assumed, in connection with a reorganization occurring on or after the date of the enactment of this Act [Oct. 22, 2004]."

Effective Date of 2000 Amendment

Amendment by Pub. L. 106–554 applicable to assumptions of liability after Oct. 18, 1999, see section 1(a)(7) [title III, §309(d)] of Pub. L. 106–554, set out as a note under section 358 of this title.

Effective Date of 1999 Amendment

Amendment by Pub. L. 106–36 applicable to transfers after Oct. 18, 1998, see section 3001(e) of Pub. L. 106–36, set out as a note under section 351 of this title.

Effective Date of 1980 Amendments

Amendment by Pub. L. 96–589 applicable to bankruptcy cases or similar judicial proceedings commencing after Dec. 31, 1980, with exception permitting the debtor to make the amendment applicable to such cases or proceedings commencing after Sept. 30, 1979, see section 7(c)(1), (f) of Pub. L. 96–589, set out as a note under section 108 of this title.

Amendment by Pub. L. 96–222 effective, except as otherwise provided, as if it had been included in the provisions of the Revenue Act of 1978, Pub. L. 95–600, to which such amendment relates, see section 201 of Pub. L. 96–222, set out as a note under section 32 of this title.

Effective Date of 1978 Amendment

Pub. L. 95–600, title III, §365(c), Nov. 6, 1978, 92 Stat. 2855, provided that: "The amendments made by subsections (a) and (b) [amending this section and section 358 of this title] shall apply to transfers occurring on or after the date of the enactment of this Act [Nov. 6, 1978]."

Savings Provision

For provisions that nothing in amendment by Pub. L. 101–508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liability for tax for periods ending after Nov. 5, 1990, see section 11821(b) of Pub. L. 101–508, set out as a note under section 45K of this title.
26 U.S.C. § 246 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 246: Rules applying to deductions for dividends received
Rules applying to deductions for dividends received
Status: in_force

(a) Deduction not allowed for dividends from certain corporations

(1) In general

The deductions allowed by sections 243 1 245, and 245A shall not apply to any dividend from a corporation which, for the taxable year of the corporation in which the distribution is made, or for the next preceding taxable year of the corporation, is a corporation exempt from tax under section 501 (relating to certain charitable, etc., organizations) or section 521 (relating to farmers' cooperative associations).

(2) Subsection not to apply to certain dividends of Federal Home Loan Banks

(A) Dividends out of current earnings and profits

In the case of any dividend paid by any FHLB out of earnings and profits of the FHLB for the taxable year in which such dividend was paid, paragraph (1) shall not apply to that portion of such dividend which bears the same ratio to the total dividend as—

(i) the dividends received by the FHLB from the FHLMC during such taxable year, bears to

(ii) the total earnings and profits of the FHLB for such taxable year.

(B) Dividends out of accumulated earnings and profits

In the case of any dividend which is paid out of any accumulated earnings and profits of any FHLB, paragraph (1) shall not apply to that portion of the dividend which bears the same ratio to the total dividend as—

(i) the amount of dividends received by such FHLB from the FHLMC which are out of earnings and profits of the FHLMC—

(I) for taxable years ending after December 31, 1984, and

(II) which were not previously treated as distributed under subparagraph (A) or this subparagraph, bears to

(ii) the total accumulated earnings and profits of the FHLB as of the time such dividend is paid.

For purposes of clause (ii), the accumulated earnings and profits of the FHLB as of January 1, 1985, shall be treated as equal to its retained earnings as of such date.

(C) Coordination with section 243

To the extent that paragraph (1) does not apply to any dividend by reason of subparagraph (A) or (B) of this paragraph, the requirement contained in section 243(a) that the corporation paying the dividend be subject to taxation under this chapter shall not apply.

(D) Definitions

For purposes of this paragraph—

(i) FHLB

The term "FHLB" means any Federal Home Loan Bank.

(ii) FHLMC

The term "FHLMC" means the Federal Home Loan Mortgage Corporation.

(iii) Taxable year of FHLB

The taxable year of an FHLB shall, except as provided in regulations prescribed by the Secretary, be treated as the calendar year.

(iv) Earnings and profits

The earnings and profits of any FHLB for any taxable year shall be treated as equal to the sum of—

(I) any dividends received by the FHLB from the FHLMC during such taxable year, and

(II) the total earnings and profits (determined without regard to dividends described in subclause (I)) of the FHLB as reported in its annual financial statement prepared in accordance with section 20 of the Federal Home Loan Bank Act (12 U.S.C. 1440).

(b) Limitation on aggregate amount of deductions

(1) General rule

Except as provided in paragraph (2), the aggregate amount of the deductions allowed by section 243(a)(1), subsection 2 (a) and 2 (b) of section 245, and section 250 shall not exceed the percentage determined under paragraph (3) of the taxable income computed without regard to the deductions allowed by sections 172, 199A, 243(a)(1), subsection 2 (a) and 2 (b) of section 245, and 250, without regard to any adjustment under section 1059, and without regard to any capital loss carryback to the taxable year under section 1212(a)(1).

(2) Effect of net operating loss

Paragraph (1) shall not apply for any taxable year for which there is a net operating loss (as determined under section 172).

(3) Special rules

The provisions of paragraph (1) shall be applied—

(A) first separately with respect to dividends from 20-percent owned corporations (as defined in section 243(c)(2)) and the percentage determined under this paragraph shall be 65 percent, and

(B) then separately with respect to dividends not from 20-percent owned corporations and the percentage determined under this paragraph shall be 50 percent and the taxable income shall be reduced by the aggregate amount of dividends from 20-percent owned corporations (as so defined).

(c) Exclusion of certain dividends

(1) In general

No deduction shall be allowed under section 243 1 245, or 245A, in respect of any dividend on any share of stock—

(A) which is held by the taxpayer for 45 days or less during the 91-day period beginning on the date which is 45 days before the date on which such share becomes ex-dividend with respect to such dividend, or

(B) to the extent that the taxpayer is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property.

(2) 90-day rule in the case of certain preference dividends

In the case of stock having preference in dividends, if the taxpayer receives dividends with respect to such stock which are attributable to a period or periods aggregating in excess of 366 days, paragraph (1)(A) shall be applied—

(A) by substituting "90 days" for "45 days" each place it appears, and

(B) by substituting "181-day period" for "91-day period".

(3) Determination of holding periods

For purposes of this subsection, in determining the period for which the taxpayer has held any share of stock—

(A) the day of disposition, but not the day of acquisition, shall be taken into account, and

(B) paragraph (3) of section 1223 shall not apply.

(4) Holding period reduced for periods where risk of loss diminished

The holding periods determined for purposes of this subsection shall be appropriately reduced (in the manner provided in regulations prescribed by the Secretary) for any period (during such periods) in which—

(A) the taxpayer has an option to sell, is under a contractual obligation to sell, or has made (and not closed) a short sale of, substantially identical stock or securities,

(B) the taxpayer is the grantor of an option to buy substantially identical stock or securities, or

(C) under regulations prescribed by the Secretary, a taxpayer has diminished his risk of loss by holding 1 or more other positions with respect to substantially similar or related property.

The preceding sentence shall not apply in the case of any qualified covered call (as defined in section 1092(c)(4) but without regard to the requirement that gain or loss with respect to the option not be ordinary income or loss), other than a qualified covered call option to which section 1092(f) applies.

(5) Special rules for foreign source portion of dividends received from specified 10-percent owned foreign corporations

(A) 1-year holding period requirement

For purposes of section 245A—

(i) paragraph (1)(A) shall be applied—

(I) by substituting "365 days" for "45 days" each place it appears, and

(II) by substituting "731-day period" for "91-day period", and

(ii) paragraph (2) shall not apply.

(B) Status must be maintained during holding period

For purposes of applying paragraph (1) with respect to section 245A, the taxpayer shall be treated as holding the stock referred to in paragraph (1) for any period only if—

(i) the specified 10-percent owned foreign corporation referred to in section 245A(a) is a specified 10-percent owned foreign corporation at all times during such period, and

(ii) the taxpayer is a United States shareholder with respect to such specified 10-percent owned foreign corporation at all times during such period.

(d) Dividends from a DISC or former DISC

No deduction shall be allowed under section 243 in respect of a dividend from a corporation which is a DISC or former DISC (as defined in section 992(a)) to the extent such dividend is paid out of the corporation's accumulated DISC income or previously taxed income, or is a deemed distribution pursuant to section 995(b)(1).

(Aug. 16, 1954, ch. 736, 68A Stat. 74; Pub. L. 85–866, title I, §§18(a), 57(c)(2), Sept. 2, 1958, 72 Stat. 1614, 1646; Pub. L. 88–272, title II, §214(b)(2), Feb. 26, 1964, 78 Stat. 55; Pub. L. 91–172, title IV, §434(b)(1), title V, §512(f)(3), Dec. 30, 1969, 83 Stat. 625, 641; Pub. L. 92–178, title V, §502(a), Dec. 10, 1971, 85 Stat. 549; Pub. L. 94–455, title X, §1051(f)(3), title XIX, §1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1646, 1834; Pub. L. 97–248, title II, §213(c), Sept. 3, 1982, 96 Stat. 465; Pub. L. 98–369, div. A, title I, §§53(b), (d)(2), 177(b), title VIII, §801(b)(2)(A), July 18, 1984, 98 Stat. 567, 568, 709, 995; Pub. L. 99–514, title VI, §611(a)(3), title XII, §1275(a)(2)(B), title XVIII, §§1804(b)(1)(A), (B), 1812(d)(1), Oct. 22, 1986, 100 Stat. 2249, 2598, 2798, 2835; Pub. L. 100–203, title X, §10221(c)(1), Dec. 22, 1987, 101 Stat. 1330–409; Pub. L. 100–647, title I, §1018(u)(10), Nov. 10, 1988, 102 Stat. 3590; Pub. L. 104–188, title I, §1616(b)(4), Aug. 20, 1996, 110 Stat. 1856; Pub. L. 105–34, title X, §1015(a), (b), Aug. 5, 1997, 111 Stat. 921, 922; Pub. L. 108–311, title IV, §406(f), Oct. 4, 2004, 118 Stat. 1190; Pub. L. 108–357, title I, §102(d)(4), title VIII, §888(d), Oct. 22, 2004, 118 Stat. 1429, 1643; Pub. L. 109–135, title IV, §402(a)(4), Dec. 21, 2005, 119 Stat. 2610; Pub. L. 113–295, div. A, title II, §221(a)(41)(E), Dec. 19, 2014, 128 Stat. 4044; Pub. L. 115–97, title I, §§11011(d)(2), 13002(c), 13305(b)(1), 14101(b), (c)(1), 14202(b)(2), Dec. 22, 2017, 131 Stat. 2071, 2100, 2126, 2191, 2216; Pub. L. 115–141, div. U, title IV, §401(d)(1)(D)(vi), Mar. 23, 2018, 132 Stat. 1207.)

Editorial Notes

Amendments

2018—Subsec. (e). Pub. L. 115–141 struck out subsec. (e). Prior to amendment, text read as follows: "No deduction shall be allowed under section 243(a) with respect to a dividend received pursuant to a distribution described in section 936(h)(4)."

2017—Subsec. (a)(1). Pub. L. 115–97, §14101(c)(1), substituted "245, and 245A" for "and 245".

Subsec. (b)(1). Pub. L. 115–97, §14202(b)(2)(B), which directed amendment of par. (1) by substituting "subsection (a) and (b) of section 245, and 250" for "and subsection (a) and (b) of section 245" the second place appearing, was executed by making the substitution for "and subsection (a) or (b) of section 245", to reflect the probable intent of Congress.

Pub. L. 115–97, §14202(b)(2)(A), which directed amendment of par. (1) by substituting ", subsection (a) and (b) of section 245, and section 250" for "and subsection (a) and (b) of section 245" the first place appearing, was executed by making the substitution for "and subsection (a) or (b) of section 245", to reflect the probable intent of Congress.

Pub. L. 115–97, §13305(b)(1), struck out "199," after "sections 172,".

Pub. L. 115–97, §11011(d)(2), which directed insertion of "199A," before "243(a)(1)", was executed by making the insertion before "243(a)(1)" the second place appearing, to reflect the probable intent of Congress.

Subsec. (b)(3)(A). Pub. L. 115–97, §13002(c)(1), substituted "65 percent" for "80 percent".

Subsec. (b)(3)(B). Pub. L. 115–97, §13002(c)(2), substituted "50 percent" for "70 percent".

Subsec. (c)(1). Pub. L. 115–97, §14101(b)(1), substituted "245, or 245A" for "or 245" in introductory provisions.

Subsec. (c)(5). Pub. L. 115–97, §14101(b)(2), added par. (5).

2014—Subsec. (a)(1). Pub. L. 113–295, §221(a)(41)(E)(i), struck out ", 244," after "sections 243".

Subsec. (b)(1). Pub. L. 113–295, §221(a)(41)(E)(ii), substituted "section 243(a)(1)" for "sections 243(a)(1), 244(a)," and "and subsection (a) or (b) of section 245," for "244(a), subsection (a) or (b) of section 245, and 247,".

Subsec. (c)(1). Pub. L. 113–295, §221(a)(41)(E)(iii), struck out ", 244," after "section 243" in introductory provisions.

2005—Subsec. (c)(3)(B). Pub. L. 109–135 substituted "paragraph (3) of section 1223" for "paragraph (4) of section 1223".

2004—Subsec. (b)(1). Pub. L. 108–357, §102(d)(4), inserted "199," after "172,".

Subsec. (c)(1)(A). Pub. L. 108–311, §406(f)(1), substituted "91-day period" for "90-day period".

Subsec. (c)(2)(B). Pub. L. 108–311, §406(f)(2), substituted "181-day period" for "180-day period" and "91-day period" for "90-day period".

Subsec. (c)(4). Pub. L. 108–357, §888(d), inserted ", other than a qualified covered call option to which section 1092(f) applies" before period at end of concluding provisions.

1997—Subsec. (c)(1)(A). Pub. L. 105–34, §1015(a), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: "which is held by the taxpayer for 45 days or less, or".

Subsec. (c)(2). Pub. L. 105–34, §1015(b)(1), amended heading and text of par. (2) generally. Prior to amendment, text read as follows: "In the case of any stock having preference in dividends, the holding period specified in paragraph (1)(A) shall be 90 days in lieu of 45 days if the taxpayer receives dividends with respect to such stock which are attributable to a period or periods aggregating in excess of 366 days."

Subsec. (c)(3). Pub. L. 105–34, §1015(b)(2), inserted "and" at end of subpar. (A), redesignated subpar. (C) as (B), and struck out former subpar. (B) which read as follows: "there shall not be taken into account any day which is more than 45 days (or 90 days in the case of stock to which paragraph (2) applies) after the date on which such share becomes ex-dividend, and".

1996—Subsec. (f). Pub. L. 104–188 struck out subsec. (f) which provided a cross reference to section 596 of this title for special rule relating to mutual savings banks, etc., to which section 593 applies.

1988—Subsec. (c)(1)(A). Pub. L. 100–647 substituted "which" for "Which".

1987—Subsec. (b)(1). Pub. L. 100–203, §10221(c)(1)(A), substituted "the percentage determined under paragraph (3)" for "80 percent".

Subsec. (b)(3). Pub. L. 100–203, §10221(c)(1)(B), added par. (3).

1986—Subsec. (a)(2)(B). Pub. L. 99–514, §1812(d)(1)(A), substituted "In" for "For purposes of subparagraph (A), in" in introductory provisions and substituted cl. (i)(II) for former cl. (i)(II) which read as follows: "which were not taken into account under subparagraph (A), bears to".

Subsec. (a)(2)(C), (D). Pub. L. 99–514, §1812(d)(1)(B), (C), added subpar. (C), redesignated former subpar. (C) as (D), and added cl. (iv) to subpar. (D).

Subsec. (b)(1). Pub. L. 99–514, §611(a)(3), substituted "80 percent" for "85 percent".

Subsec. (c)(1)(A). Pub. L. 99–514, §1804(b)(1)(A), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: "which is sold or otherwise disposed of in any case in which the taxpayer has held such share for 45 days or less, or".

Subsec. (c)(4). Pub. L. 99–514, §1804(b)(1)(B), substituted "determined for purposes of this subsection" for "determined under paragraph (3)".

Subsec. (e). Pub. L. 99–514, §1275(a)(2)(B), struck out "or 934(e)(3)" after "936(h)(4)".

1984—Subsec. (a). Pub. L. 98–369, §177(b), amended subsec. (a) generally, designating existing provisions as par. (1) and adding par. (2).

Subsec. (b)(1). Pub. L. 98–369, §801(b)(2)(A), substituted "subsection (a) or (b) of section 245" for "245" in two places.

Pub. L. 98–369, §53(d)(2), substituted "without regard to any adjustment under section 1059, and without regard" for "and without regard".

Subsec. (c)(1)(A). Pub. L. 98–369, §53(b)(1), substituted "45" for "15".

Subsec. (c)(1)(B). Pub. L. 98–369, §53(b)(3), substituted "to make related payments with respect to positions in substantially similar or related property" for "to make corresponding payments with respect to substantially identical stock or securities".

Subsec. (c)(2). Pub. L. 98–369, §53(b)(1), substituted "45" for "15".

Subsec. (c)(3). Pub. L. 98–369, §53(b)(4), struck out last sentence which directed that the holding periods determined under the preceding provisions of this paragraph be appropriately reduced (in the manner provided in regulations prescribed by the Secretary) for any period (during such holding periods) in which the taxpayer had an option to sell, was under a contractual obligation to sell, or had made (and not closed) a short sale of, substantially identical stock or securities.

Subsec. (c)(3)(B). Pub. L. 98–369, §53(b)(1), substituted "45" for "15".

Subsec. (c)(4). Pub. L. 98–369, §53(b)(2), added par. (4).

1982—Subsecs. (e), (f). Pub. L. 97–248 added subsec. (e) and redesignated former subsec. (e) as (f).

1976—Subsec. (a). Pub. L. 94–455, §1051(f)(3), struck out references to dividends from corporations organized under the China Trade Act, 1922, and corporations to which section 931 (relating to income from sources within possessions of the United States) applies.

Subsec. (c)(3). Pub. L. 94–455, §1906(b)(13)(A), struck out "or his delegate" after "Secretary".

1971—Subsecs. (d), (e). Pub. L. 92–178 added subsec. (d) and redesignated former subsec. (d) as (e).

1969—Subsec. (b)(1). Pub. L. 91–172, §512(f)(3), substituted "and 247, and without regard to any capital loss carryback to the taxable year under section 1212(a)(1)" for "and 247".

Subsec. (d). Pub. L. 91–172, §434(b)(1), added subsec. (d).

1964—Subsec. (b). Pub. L. 88–272 substituted "243(a)(1), 244(a)" for "243(a), 244" wherever appearing.

1958—Subsec. (b)(1). Pub. L. 85–866, §57(c)(2), substituted "243(a)" for "243" wherever appearing.

Subsec. (c). Pub. L. 85–866, §18(a), added subsec. (c).

Statutory Notes and Related Subsidiaries

Effective Date of 2017 Amendment

Amendment by section 11011(d)(2) of Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 11011(e) of Pub. L. 115–97, set out as a note under section 62 of this title.

Amendment by section 13002(c) of Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 13002(f) of Pub. L. 115–97, set out as a note under section 243 of this title.

Amendment by section 13305(b)(1) of Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, except as provided by transition rule, see section 13305(c) of Pub. L. 115–97, set out as a note under section 74 of this title.

Amendment by section 14101(b), (c)(1) of Pub. L. 115–97 applicable to distributions made after Dec. 31, 2017, see section 14101(f) of Pub. L. 115–97, set out as an Effective Date note under section 245A of this title.

Amendment by section 14202(b)(2) of Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 14202(c) of Pub. L. 115–97, set out as a note under section 172 of this title.

Effective Date of 2014 Amendment

Amendment by Pub. L. 113–295 not applicable to preferred stock issued before Oct. 1, 1942 (determined in the same manner as under section 247 of this title as in effect before its repeal by Pub. L. 113–295), see section 221(a)(41)(K) of Pub. L. 113–295, set out as a note under section 172 of this title.

Except as otherwise provided in section 221(a) of Pub. L. 113–295, amendment by Pub. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title.

Effective Date of 2005 Amendment

Amendment by Pub. L. 109–135 effective as if included in the provisions of the Energy Policy Act of 2005, Pub. L. 109–58, to which it relates, but not applicable with respect to any transaction ordered in compliance with the Public Utility Holding Company Act of 1935 (15 U.S.C. 79 et seq.) before its repeal, see section 402(m) of Pub. L. 109–135, set out as an Effective and Termination Dates of 2005 Amendments note under section 23 of this title.

Effective Date of 2004 Amendments

Amendment by section 102(d)(4) of Pub. L. 108–357 applicable to taxable years beginning after Dec. 31, 2004, see section 102(e) of Pub. L. 108–357, set out as a note under section 56 of this title.

Pub. L. 108–357, title VIII, §888(e), Oct. 22, 2004, 118 Stat. 1643, provided that: "The amendments made by this section [amending this section and sections 1092 and 1258 of this title] shall apply to positions established on or after the date of the enactment of this Act [Oct. 22, 2004]."

Amendment by Pub. L. 108–311 effective as if included in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates, see section 406(h) of Pub. L. 108–311, set out as a note under section 55 of this title.

Effective Date of 1997 Amendment

Pub. L. 105–34, title X, §1015(c), Aug. 5, 1997, 111 Stat. 922, provided that:

"(1) In general.—The amendments made by this section [amending this section] shall apply to dividends received or accrued after the 30th day after the date of the enactment of this Act [Aug. 5, 1997].

"(2) Transitional rule.—The amendments made by this section shall not apply to dividends received or accrued during the 2-year period beginning on the date of the enactment of this Act if—

"(A) the dividend is paid with respect to stock held by the taxpayer on June 8, 1997, and all times thereafter until the dividend is received,

"(B) such stock is continuously subject to a position described in section 246(c)(4) of the Internal Revenue Code of 1986 on June 8, 1997, and all times thereafter until the dividend is received, and

"(C) such stock and position are clearly identified in the taxpayer's records within 30 days after the date of the enactment of this Act.

Stock shall not be treated as meeting the requirement of subparagraph (B) if the position is sold, closed, or otherwise terminated and reestablished."

Effective Date of 1996 Amendment

Amendment by Pub. L. 104–188 applicable to taxable years beginning after Dec. 31, 1995, see section 1616(c) of Pub. L. 104–188, set out as a note under section 593 of this title.

Effective Date of 1988 Amendment

Amendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.

Effective Date of 1987 Amendment

Amendment by Pub. L. 100–203 applicable to taxable years beginning after Dec. 31, 1987, see section 10221(e)(2) of Pub. L. 100–203, as amended, set out as a note under section 243 of this title.

Effective Date of 1986 Amendment

Pub. L. 99–514, title VI, §611(b), Oct. 22, 1986, 100 Stat. 2249, provided that:

"(1) In general.—The amendments made by subsection (a) [amending this section and sections 243, 244, 246A, and 805 of this title] shall apply to dividends received or accrued after December 31, 1986, in taxable years ending after such date.

"(2) Amendment relating to limitation on deductions.—The amendment made by subsection (a) to section 246(b) of the Internal Revenue Code of 1986 shall apply to taxable years beginning after December 31, 1986."

Amendment by section 1275(a)(2)(B) of Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, with certain exceptions and qualifications, see section 1277 of Pub. L. 99–514, set out as a note under section 931 of this title.

Pub. L. 99–514, title XVIII, §1804(b)(1)(C), Oct. 22, 1986, 100 Stat. 2798, provided that: "The amendments made by this paragraph [amending this section] shall apply to stock acquired after March 1, 1986."

Amendment by section 1812(d)(1) of Pub. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title.

Effective Date of 1984 Amendment

Amendment by section 53(d)(2) of Pub. L. 98–369 applicable to distributions after Mar. 1, 1984, in taxable years ending after such date, and amendment of subsec. (c) of this section by section 53(b) of Pub. L. 98–369, applicable to stock acquired after July 18, 1984, in taxable years ending after such date, see section 53(e)(1), (2) of Pub. L. 98–369, set out as an Effective Date note under section 1059 of this title.

Amendment by section 177(b) of Pub. L. 98–369, effective Jan. 1, 1985, see section 177(d) of Pub. L. 98–369, set out as a note under section 172 of this title.

Amendment by section 801(b)(2)(A) of Pub. L. 98–369 applicable to transactions after Dec. 31, 1984, in taxable years ending after such date, see section 805(a)(1) of Pub. L. 98–369, as amended, set out as a note under section 245 of this title.

Effective Date of 1982 Amendment

Pub. L. 97–248, title II, §213(e), Sept. 3, 1982, 96 Stat. 466, as amended by Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that:

"(1) In general.—Except as provided in paragraphs (2) and (3), the amendments made by this section [amending this section and sections 367, 934, and [former] 936 of this title] shall apply to taxable years beginning after December 31, 1982.

"(2) Certain sales made after july 1, 1982.—Paragraph (6) of [former] section 936(h) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], and so much of section 934 to which such paragraph applies by reason of section 934(e)(4) of such Code, shall apply to taxable years ending after July 1, 1982.

"(3) Certain transfers of intangibles made after august 14, 1982.—Subsection (d) [amending section 367 of this title] shall apply to taxable years ending after August 14, 1982."

Effective Date of 1976 Amendment

For effective date of amendment by section 1051(f)(3) of Pub. L. 94–455, see section 1051(i) of Pub. L. 94–455, set out as a note under section 27 of this title.

Amendment by section 1906(b)(13)(A) of Pub. L. 94–455 effective Feb. 1, 1977, see section 1906(d)(1) of Pub. L. 94–455, set out as a note under section 6013 of this title.

Effective Date of 1971 Amendment

Amendment by Pub. L. 92–178 applicable with respect to taxable years ending after Dec. 31, 1971, except that a corporation may not be a DISC for any taxable year beginning before Jan. 1, 1972, see section 507 of Pub. L. 92–178, set out as an Effective Date note under section 991 of this title.

Effective Date of 1969 Amendment

Amendment by section 512(f)(3) of Pub. L. 91–172 applicable with respect to net capital losses sustained in taxable years beginning after Dec. 31, 1969, see section 512(g) of Pub. L. 91–172, set out as a note under section 1212 of this title.

Pub. L. 91–172, title IV, §434(c), Dec. 30, 1969, 83 Stat. 625, provided that: "The amendments made by this section [enacting section 596 of this title and amending this section] shall apply to taxable years beginning after July 11, 1969."

Effective Date of 1964 Amendment

Amendment by Pub. L. 88–272 applicable to dividends received in taxable years ending after Dec. 31, 1963, see section 214(c) of Pub. L. 88–272, set out as a note under section 243 of this title.

Effective Date of 1958 Amendment

Pub. L. 85–866, title I, §18(b), Sept. 2, 1958, 72 Stat. 1615, provided that: "The amendment made by subsection (a) [amending this section] shall apply with respect to taxable years ending after December 31, 1957, but only with respect to shares of stock acquired or short sales made after December 31, 1957."

Amendment by section 57(c)(2) of Pub. L. 85–866 applicable with respect to taxable years beginning after Sept. 2, 1958, see section 57(d) of Pub. L. 85–866, set out as a note under section 243 of this title.

Savings Provision

For provisions that nothing in amendment by Pub. L. 115–141 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Mar. 23, 2018, for purposes of determining liability for tax for periods ending after Mar. 23, 2018, see section 401(e) of Pub. L. 115–141, set out as a note under section 23 of this title.

Plan Amendments Not Required Until January 1, 1989

For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title.

1 So in original. Probably should be followed by a comma.

2 So in original.
26 U.S.C. § 1355 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 1355: Definitions and special rules
Definitions and special rules
Status: in_force

(a) Definitions

For purposes of this subchapter—

(1) Electing corporation

The term "electing corporation" means any corporation for which an election is in effect under this subchapter.

(2) Electing group; controlled group

(A) Electing group

The term "electing group" means a controlled group of which one or more members is an electing corporation.

(B) Controlled group

The term "controlled group" means any group which would be treated as a single employer under subsection (a) or (b) of section 52 if paragraphs (1) and (2) of section 52(a) did not apply.

(3) Qualifying vessel operator

The term "qualifying vessel operator" means any corporation—

(A) who operates one or more qualifying vessels, and

(B) who meets the shipping activity requirement in subsection (c).

(4) Qualifying vessel

The term "qualifying vessel" means a self-propelled (or a combination self-propelled and non-self-propelled) United States flag vessel of not less than 6,000 deadweight tons used exclusively in the United States foreign trade during the period that the election under this subchapter is in effect.

(5) United States flag vessel

The term "United States flag vessel" means any vessel documented under the laws of the United States.

(6) United States domestic trade

The term "United States domestic trade" means the transportation of goods or passengers between places in the United States.

(7) United States foreign trade

The term "United States foreign trade" means the transportation of goods or passengers between a place in the United States and a foreign place or between foreign places.

(b) Operating a vessel

For purposes of this subchapter—

(1) In general

Except as provided in paragraph (2), a person is treated as operating any vessel during any period if—

(A)(i) such vessel is owned by, or chartered (including a time charter) to, the person, or

(ii) the person provides services for such vessel pursuant to an operating agreement, and

(B) such vessel is in use as a qualifying vessel during such period.

(2) Bareboat charters

A person is treated as operating and using a vessel that it has chartered out on bareboat charter terms only if—

(A)(i) the vessel is temporarily surplus to the person's requirements and the term of the charter does not exceed 3 years, or

(ii) the vessel is bareboat chartered to a member of a controlled group which includes such person or to an unrelated person who sub-bareboats or time charters the vessel to such a member (including the owner of the vessel), and

(B) the vessel is used as a qualifying vessel by the person to whom ultimately chartered.

(c) Shipping activity requirement

For purposes of this section—

(1) In general

Except as otherwise provided in this subsection, a corporation meets the shipping activity requirement of this subsection for any taxable year only if the requirement of paragraph (4) is met for each of the 2 preceding taxable years.

(2) Special rule for 1st year of election

A corporation meets the shipping activity requirement of this subsection for the first taxable year for which the election under section 1354(a) is in effect only if the requirement of paragraph (4) is met for the preceding taxable year.

(3) Controlled groups

A corporation who is a member of a controlled group meets the shipping activity requirement of this subsection only if such requirement is met determined by treating all members of such group as 1 person.

(4) Requirement

The requirement of this paragraph is met for any taxable year if, on average during such year, at least 25 percent of the aggregate tonnage of qualifying vessels used by the corporation were owned by such corporation or chartered to such corporation on bareboat charter terms.

(d) Activities carried on partnerships, etc.

In applying this subchapter to a partner in a partnership—

(1) each partner shall be treated as operating vessels operated by the partnership,

(2) each partner shall be treated as conducting the activities conducted by the partnership, and

(3) the extent of a partner's ownership, charter, or operating agreement interest in any vessel operated by the partnership shall be determined on the basis of the partner's interest in the partnership.

A similar rule shall apply with respect to other pass-thru entities.

(e) Effect of temporarily ceasing to operate a qualifying vessel

(1) In general

For purposes of subsections (b) and (c), an electing corporation shall be treated as continuing to use a qualifying vessel during any period of temporary cessation if the electing corporation gives timely notice to the Secretary stating—

(A) that it has temporarily ceased to operate the qualifying vessel, and

(B) its intention to resume operating the qualifying vessel.

(2) Notice

Notice shall be deemed timely if given not later than the due date (including extensions) for the corporation's tax return for the taxable year in which the temporary cessation begins.

(3) Period disregard in effect

The period of temporary cessation under paragraph (1) shall continue until the earlier of the date on which—

(A) the electing corporation abandons its intention to resume operation of the qualifying vessel, or

(B) the electing corporation resumes operation of the qualifying vessel.

(f) Effect of temporarily operating a qualifying vessel in the United States domestic trade

(1) In general

For purposes of this subchapter, an electing corporation shall be treated as continuing to use a qualifying vessel in the United States foreign trade during any period of temporary use in the United States domestic trade if the electing corporation gives timely notice to the Secretary stating—

(A) that it temporarily operates or has operated in the United States domestic trade a qualifying vessel which had been used in the United States foreign trade, and

(B) its intention to resume operation of the vessel in the United States foreign trade.

(2) Notice

Notice shall be deemed timely if given not later than the due date (including extensions) for the corporation's tax return for the taxable year in which the temporary cessation begins.

(3) Period disregard in effect

The period of temporary use under paragraph (1) continues until the earlier of the date on which—

(A) the electing corporation abandons its intention to resume operations of the vessel in the United States foreign trade, or

(B) the electing corporation resumes operation of the vessel in the United States foreign trade.

(4) No disregard if domestic trade use exceeds 30 days

Paragraph (1) shall not apply to any qualifying vessel which is operated in the United States domestic trade for more than 30 days during the taxable year.

(g) Great Lakes domestic shipping to not disqualify vessel

(1) In general

If the electing corporation elects (at such time and in such manner as the Secretary may require) to apply this subsection for any taxable year to any qualifying vessel which is used in qualified zone domestic trade during the taxable year—

(A) solely for purposes of subsection (a)(4), such use shall be treated as use in United States foreign trade (and not as use in United States domestic trade), and

(B) subsection (f) shall not apply with respect to such vessel for such taxable year.

(2) Effect of temporarily operating vessel in United States domestic trade

In the case of a qualifying vessel to which this subsection applies—

(A) In general

An electing corporation shall be treated as using such vessel in qualified zone domestic trade during any period of temporary use in the United States domestic trade (other than qualified zone domestic trade) if the electing corporation gives timely notice to the Secretary stating—

(i) that it temporarily operates or has operated in the United States domestic trade (other than qualified zone domestic trade) a qualifying vessel which had been used in the United States foreign trade or qualified zone domestic trade, and

(ii) its intention to resume operation of the vessel in the United States foreign trade or qualified zone domestic trade.

(B) Notice

Notice shall be deemed timely if given not later than the due date (including extensions) for the corporation's tax return for the taxable year in which the temporary cessation begins.

(C) Period disregard in effect

The period of temporary use under subparagraph (A) continues until the earlier of the date of which—

(i) the electing corporation abandons its intention to resume operations of the vessel in the United States foreign trade or qualified zone domestic trade, or

(ii) the electing corporation resumes operation of the vessel in the United States foreign trade or qualified zone domestic trade.

(D) No disregard if domestic trade use exceeds 30 days

Subparagraph (A) shall not apply to any qualifying vessel which is operated in the United States domestic trade (other than qualified zone domestic trade) for more than 30 days during the taxable year.

(3) Allocation of income and deductions to qualifying shipping activities

In the case of a qualifying vessel to which this subsection applies, the Secretary shall prescribe rules for the proper allocation of income, expenses, losses, and deductions between the qualified shipping activities and the other activities of such vessel.

(4) Qualified zone domestic trade

For purposes of this subsection—

(A) In general

The term "qualified zone domestic trade" means the transportation of goods or passengers between places in the qualified zone if such transportation is in the United States domestic trade.

(B) Qualified zone

The term "qualified zone" means the Great Lakes Waterway and the St. Lawrence Seaway.

(h) Regulations

The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section.

(Added Pub. L. 108–357, title II, §248(a), Oct. 22, 2004, 118 Stat. 1452; amended Pub. L. 109–135, title IV, §403(g)(1)(B)–(2), Dec. 21, 2005, 119 Stat. 2624; Pub. L. 109–222, title II, §205(a), May 17, 2006, 120 Stat. 350; Pub. L. 109–432, div. A, title IV, §§413(a), 415(a), Dec. 20, 2006, 120 Stat. 2963; Pub. L. 115–141, div. U, title IV, §401(a)(187), Mar. 23, 2018, 132 Stat. 1193.)

Editorial Notes

Amendments

2018—Subsec. (f)(3). Pub. L. 115–141 substituted "on which" for "of which" in introductory provisions.

2006—Subsec. (a)(4). Pub. L. 109–432, §413(a), substituted "6,000" for "10,000 (6,000, in the case of taxable years beginning after December 31, 2005, and ending before January 1, 2011)".

Pub. L. 109–222 inserted "(6,000, in the case of taxable years beginning after December 31, 2005, and ending before January 1, 2011)" after "10,000".

Subsecs. (g), (h). Pub. L. 109–432, §415(a), added subsec. (g) and redesignated former subsec. (g) as (h).

2005—Subsec. (a)(8). Pub. L. 109–135, §403(g)(1)(B), struck out heading and text of par. (8). Text read as follows: "The term 'charter' includes an operating agreement."

Subsec. (b)(1). Pub. L. 109–135, §403(g)(1)(C), reenacted heading without change and amended text generally. Prior to amendment, text read as follows: "Except as provided in paragraph (2), a person is treated as operating any vessel during any period if such vessel is—

"(A) owned by, or chartered (including a time charter) to, the person, and

"(B) is in use as a qualifying vessel during such period."

Subsec. (c)(3). Pub. L. 109–135, §403(g)(2), substituted "determined by treating all members of such group as 1 person." for "determined—

"(A) by treating all members of such group as 1 person, and

"(B) by disregarding vessel charters between members of such group."

Subsec. (d)(3). Pub. L. 109–135, §403(g)(1)(D), amended par. (3) generally. Prior to amendment, par. (3) read as follows: "the extent of a partner's ownership or charter interest in any vessel owned by or chartered to the partnership shall be determined on the basis of the partner's interest in the partnership."

Statutory Notes and Related Subsidiaries

Effective Date of 2006 Amendment

Pub. L. 109–432, div. A, title IV, §413(b), Dec. 20, 2006, 120 Stat. 2963, provided that: "The amendment made by this section [amending this section] shall take effect as if included in section 205 of the Tax Increase Prevention and Reconciliation Act of 2005 [Pub. L. 109–222]."

Pub. L. 109–432, div. A, title IV, §415(b), Dec. 20, 2006, 120 Stat. 2965, provided that: "The amendments made by this section [amending this section] shall apply to taxable years beginning after the date of the enactment of this Act [Dec. 20, 2006]."

Pub. L. 109–222, title II, §205(b), May 17, 2006, 120 Stat. 350, provided that: "The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning after December 31, 2005."

Effective Date of 2005 Amendment

Amendments by Pub. L. 109–135 effective as if included in the provisions of the American Jobs Creation Act of 2004, Pub. L. 108–357, to which they relate, see section 403(nn) of Pub. L. 109–135, set out as a note under section 26 of this title.

Effective Date

Section applicable to taxable years beginning after Oct. 22, 2004, see section 248(c) of Pub. L. 108–357, set out as an Effective Date of 2004 Amendments note under section 56 of this title.
26 U.S.C. § 6702 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 68 / Section 6702: Frivolous tax submissions
Frivolous tax submissions
Status: in_force

(a) Civil penalty for frivolous tax returns

A person shall pay a penalty of $5,000 if—

(1) such person files what purports to be a return of a tax imposed by this title but which—

(A) does not contain information on which the substantial correctness of the self-assessment may be judged, or

(B) contains information that on its face indicates that the self-assessment is substantially incorrect, and

(2) the conduct referred to in paragraph (1)—

(A) is based on a position which the Secretary has identified as frivolous under subsection (c), or

(B) reflects a desire to delay or impede the administration of Federal tax laws.

(b) Civil penalty for specified frivolous submissions

(1) Imposition of penalty

Except as provided in paragraph (3), any person who submits a specified frivolous submission shall pay a penalty of $5,000.

(2) Specified frivolous submission

For purposes of this section—

(A) Specified frivolous submission

The term "specified frivolous submission" means a specified submission if any portion of such submission—

(i) is based on a position which the Secretary has identified as frivolous under subsection (c), or

(ii) reflects a desire to delay or impede the administration of Federal tax laws.

(B) Specified submission

The term "specified submission" means—

(i) a request for a hearing under—

(I) section 6320 (relating to notice and opportunity for hearing upon filing of notice of lien), or

(II) section 6330 (relating to notice and opportunity for hearing before levy), and

(ii) an application under—

(I) section 6159 (relating to agreements for payment of tax liability in installments),

(II) section 7122 (relating to compromises), or

(III) section 7811 (relating to taxpayer assistance orders).

(3) Opportunity to withdraw submission

If the Secretary provides a person with notice that a submission is a specified frivolous submission and such person withdraws such submission within 30 days after such notice, the penalty imposed under paragraph (1) shall not apply with respect to such submission.

(c) Listing of frivolous positions

The Secretary shall prescribe (and periodically revise) a list of positions which the Secretary has identified as being frivolous for purposes of this subsection. The Secretary shall not include in such list any position that the Secretary determines meets the requirement of section 6662(d)(2)(B)(ii)(II).

(d) Reduction of penalty

The Secretary may reduce the amount of any penalty imposed under this section if the Secretary determines that such reduction would promote compliance with and administration of the Federal tax laws.

(e) Penalties in addition to other penalties

The penalties imposed by this section shall be in addition to any other penalty provided by law.

(f) Partnership adjustments

An administrative adjustment request under section 6227 and a partnership adjustment tracking report under section 6226(b)(4)(A) shall be treated as a return for purposes of this section.

(Added Pub. L. 97–248, title III, §326(a), Sept. 3, 1982, 96 Stat. 617; amended Pub. L. 109–432, div. A, title IV, §407(a), Dec. 20, 2006, 120 Stat. 2960; Pub. L. 115–141, div. U, title II, §206(n)(4), Mar. 23, 2018, 132 Stat. 1182.)

Editorial Notes

Amendments

2018—Subsec. (f). Pub. L. 115–141 added subsec. (f).

2006—Pub. L. 109–432 amended section catchline and text generally, substituting provisions relating to civil penalties for frivolous tax returns and submissions, listing of frivolous positions, reduction of penalty to promote compliance with tax laws, and application of other penalties, consisting of subsecs. (a) to (e), for provisions relating to civil penalty for frivolous tax returns and application of other penalties, consisting of subsecs. (a) and (b).

Statutory Notes and Related Subsidiaries

Effective Date of 2018 Amendment

Amendment by Pub. L. 115–141 effective as if included in section 1101 of Pub. L. 114–74, see section 207 of Pub. L. 115–141, set out as a note under section 6031 of this title.

Effective Date of 2006 Amendment

Amendment by Pub. L. 109–432 applicable to submissions made and issues raised after the date on which the Secretary first prescribes a list under subsec. (c) of this section, see section 407(f) of Pub. L. 109–432, set out as a note under section 6320 of this title.

Effective Date

Pub. L. 97–248, title III, §326(c), Sept. 3, 1982, 96 Stat. 617, provided that: "The amendments made by this section [enacting this section] shall apply with respect to documents filed after the date of the enactment of this Act [Sept. 3, 1982]."
26 U.S.C. § 7610 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 78 / Section 7610: Fees and costs for witnesses
Fees and costs for witnesses
Status: in_force

(a) In general

The Secretary shall by regulations establish the rates and conditions under which payment may be made of—

(1) fees and mileage to persons who are summoned to appear before the Secretary, and

(2) reimbursement for such costs that are reasonably necessary which have been directly incurred in searching for, reproducing, or transporting books, papers, records, or other data required to be produced by summons.

(b) Exceptions

No payment may be made under paragraph (2) of subsection (a) if—

(1) the person with respect to whose liability the summons is issued has a proprietary interest in the books, papers, records or other data required to be produced, or

(2) the person summoned is the person with respect to whose liability the summons is issued or an officer, employee, agent, accountant, or attorney of such person who, at the time the summons is served, is acting as such.

(c) Summons to which section applies

This section applies with respect to any summons authorized under section 6420(e)(2), 6421(g)(2), 6427(j)(2), or 7602.

(Added Pub. L. 94–455, title XII, §1205(a), Oct. 4, 1976, 90 Stat. 1699; amended Pub. L. 95–599, title V, §505(c)(6), Nov. 6, 1978, 92 Stat. 2760; Pub. L. 96–223, title II, §232(d)(4)(E), Apr. 2, 1980, 94 Stat. 278; Pub. L. 97–424, title V, §515(b)(12), Jan. 6, 1983, 96 Stat. 2182; Pub. L. 98–369, div. A, title IX, §911(d)(2)(G), July 18, 1984, 98 Stat. 1007; Pub. L. 99–514, title XVII, §1703(e)(2)(G), Oct. 22, 1986, 100 Stat. 2778; Pub. L. 100–647, title I, §1017(c)(9), (12), Nov. 10, 1988, 102 Stat. 3576, 3577.)

Editorial Notes

Amendments

1988—Subsec. (c). Pub. L. 100–647, §1017(c)(12), made technical correction to language of Pub. L. 99–514, §1703(e)(2)(G), see 1986 Amendment note below.

Pub. L. 100–647, §1017(c)(9), substituted "6421(g)(2)" for "6421(f)(2)".

1986—Subsec. (c). Pub. L. 99–514, as amended by Pub. L. 100–647, §1017(c)(12), substituted "6427(j)(2)" for "6427(i)(2)".

1984—Subsec. (c). Pub. L. 98–369 substituted "6427(i)(2)" for "6427(h)(2)".

1983—Subsec. (c). Pub. L. 97–424 struck out "6424(d)(2)," after "6421(f)(2),".

1980—Subsec. (c). Pub. L. 96–223 substituted "6427(h)(2)" for "6427(g)(2)".

1978—Subsec. (c). Pub. L. 95–599 substituted "6427(g)(2)" for "6427(e)(2)".

Statutory Notes and Related Subsidiaries

Effective Date of 1988 Amendment

Amendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.

Effective Date of 1986 Amendment

Amendment by Pub. L. 99–514 applicable to gasoline removed (as defined in section 4082 of this title as amended by section 1703 of Pub. L. 99–514) after Dec. 31, 1987, see section 1703(h) of Pub. L. 99–514, set out as a note under section 4081 of this title.

Effective Date of 1984 Amendment

Amendment by Pub. L. 98–369 effective Aug. 1, 1984, see section 911(e) of Pub. L. 98–369, set out as a note under section 6427 of this title.

Effective Date of 1983 Amendment

Amendment by Pub. L. 97–424 applicable with respect to articles sold after Jan. 6, 1983, see section 515(c) of Pub. L. 97–424, set out as a note under section 34 of this title.

Effective Date of 1980 Amendment

Amendment by Pub. L. 96–223 effective Jan. 1, 1979, see section 232(h)(2) of Pub. L. 96–223, set out as a note under section 6427 of this title.

Effective Date of 1978 Amendment

Amendment by Pub. L. 95–599 effective Jan. 1, 1979, see section 505(d) of Pub. L. 95–599, set out as a note under section 6427 of this title.