Stock received in a tax-free reorganization when the effect of the transaction is substantially the same as the receipt of a dividend. No gain or loss recognized if only stock and securities are distributed. The distribution is treated as a liquidation if it is one of a series of distributions in redemption of all the stock of a corporation pursuant to a plan. When the corp. ceases to be a going concern and is engaged in activities whose sole function is the winding up of its business. Formal written plan is not required, but is preferred.
Informal plans are okay, but documentation is recommended.
Gain or loss is computed on each block of stock. Additional receipts past zero are recognized gain. Principal payments are considered payments for the stock retired. Interest is treated as interest income. Does not apply to inventory unless bulk sale occurs.