Source: https://www.charitableplanning.com/library/documents/497848
Timestamp: 2019-04-19 20:53:23+00:00

Document:
Except as otherwise provided in this chapter, a distribution of property (as defined in section 317(a)) made by a corporation to a shareholder with respect to its stock shall be treated in the manner provided in subsection (c).
For purposes of this section, the amount of any distribution shall be the amount of money received, plus the fair market value of the other property received.
(B) the amount of any liability to which the property received by the shareholder is subject immediately before, and immediately after, the distribution.
For purposes of this section, fair market value shall be determined as of the date of the distribution.
That portion of the distribution which is a dividend (as defined in section 316) shall be included in gross income.
That portion of the distribution which is not a dividend shall be applied against and reduce the adjusted basis of the stock.
Except as provided in subparagraph (B), that portion of the distribution which is not a dividend, to the extent that it exceeds the adjusted basis of the stock, shall be treated as gain from the sale or exchange of property.
That portion of the distribution which is not a dividend, to the extent that it exceeds the adjusted basis of the stock and to the extent that it is out of increase in value accrued before March 1, 1913, shall be exempt from tax.
The basis of property received in a distribution to which subsection (a) applies shall be the fair market value of such property.
Except to the extent otherwise provided in regulations, solely for purposes of determining the taxable income of any 20 percent corporate shareholder (and its adjusted basis in the stock of the distributing corporation), section 312 shall be applied with respect to the distributing corporation as if it did not contain subsections (k) and (n) thereof.
but only if, but for this subsection, the distributee corporation would be entitled to a deduction under section 243 or 245 with respect to such distribution.
The reference in paragraph (1) to subsection (n) of section 312 shall be treated as not including a reference to paragraph (7) of such subsection.
The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection.
(1) For distributions in redemption of stock, see section 302.
(2) For distributions in complete liquidation, see part II (sec. 331 and following).
(3) For distributions in corporate organizations and reorganizations, see part III (sec. 351 and following).
(4) For taxation of dividends received by individuals at capital gain rates, see section 1(h)(11).
2014—Subsec. (e)(2). Pub. L. 113–295 struck out ", 244," after "section 243" in concluding provisions.
2003—Subsec. (f)(4). Pub. L. 108–27 added par. (4).
1988—Subsec. (b)(1). Pub. L. 100–647, §1006(e)(10), amended par. (1) generally. Prior to amendment, par. (1) contained subpars. (A) to (D) which provided what the amount of any distribution would be for noncorporate distributees, corporate distributees, certain corporate distributees of foreign corporations, and foreign corporate distributees.
Subsec. (d). Pub. L. 100–647, §1006(e)(11), amended subsec. (d) generally. Prior to amendment, subsec. (d) contained pars. (1) to (4) which provided what the basis of property received would be for noncorporate distributees, corporate distributees, foreign corporate distributees, and certain corporate distributees of foreign corporations.
Subsec. (e). Pub. L. 100–647, §2004(j)(3)(B), added par. (3) and redesignated former par. (3) as (4).
Pub. L. 100–647, §1006(e)(12), redesignated subsec. (f) as (e) and struck out former subsec. (e) which related to special rule for holding period of appreciated property distributed to corporation.
Subsecs. (f), (g). Pub. L. 100–647, §1006(e)(12), redesignated subsec. (g) as (f). Former subsec. (f) redesignated (e).
1987—Subsec. (f)(1). Pub. L. 100–203 substituted "subsections (k) and (n)" for "subsection (n)".
1986—Subsec. (f)(3). Pub. L. 99–514, §1804(f)(2)(B), substituted "this subsection" for "this section".
Subsec. (g)(4). Pub. L. 99–514, §612(b)(1), struck out par. (4) which provided: "For partial exclusion from gross income of dividends received by individuals, see section 116."
1984—Subsec. (e). Pub. L. 98–369, §54(b), added subsec. (e). Former subsec. (e) redesignated (f).
Subsec. (e)(2). Pub. L. 98–369, §712(i)(1), substituted "complete liquidation" for "partial or complete liquidation" in subsec. (e)(2), which became subsec. (g)(2).
Subsec. (f). Pub. L. 98–369, §61(d), added subsec. (f). Former subsec. (f) redesignated (g).
Pub. L. 98–369, §54(b), redesignated former subsec. (e) as (f).
Subsec. (g). Pub. L. 98–369, §§54(b), 61(d), redesignated former subsec. (e) successively as subsec. (f) and as subsec. (g).
Subsec. (g)(2). Pub. L. 98–369, §712(i)(1), substituted "complete liquidation" for "partial or complete liquidation" in subsec. (e)(2), which became subsec. (g)(2).
1978—Subsec. (b)(1)(B)(ii). Pub. L. 95–628, §3(a), substituted "amount of gain recognized to the distributing corporation on the distribution" for "amount of gain to the distributing corporation which is recognized under subsection (b), (c), or (d) of section 311, under section 341(f), or under section 617(d)(1), 1245(a), 1250(a), 1251(c), 1252(a), or 1254(a)".
Subsec. (d)(2)(B). Pub. L. 95–628, §3(b), substituted "amount of gain recognized to the distributing corporation on the distribution" for "amount of gain to the distributing corporation which is recognized under subsection (b), (c), or (d) of section 311, under section 341(f), or under section 617(d)(1), 1245(a), 1250(a), 1251(c), 1252(a), or 1254(a)".
1976—Subsec. (b)(1)(B)(ii). Pub. L. 94–455, §205(c)(1)(B), substituted "1252(a), or 1254(a)" for "or 1252(a)".
Subsec. (b)(1)(C). Pub. L. 94–455, §1906(b)(13)(A), struck out "or his delegate" after "Secretary".
Subsec. (d)(2)(B). Pub. L. 94–455, §205(c)(1)(C), substituted "1252(a), or 1254(a)" for "or 1252(a)".
Subsec. (e). Pub. L. 94–455, §1901(a)(41), (b)(32)(A), redesignated subsec. (g) as (e). Former subsec. (e), which related to exceptions for certain distributions by personal service corporations, was struck out.
Subsec. (f). Pub. L. 94–455, §1901(b)(32)(A), struck out subsec. (f) which related to special rules for distribution of antitrust stock to corporations.
Subsec. (g). Pub. L. 94–455, §1901(b)(32)(A), redesignated subsec. (g) as (e).
1971—Subsec. (b)(1)(B). Pub. L. 92–178, §312(a)(1), substituted "corporation, unless subparagraph (D) applies" for "corporation" where first appearing.
Subsec. (b)(1)(D). Pub. L. 92–178, §312(a)(2), added subpar. (D).
Subsec. (d)(2). Pub. L. 92–178, §312(a)(3), substituted "corporation, unless paragraph (3) applies" for "corporation" where first appearing.
Subsec. (d)(3), (4). Pub. L. 92–178, §312(a)(4), added par. (3) and redesignated former par. (3) as (4).
1969—Subsec. (b)(1)(B)(ii). Pub. L. 91–172, §§211(b)(1), 905(b)(2), substituted "1250(a), 1251(c), or 1252(a)" for "or 1250(a)" and inserted reference to section 311(a).
Subsec. (d)(2)(B). Pub. L. 91–172, §§211(b)(2), 905(b)(2), substituted "1250(a), 1251(c), or 1252(a)", for "or 1250(a)" and inserted reference to section 311(a).
1966—Subsec. (b)(1)(B)(ii). Pub. L. 89–570 included reference to section 617(d)(1).
Subsec. (b)(1)(C). Pub. L. 89–809 substituted "gross income which is effectively connected with the conduct of a trade or business within the United States" for "gross income from sources within the United States" in cl. (i), "gross income which is not effectively connected with the conduct of a trade or business within the United States" for "gross income from sources without the United States" in cl. (ii), and inserted text following cl. (ii) setting out the treatment to be accorded gross income for any period before the first taxable year beginning after December 31, 1966.
Subsec. (d)(2)(B). Pub. L. 89–570 included reference to section 617(d)(1).
1964—Subsec. (b). Pub. L. 88–484 included amount of gain recognized under section 341(f).
Pub. L. 88–272 inserted reference to section 1250(a).
Subsec. (d). Pub. L. 88–484 included amount of gain recognized under section 341(f).
1962—Subsec. (b)(1)(B). Pub. L. 87–834, §13(f)(2), substituted "subsection (b) or (c) of section 311 or under section 1245(a)" for "subsection (b) or (c) of section 311".
Subsec. (b)(1)(C). Pub. L. 87–834, §5(a), added subpar. (C).
Subsec. (d)(2). Pub. L. 87–834, §13(f)(2), substituted "subsection (b) or (c) of section 311 or under section 1245(a)" for "subsection (b) or (c) of section 311".
Subsec. (d)(3). Pub. L. 87–834, §5(b), added par. (3).
Subsecs. (f), (g). Pub. L. 87–403 added subsec. (f) and redesignated former subsec. (f) as (g).
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.
Amendment by section 1006(e)(10)–(12) 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(j)(3)(B) 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.
"(ii) such amendment shall not affect the determination of whether any distribution on or before December 15, 1987, is a dividend and the amount of any reduction in accumulated earnings and profits on account of any such distribution.
"(B) Exception.—The amendment made by paragraph (1) shall not apply for purposes of determining gain or loss on any disposition of stock after December 15, 1987, and before January 1, 1989, if such disposition is pursuant to a written binding contract, governmental order, letter of intent or preliminary agreement, or stock acquisition agreement, in effect on or before December 15, 1987."
Pub. L. 99–514, title VI, §612(c), Oct. 22, 1986, 100 Stat. 2251, provided that: "The amendments made by this section [amending this section and sections 584, 642, 643, 702, 854, and 857 of this title, repealing section 116 of this title, and enacting provisions set out as a note under section 584 of this title] shall apply to taxable years beginning after December 31, 1986."
Amendment by section 1804(f)(2)(B) 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.
Amendment by section 54(b) of Pub. L. 98–369 applicable to distributions after July 18, 1984, in taxable years ending after July 18, 1984, see section 54(d)(2) of Pub. L. 98–369, set out as a note under section 311 of this title.
Pub. L. 98–369, div. A, title I, §61(e)(4), July 18, 1984, 98 Stat. 583, provided that: "The amendment made by subsection (d) [amending this section] shall apply to distributions after the date of the enactment of this Act [July 18, 1984] in taxable years ending after such date."
Amendment by section 712(i)(1) of Pub. L. 98–369 effective as if included in the provision of the Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. 97–248, to which such amendment relates, see section 715 of Pub. L. 98–369, set out as a note under section 31 of this title.
Pub. L. 95–628, §3(d), Nov. 10, 1978, 92 Stat. 3628, provided that: "The amendments made by this section [amending this section and section 312 of this title] shall apply to distributions made after the date of the enactment of this Act [Nov. 10, 1978]."
Amendment by section 205(c)(1)(B), (C) of Pub. L. 94–455 effective for taxable years ending after Dec. 31, 1975, see section 205(e) of Pub. L. 94–455, set out as an Effective Date note under section 1254 of this title.
Amendment by section 1901(a)(41), (b)(32)(A) of Pub. L. 94–455 effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94–455, set out as a note under section 2 of this title.
Pub. L. 92–178, title III, §312(b), Dec. 10, 1971, 85 Stat. 526, provided that: "The amendments made by subsection (a) [amending this section] shall apply with respect to distributions made after November 8, 1971."
Pub. L. 91–172, title II, §211(c), Dec. 30, 1969, 83 Stat. 570, provided that: "The amendments made by this section [enacting section 1251 of this title and amending this section and sections 312, 341, 453, and 751 of this title] shall apply to taxable years beginning after December 31, 1969."
Amendment by section 905(b)(2) of Pub. L. 91–172 effective with respect to distributions made after Nov. 30, 1969, see section 905(c) of Pub. L. 91–172, set out as a note under section 311 of this title.
Amendment by Pub. L. 89–809 applicable with respect to taxable years beginning after Dec. 31, 1966, see section 104(n) of Pub. L. 89–809, set out as a note under section 11 of this title.
Pub. L. 88–484, §2, Aug. 22, 1964, 78 Stat. 597, provided that: "The amendments made by the first section of this Act [amending this section and sections 312, 341, and 453 of this title] shall apply with respect to transactions after the date of the enactment of this Act [Aug. 22, 1964] in taxable years ending after such date."
Amendment by Pub. L. 88–272 applicable to dispositions after Dec. 31, 1963, in taxable years ending after such date, see section 231(c) of Pub. L. 88–272, set out as an Effective Date note under section 1250 of this title.
Pub. L. 87–834, §5(d), Oct. 16, 1962, 76 Stat. 977, provided that: "The amendments made by this section [amending this section and section 245 of this title] shall apply to distributions made after December 31, 1962."
Amendment by section 13(f)(2) of Pub. L. 87–834 applicable to taxable years beginning after Dec. 31, 1962, see section 13(g) of Pub. L. 87–834, set out as an Effective Date note under section 1245 of this title.
Pub. L. 87–403, §2(b), Feb. 2, 1962, 76 Stat. 6, provided that: "The amendments made by this section [amending this section] shall apply only with respect to distributions made after the date of the enactment of this Act [Feb. 2, 1962]."
Pub. L. 99–514, title VI, §634, Oct. 22, 1986, 100 Stat. 2282, directed Secretary of the Treasury or his delegate to conduct a study of proposals to reform the provisions of subchapter C of chapter 1 of the Internal Revenue Code of 1986, and not later than Jan. 1, 1988 (due date extended to Jan. 1, 1992, by Pub. L. 101–508, title XI, §11831(b), Nov. 5, 1990, 104 Stat. 1388–559), to submit to Committee on Ways and Means of House of Representatives and Committee on Finance of Senate a report on the study conducted (together with such recommendations he deemed advisable).

References: §1006
 §1006
 §2004
 §1006
 §1006
 §1804
 §612
 §54
 §712
 §61
 §54
 §712
 §3
 §3
 §205
 §1906
 §205
 §1901
 §1901
 §1901
 §312
 §312
 §312
 §312
 §13
 §5
 §13
 §5
 §612
 §61
 §3
 §312
 §211
 §2
 §5
 §2
 §634
 §11831