Source: https://www.charitableplanning.com/library/documents/497872
Timestamp: 2019-04-19 20:12:28+00:00

Document:
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.
(C) whether or not the distribution is in pursuance of a plan of reorganization (within the meaning of section 368(a)(1)(D)).
(ii) securities in the controlled corporation are received and no securities are surrendered in connection with such distribution.
shall not be treated as stock of such controlled corporation, but as other property.
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.
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.
(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) 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.
(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.
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.
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.
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.
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.
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.
then gain shall be recognized to the distributing corporation as if such property were sold to the distributee at its fair market value.
For purposes of subparagraph (A), the term "qualified property" means any stock or securities in the controlled corporation.
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.
Sections 311 and 336(a) shall not apply to any distribution referred to in paragraph (1).
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).
(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.
(II) any securities in the distributing corporation acquired by purchase during the 5-year period ending on the date of the distribution.
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.
(ii) the property is not acquired in an exchange to which section 351, 354, 355, or 356 applies.
(iii) any debt of the transferor.
such acquirer shall be treated as having acquired such property by purchase on the date it was so acquired by such other person.
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.
(iv) any other device or transaction.
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.
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.
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).
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.
(B) regulations modifying the definition of the term "purchase".
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).
(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.
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.
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).
This subsection shall not apply to any distribution to which subsection (d) applies.
(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).
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.
The term "50-percent or greater interest" has the meaning given such term by subsection (d)(4).
Paragraph (1) shall not apply to any distribution made in a title 11 or similar case (as defined in section 368(a)(3)).
The rules of paragraph (7)(A) of subsection (d) shall apply.
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.
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.
(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.
(C) providing for the application of rules similar to the rules of subsection (d)(6) where appropriate for purposes of paragraph (2)(B).
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)).
(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.
(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.
(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.
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.
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.
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.
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).
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.
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).
The rules of section 318 shall apply for purposes of determining ownership of stock for purposes of this paragraph.
For purposes of this subsection, the term "transaction" includes a series of transactions.
(C) which modify the application of the attribution rules applied for purposes of this subsection.
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.
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.
(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.
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.
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.
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)".
"(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.
"(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)."
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).
"(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".
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.
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."
"(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.
"(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.
"(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."
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]."
"(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].
"(C) described on or before such date in a public announcement or in a filing with the Securities and Exchange Commission."
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.
"(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.
"(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.
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.
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.
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.
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."

References: §101
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 §202
 §507
 §6010
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 §11321
 §1018
 §10223
 §10223
 §10223
 §4
 §311
 §410
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