Source: https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section302&num=0&edition=prelim
Timestamp: 2019-09-18 11:39:16
Document Index: 125032055

Matched Legal Cases: ['§ 302', '§302', '§1906', '§5', '§222', '§712', '§306', '§306', '§306', '§222', '§222', '§228', '§222', '§5', '§5', '§228', '§222', '§306', '§2']

[USC02] 26 USC 302: Distributions in redemption of stock
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26 USC 302: Distributions in redemption of stock Text contains those laws in effect on September 17, 2019
§302. Distributions in redemption of stock
For purposes of this paragraph, the distribution is substantially disproportionate if-
is less than 80 percent of-
For purposes of this paragraph, no distribution shall be treated as substantially disproportionate unless the shareholder's ownership of the common stock of the corporation (whether voting or nonvoting) after and before redemption also meets the 80 percent requirement of the preceding sentence. For purposes of the preceding sentence, if there is more than one class of common stock, the determinations shall be made by reference to fair market value.
(4) Redemption from noncorporate shareholder in partial liquidation
Subsection (a) shall apply to a distribution if such distribution is-
(A) in redemption of stock held by a shareholder who is not a corporation, and
(B) in partial liquidation of the distributing corporation.
(5) Redemptions by certain regulated investment companies
Except to the extent provided in regulations prescribed by the Secretary, subsection (a) shall apply to any distribution in redemption of stock of a publicly offered regulated investment company (within the meaning of section 67(c)(2)(B)) if-
(A) such redemption is upon the demand of the stockholder, and
(B) such company issues only stock which is redeemable upon the demand of the stockholder.
(A) In the case of a distribution described in subsection (b)(3), section 318(a)(1) shall not apply if-
(i) immediately after the distribution the distributee has no interest in the corporation (including an interest as officer, director, or employee), other than an interest as a creditor,
(ii) the distributee does not acquire any such interest (other than stock acquired by bequest or inheritance) within 10 years from the date of such distribution, and
(iii) the distributee, at such time and in such manner as the Secretary by regulations prescribes, files an agreement to notify the Secretary of any acquisition described in clause (ii) and to retain such records as may be necessary for the application of this paragraph.
(B) Subparagraph (A) of this paragraph shall not apply if-
(i) any portion of the stock redeemed was acquired, directly or indirectly, within the 10-year period ending on the date of the distribution by the distributee from a person the ownership of whose stock would (at the time of distribution) be attributable to the distributee under section 318(a), or
(ii) any person owns (at the time of the distribution) stock the ownership of which is attributable to the distributee under section 318(a) and such person acquired any stock in the corporation, directly or indirectly, from the distributee within the 10-year period ending on the date of the distribution, unless such stock so acquired from the distributee is redeemed in the same transaction.
Subparagraph (A) shall not apply to a distribution to any entity unless-
(I) such entity and each related person meet the requirements of clauses (i), (ii), and (iii) of subparagraph (A), and
(II) each related person agrees to be jointly and severally liable for any deficiency (including interest and additions to tax) resulting from an acquisition described in clause (ii) of subparagraph (A).
In any case to which the preceding sentence applies, the second sentence of subparagraph (A) and subparagraph (B)(ii) shall be applied by substituting "distributee or any related person" for "distributee" each place it appears.
(I) the term "entity" means a partnership, estate, trust, or corporation; and
(II) the term "related person" means any person to whom ownership of stock in the corporation is (at the time of the distribution) attributable under section 318(a)(1) if such stock is further attributable to the entity under section 318(a)(3).
For purposes of subsection (b)(4), a distribution shall be treated as in partial liquidation of a corporation if-
(A) the distribution is not essentially equivalent to a dividend (determined at the corporate level rather than at the shareholder level), and
(B) the distribution is pursuant to a plan and occurs within the taxable year in which the plan is adopted or within the succeeding taxable year.
(2) Termination of business
The distributions which meet the requirements of paragraph (1)(A) shall include (but shall not be limited to) a distribution which meets the requirements of subparagraphs (A) and (B) of this paragraph:
(A) The distribution is attributable to the distributing corporation's ceasing to conduct, or consists of the assets of, a qualified trade or business.
(B) Immediately after the distribution, the distributing corporation is actively engaged in the conduct of a qualified trade or business.
For purposes of paragraph (2), the term "qualified trade or business" means any trade or business which-
(A) was actively conducted throughout the 5-year period ending on the date of the redemption, and
(B) was not acquired by the corporation within such period in a transaction in which gain or loss was recognized in whole or in part.
For special rules relating to redemption-
(1) Death Taxes.-Of stock to pay death taxes, see section 303.
(2) Section 306 Stock.-Of section 306 stock, see section 306.
(3) Liquidations.-Of stock in complete liquidation, see section 331.
(Aug. 16, 1954, ch. 736, 68A Stat. 85 ; Pub. L. 94–455, title XIX, §1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834 ; Pub. L. 96–589, §5(b), Dec. 24, 1980, 94 Stat. 3405 ; Pub. L. 97–248, title II, §§222(c), 228(a), Sept. 3, 1982, 96 Stat. 478 , 493; Pub. L. 98–369, div. A, title VII, §712(i)(1), July 18, 1984, 98 Stat. 948 ; Pub. L. 111–325, title III, §306(a), Dec. 22, 2010, 124 Stat. 3549 .)
2010-Subsec. (a). Pub. L. 111–325, §306(a)(2), substituted "(4), or (5)" for "or (4)".
Subsec. (b)(5), (6). Pub. L. 111–325, §306(a)(1), added par. (5) and redesignated former par. (5) as (6).
1984-Subsec. (f)(3). Pub. L. 98–369 substituted "complete liquidation" for "partial or complete liquidation".
1982-Subsec. (a). Pub. L. 97–248, §222(c)(3), substituted "paragraph (1), (2), (3), or (4)" for "paragraph (1), (2), or (3)".
Subsec. (b)(4), (5). Pub. L. 97–248, §222(c)(1), (4), added par. (4), redesignated former par. (4) as (5) and substituted "paragraph (2), (3), or (4)" for "paragraph (2) or (3)" after "to meet the requirements of", and "paragraph (1), (2), or (4)" for "paragraph (1) or (2)" after "and also the requirements of".
Subsec. (c)(2)(C). Pub. L. 97–248, §228(a), added subpar. (C).
Subsecs. (e), (f). Pub. L. 97–248, §222(c)(2), added subsec. (e) and redesignated former subsec. (e) as (f).
1980-Subsec. (a). Pub. L. 96–589, §5(b)(2)(A), struck out reference to par. (4) of subsec. (b).
Subsec. (b)(4), (5). Pub. L. 96–589, §5(b)(1), (2)(B), redesignated par. (5) as (4) and struck out reference to par. (4) in two places. Former par. (4) was struck out.
1976-Subsec. (c)(2). Pub. L. 94–455 struck out "or his delegate" after "Secretary" wherever appearing.
Pub. L. 97–248, title II, §228(b), Sept. 3, 1982, 96 Stat. 493 , provided that: "The amendment made by subsection (a) [amending this section] shall apply with respect to distributions after August 31, 1982, in taxable years ending after such date."
Pub. L. 97–248, title II, §222(f), Sept. 3, 1982, 96 Stat. 481 , as amended by Pub. L. 97–448, title III, §306(a)(6)(A), Jan. 12, 1983, 96 Stat. 2402 ; Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095 , provided that:
"(1) In general.-The amendments made by this section [amending this section and sections 306, 312, 331, 334, 336, 341, 346, 543, and 562 of this title and repealing section 338 of this title] shall apply to distributions after August 31, 1982.
"(A) Ruling requests.-The amendments made by this section shall not apply to distributions made by any corporation if-
"(i)(I) on July 22, 1982, there was a ruling request by such corporation pending with the Internal Revenue Service as to whether such distributions would qualify as a partial liquidation, or
"(II) within the period beginning on July 12, 1981, and ending on July 22, 1982, the Internal Revenue Service granted a ruling to such corporation that the distributions would qualify as a partial liquidation, and
"(ii) such distributions are pursuant to a plan of partial liquidation adopted before October 1, 1982 (or, if later, 90 days after the date on which the Internal Revenue Service granted a ruling pursuant to the request described in clause (i)(I)).
"(B) Plans adopted before july 23, 1982.-The amendments made by this section shall not apply to distributions made pursuant to a plan of partial liquidation adopted before July 23, 1982.
"(C) Control acquired after 1981 and before july 23, 1982.-The amendments made by this section shall not apply to distributions made pursuant to a plan of partial liquidation adopted before October 1, 1982, where control of the corporation making the distributions was acquired after December 31, 1981, and before July 23, 1982.
"(D) Tender offer or binding contract outstanding on july 22, 1982.-
"(i) In general.-The amendments made by this section shall not apply to distributions made by a corporation if-
"(I) such distributions are pursuant to a plan of liquidation adopted before October 1, 1982, and
"(II) control of such corporation was acquired after July 22, 1982, pursuant to a tender offer or binding contract outstanding on such date.
"(ii) Extension of time for adopting plan where acquisition subject to federal regulatory approval.-If the acquisition described in clause (i)(II) is subject to approval by a Federal regulatory agency, clause (i) shall be applied by substituting for 'October 1, 1982' the date which is 90 days after the date on which approval by the Federal regulatory agency of such acquisition becomes final.
"(iii) Special rule where offer subject to approval by foreign regulatory body.-In any case where an offer to acquire stock in a corporation was subject to intervention by a foreign regulatory body and a public announcement of such an offer resulted in the intervention by such foreign regulatory body before July 23, 1982-
"(I) such public announcement shall be treated as a tender offer, and
"(II) clause (i) shall be applied by substituting for 'October 1, 1982' the date which is 90 days after the date on which such regulatory body approves a public offer to acquire stock in such corporation.
"(iv) Special rule where one-third of shares acquired during march and april 1982.-If-
"(I) one-third or more of the shares of a corporation were acquired by another corporation during March and April 1982, and
"(II) during March or April 1982, the acquiring corporation filed with the Federal Trade Commission notification of its intent to acquire control of the acquired corporation,
"(E) Insurance companies.-The amendments made by this section shall not apply to distributions made by an insurance company pursuant to a plan of partial liquidation adopted before October 1, 1982, where control was acquired by the distributee or its parent after December 31, 1980, and before July 23, 1982, and the conduct of the insurance business by the distributee is conditioned on approval by a State regulatory authority.
For purposes of this paragraph, the term 'control' has the meaning given to such term by section 368(c) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], except that in applying such section both direct and indirect ownership of stock shall be taken into account.
"(3) Approval of plan by board of directors.-For purposes of-
"(A) paragraph (2), and
"(B) applying section 346(a)(2) of the Internal Revenue Code of 1986 (as in effect on the day before the date of the enactment of this Act) [Sept. 3, 1982] to distributions to which (but for paragraph (2)) the amendments made by this section would apply,
a plan of liquidation shall be treated as adopted when approved by the corporation's board of directors.
"(4) Coordination with amendments made by section 224.-For purposes of section 338(e)(2)(C) of the Internal Revenue Code of 1986 (as added by section 224), any property acquired in a distribution to which the amendments made by this section do not apply by reason of paragraph (2) shall be treated as acquired before September 1, 1982."