2023 Laws of Puerto Rico › TITLE THIRTEEN - Taxation and Finance (§§ 1 — 33423) › Subtitle 17 - Internal Revenue Code of 2011 (§§ 30001 — 33423) › PART II - Income Taxes (§§ 30041 — 30622) › Chapter 1005 - Computation of Taxable Income (§§ 30101 — 30157) › Subchapter D - Determination of Capital Gains and Losses (§§ 30141 — 30149) › § 30146 - Certain stock purchases treated as asset acquisitions

(a) General rule.— For purposes of this part, if a purchasing corporation makes an election under this section (or is treated under subsection (d) of this section as having made such an election), then, in the case of any qualified stock purchase, the target corporation:
(1) Shall be treated as having sold all of its assets at the close of the acquisition date at fair market value in a single transaction, and
(2) shall be treated as a new corporation which purchased all of the assets referred to in clause (1) as of the beginning of the day after the acquisition date.
(b) Basis of assets after deemed purchase.—
(1) In general.— For purposes of subsection (a), the assets of the target corporation shall be treated as purchased for an amount equal to the sum of:
(A) The grossed-up basis of the recently purchased stock, as determined in clause (4) of this subsection, and
(B) the basis of the nonrecently purchased stock.
(2) Adjustment for liabilities and other relevant items.— The amount described in clause (1) shall be adjusted under regulations prescribed by the Secretary for liabilities of the target corporation and other relevant items.
(3) Election to step-up the basis of certain target stock.—
(A) In general.— Under regulations prescribed by the Secretary, the basis of the stock described in subsection (b)(1)(B) shall be the basis amount determined under paragraph (B) of this clause if the purchasing corporation makes an election to recognize gain as if such stock were sold on the acquisition date for an amount equal to the basis amount determined under paragraph (B).
(B) Determination of basis amount.— For purposes of paragraph (A), the basis amount determined under this paragraph shall be an amount equal to the grossed-up basis of the stock described under clause (1)(A) multiplied by a fraction -
(i) The numerator of which is the percentage of stock (by value) described in subsection (b)(1)(B), and
(ii) the denominator of which is one hundred percent (100%) minus the percentage referred to in subparagraph (i).
(4) Grossed-up basis.— For purposes of clause (1), the grossed-up basis shall be an amount equal to the basis of the stock described in subsection (b)(1)(A) of this section, multiplied by a fraction
(A) The numerator of which is one hundred percent (100%), minus the percentage of stock (by value) described in subsection (b)(1)(B), and
(B) the denominator of which is the percentage of stock (by value) described in subsection (b)(1)(A).
(5) Allocation of basis.— The amount determined under clauses (1) and (2) shall be allocated among the assets of the target corporation in accordance with the regulations prescribed by the Secretary.
(6) Definitions of recently purchased stock and nonrecently purchased stock.— For purposes of this subsection:
(A) Recently purchased stock.— The term “recently purchased stock” means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which was purchased by such corporation during the applicable period.
(B) Nonrecently purchased stock.— The term “nonrecently purchased stock” means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which is not recently purchased stock.
(c) Purchasing corporation, target corporation, and qualified stock purchase defined.— For purposes of this section:
(1) Purchasing corporation.— The term “purchasing corporation” means any corporation which makes a qualified stock purchase of stock of another corporation.
(2) Target corporation.— The term “target corporation” means any corporation the stock of which is acquired by another corporation in a qualified stock purchase.
(3) Qualified stock purchase.— The term “qualified stock purchase” means any transaction or series of transactions in which stock with at least eighty percent (80%) of the total combined voting power of the stock entitled to vote of the target corporation, and at least eighty percent (80%) of the total value of the stock of such corporation is acquired by another corporation by purchase during the applicable period.
(d) Deemed election where purchasing corporation acquires asset of target corporation.—
(1) In general.— A purchasing corporation shall be treated as having made an election under this section with respect to any target corporation if, at any time during the consistency period, the purchasing corporation acquires any asset of the target corporation (or a target affiliate).
(2) Exceptions.— Clause (1) shall not apply with respect to any acquisition by the purchasing corporation if:
(A) Such acquisition is pursuant to a sale by the target corporation (or the target affiliate) in the ordinary course of its trade or business,
(B) the basis of the property acquired is determined (wholly) by reference to the adjusted basis of such property in the hands of the person from whom acquired,
(C) such acquisition was before July 1, 1995, or
(D) such acquisition is described in regulations prescribed by the Secretary and meets such conditions as such regulations may provide.
(3) Special rules.— Whenever necessary to carry out the purpose of this subsection and subsection (e), the Secretary may treat stock acquisitions which are pursuant to a plan and in which stock with at least eighty percent (80%) of the total combined voting power of all the classes of stock entitled to vote of a target corporation, and at least eighty percent (80%) of the total value of all the classes of stock of such corporation is acquired as a qualified stock purchase.
(e) Consistency required for all stock acquisitions from same affiliated group.— If a purchasing corporation makes qualified stock purchases with respect to the target corporation and also makes a qualified stock purchase with respect to one or more target affiliates during any consistency period, then (except as otherwise provided in subsection (d)):
(1) Any election under this section with respect to the first qualified stock purchase shall apply to each other such purchase, and
(2) no election may be made under this section with respect to the second or subsequent qualified stock purchase if such an election was not made with respect to the first such purchase.
(f) Election.—
(1) Date.— Except as otherwise provided in regulations, an election under this section shall be made not later than the fifteenth (15th) day of the ninth (9th) month beginning after the month in which the acquisition date occurs.
(2) Manner.— An election by the purchasing corporation under this section shall be made in such manner as the Secretary may prescribe by regulations.
(3) Election irrevocable.— An election by a purchasing corporation under this section, once made, shall be irrevocable.
(g) Definitions and special rules.—
(1) Applicable period.— The term “applicable period” means the 12-month period beginning with the date of the first acquisition by purchase of stock included in a qualified stock purchase. No applicable period shall begin before July 1, 1995.
(2) Acquisition date.— The term “acquisition date” means, with respect to any corporation, the first day on which there is a qualified stock purchase with respect to the stock of such corporation.
(3) Purchase.—
(A) In general.— The term “purchase” means any acquisition of stock, but only if:
(i) The basis of the stock in the hands of the purchasing corporation is not determined,
(I) in whole or in part by reference to the adjusted basis of such stock in the hands of the person from whom acquired, or
(II) under § 30142(a)(2), § 30142(a)(4) or § 30142(a)(5) of this title;
(ii) the stock is not acquired in an exchange to which § 30144(b)(3), § 30144(b)(4), § 30144(b)(5), § 30144(l) of this title or other transaction described in regulations in which the transferor does not recognize the entire amount of the gain or loss realized on the transaction, and
(iii) the stock is not acquired from a related corporation.
(B) Deemed purchase under subsection (a)(2).— The term “purchase” includes any deemed purchase under subsection (a)(2).
(C) Certain stock acquisitions from related corporations.—
(i) In general.— Paragraph (A)(iii) shall not apply to an acquisition of stock from a related corporation if at least fifty percent (50%) in value of the stock of such related corporation was acquired by purchase (within the meaning of paragraphs (A) and (B)).
(ii) Certain distributions.— Paragraph (A)(i) shall not apply to an acquisition of stock described in subparagraph (i) of this paragraph if the corporation acquiring such stock:
(I) Made a qualified stock purchase of stock of the related corporation, and
(II) made an election under this section (or is treated under subsection (d) as having made such an election) with respect to such qualified stock purchase.
(4) Consistency period.—
(A) In general.— Except as provided in paragraph (B), the term “consistency period” means the period consisting of:
(i) The one-year period before the beginning of the applicable period,
(ii) the applicable period, and
(iii) the one-year period beginning on the day after the acquisition date.
(B) Extension of the consistency period.— The period referred to in paragraph (A) shall also include any period during which the Secretary determines that there was in effect a plan to make a qualified stock purchase plus one or more other qualified stock purchases (or asset acquisitions described in subsection (d)) with respect to the target corporation or any target affiliate.
(5) Related person.— The term “related person” shall have the same meaning used in § 30045 of this title.
(6) Related corporation.— The term “related corporation” means a corporation that is either related party or a member of a controlled group as defined in §§ 30045 and 30044 of this title, respectively.
(7) Coordination with estimated tax rules.— The tax imposed on the gain realized on the sale described in subsection (a)(1) shall not be considered for purposes of § 30263 of this title.
(8) Foreign corporations.— Except as provided in regulations, the term “target corporation” and the term “target affiliate” shall not include foreign corporations.
(9) Scope of this section.— The rules of this section shall only apply to such transactions that comply with the provisions of this section. The basis of the property received by a corporation in a distribution in total liquidation of another corporation shall be determined pursuant to the provisions of § 30142(a)(13)(B) of this title regardless of the intention of the distributee at the time, on or after the distribution in liquidation.
History —Jan. 31, 2011, No. 1, § 1034.06, retroactive to Jan. 1, 2011; Dec. 10, 2011, No. 232, § 42.