26 U.S.C. § 269: Acquisitions made to evade or avoid income tax

§ 1.269-1 Meaning and use of terms.§ 1.269-2 Purpose and scope of section 269.§ 1.269-3 Instances in which section 269(a) disallows a deduction, credit, or other allowance.§ 1.269-4 Power of district director to allocate deduction, credit, or allowance in part.§ 1.269-5 Time of acquisition of control.§ 1.269-6 Relationship of section 269 to section 382 before the Tax Reform Act of 1986.§ 1.269-7 Relationship of section 269 to sections 382 and 383 after the Tax Reform Act of 1986.

Cases: Bobsee Corp. v. United States, 411 F.2d 231 (5th Cir. 1969); Borge v. Commissioner, 405 F.2d 673 (2d Cir. 1968); Vulcan Materials Co. v. United States, 446 F.2d 690 (5th Cir. 1971)

(a) In general If—

“the principal purpose for which such acquisition was made is evasion or avoidance of Federal income tax by securing the benefit of a deduction, credit, or other allowance which such person or corporation would not otherwise enjoy” Closing words

Textual readingANY OF= Secretary may disallow deduction, credit, or allowance

(1) any person or persons acquire, directly or indirectly, control of a corporation, or

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(2) any corporation acquires, directly or indirectly, property of another corporation, not controlled, directly or indirectly, immediately before such acquisition, by such acquiring corporation or its stockholders, the basis of which property, in the hands of the acquiring corporation, is determined by reference to the basis in the hands of the transferor corporation,

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and the principal purpose for which such acquisition was made is evasion or avoidance of Federal income tax by securing the benefit of a deduction, credit, or other allowance which such person or corporation would not otherwise enjoy, then the Secretary may disallow such deduction, credit, or other allowance. For purposes of paragraphs (1) and (2), control means the ownership of 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 of the corporation.

Amended 1964, 1976, 2014

2014 Pub. L. 113-295 Pub. L. 113–295 struck out “or acquired on or after October 8, 1940,” after “persons acquire,” in par. (1) and after “corporation acquires,” in par. (2).
1976 Pub. L. 94-455 Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary” wherever appearing.
1964 Pub. L. 88-272 Pub. L. 88–272 substituted “the Secretary or his delegate may disallow such deduction, credit, or other allowance” for “such deduction, credit or other allowance shall not be allowed”.

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(b) Certain liquidations after qualified stock purchases

Amended 1976, 1984

1984 Pub. L. 98-369 Pub. L. 98–369 added subsec. (b), redesignated former subsec. (b) as (c) and inserted reference to subsec. (b).
1976 Pub. L. 94-455 Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary” wherever appearing.

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(1) In general If—

Textual readingALL OF= secretary may disallow such deduction

(A) there is a qualified stock purchase by a corporation of another corporation,

(B) an election is not made under section 338 with respect to such purchase,

(C) the acquired corporation is liquidated pursuant to a plan of liquidation adopted not more than 2 years after the acquisition date, and

(D) the principal purpose for such liquidation is the evasion or avoidance of Federal income tax by securing the benefit of a deduction, credit, or other allowance which the acquiring corporation would not otherwise enjoy,

then the Secretary may disallow such deduction, credit, or other allowance.

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(2) Meaning of terms For purposes of paragraph (1), the terms “qualified stock purchase” and “acquisition date” have the same respective meanings as when used in section 338.

(c) Power of Secretary to allow deduction, etc., in part In any case to which subsection (a) or (b) applies the Secretary is authorized—

Amended 1976, 1984

1984 Pub. L. 98-369 Pub. L. 98–369 added subsec. (b), redesignated former subsec. (b) as (c) and inserted reference to subsec. (b).
1976 Pub. L. 94-455 Pub. L. 94–455, § 1901(a)(38), struck out subsec. (c) relating to presumptions in the case of disproportionate purchase price.

(1) to allow as a deduction, credit, or allowance any part of any amount disallowed by such subsection, if he determines that such allowance will not result in the evasion or avoidance of Federal income tax for which the acquisition was made; or

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(2) to distribute, apportion, or allocate gross income, and distribute, apportion, or allocate the deductions, credits, or allowances the benefit of which was sought to be secured, between or among the corporations, or properties, or parts thereof, involved, and to allow such deductions, credits, or allowances so distributed, apportioned, or allocated, but to give effect to such allowance only to such extent as he determines will not result in the evasion or avoidance of Federal income tax for which the acquisition was made; or

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(3) to exercise his powers in part under paragraph (1) and in part under paragraph (2).