Amended 1962, 1976, 1984, 1986, 1988
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 1006(e)(12), redesignated subsec. (g) as (f). Former subsec. (f) redesignated (e).
- 1986 Pub. L. 99-514 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 Pub. L. 98-369 Pub. L. 98–369, §§ 54(b), 61(d), redesignated former subsec. (e) successively as subsec. (f) and as subsec. (g).
- 1984 Pub. L. 98-369 Pub. L. 98–369, § 712(i)(1), substituted “complete liquidation” for “partial or complete liquidation” in subsec. (e)(2), which became subsec. (g)(2).
- 1976 Pub. L. 94-455 Pub. L. 94–455, § 1901(b)(32)(A), redesignated subsec. (g) as (e).
- 1962 Pub. L. 87-403 Pub. L. 87–403 added subsec. (f) and redesignated former subsec. (f) as (g).
Cases: Fulman v. United States, 434 U.S. 528 (1978); Boulware v. United States, 552 U.S. 421 (2008)
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(a) In general 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).
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(b) Amount distributed
Amended 1964
- 1964 Pub. L. 88-484 Pub. L. 88–484 included amount of gain recognized under section 341(f).
- 1964 Pub. L. 88-272 Pub. L. 88–272 inserted reference to section 1250(a).
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(1) General rule 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.
Amended 1962, 1966, 1969, 1971, 1976, 1978, 1988
- 1988 Pub. L. 100-647 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.
- 1978 Pub. L. 95-628 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)”.
- 1976 Pub. L. 94-455 Pub. L. 94–455, § 205(c)(1)(B), substituted “1252(a), or 1254(a)” for “or 1252(a)”.
- 1976 Pub. L. 94-455 Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.
- 1971 Pub. L. 92-178 Pub. L. 92–178, § 312(a)(1), substituted “corporation, unless subparagraph (D) applies” for “corporation” where first appearing.
- 1971 Pub. L. 92-178 Pub. L. 92–178, § 312(a)(2), added subpar. (D).
- 1969 Pub. L. 91-172 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).
- 1966 Pub. L. 89-570 Pub. L. 89–570 included reference to section 617(d)(1).
- 1966 Pub. L. 89-809 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.
- 1962 Pub. L. 87-834 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”.
- 1962 Pub. L. 87-834 Pub. L. 87–834, § 5(a), added subpar. (C).
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(2) Reduction for liabilities The amount of any distribution determined under paragraph (1) shall be reduced (but not below zero) by—
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(A) the amount of any liability of the corporation assumed by the shareholder in connection with the distribution, and
(B) the amount of any liability to which the property received by the shareholder is subject immediately before, and immediately after, the distribution.
(3) Determination of fair market value For purposes of this section, fair market value shall be determined as of the date of the distribution.
(c) Amount taxable In the case of a distribution to which subsection (a) applies—
Cases: Bokum v. Commissioner, 94 T.C. 126 (1990)
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(1) Amount constituting dividend That portion of the distribution which is a dividend (as defined in section 316) shall be included in gross income.
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(2) Amount applied against basis That portion of the distribution which is not a dividend shall be applied against and reduce the adjusted basis of the stock.
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(3) Amount in excess of basis
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(A) In general 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.
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(B) Distributions out of increase in value accrued before March 1, 1913 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.
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(d) Basis The basis of property received in a distribution to which subsection (a) applies shall be the fair market value of such property.
Amended 1962, 1964, 1966, 1969, 1971, 1976, 1978, 1988
- 1988 Pub. L. 100-647 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.
- 1978 Pub. L. 95-628 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 Pub. L. 94-455 Pub. L. 94–455, § 205(c)(1)(C), substituted “1252(a), or 1254(a)” for “or 1252(a)”.
- 1971 Pub. L. 92-178 Pub. L. 92–178, § 312(a)(3), substituted “corporation, unless paragraph (3) applies” for “corporation” where first appearing.
- 1971 Pub. L. 92-178 Pub. L. 92–178, § 312(a)(4), added par. (3) and redesignated former par. (3) as (4).
- 1969 Pub. L. 91-172 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 Pub. L. 89-570 Pub. L. 89–570 included reference to section 617(d)(1).
- 1964 Pub. L. 88-484 Pub. L. 88–484 included amount of gain recognized under section 341(f).
- 1964 Pub. L. 88-272 Pub. L. 88–272 inserted reference to section 1250(a).
- 1962 Pub. L. 87-834 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”.
- 1962 Pub. L. 87-834 Pub. L. 87–834, § 5(b), added par. (3).
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(e) Special rule for certain distributions received by 20 percent corporate shareholder
Amended 1976, 1984, 1988
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 2004(j)(3)(B), added par. (3) and redesignated former par. (3) as (4).
- 1988 Pub. L. 100-647 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.
- 1984 Pub. L. 98-369 Pub. L. 98–369, § 54(b), added subsec. (e). Former subsec. (e) redesignated (f).
- 1976 Pub. L. 94-455 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.
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(1) In general 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.
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(2) 20 percent corporate shareholder For purposes of this subsection, the term “20 percent corporate shareholder” means, with respect to any distribution, any corporation which owns (directly or through the application of section 318)—
(A) stock in the corporation making the distribution possessing at least 20 percent of the total combined voting power of all classes of stock entitled to vote, or
(B) at least 20 percent of the total value of all stock of the distributing corporation (except nonvoting stock which is limited and preferred as to dividends),
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.
Amended 1984, 2014
- 2014 Pub. L. 113-295 Pub. L. 113–295 struck out “, 244,” after “section 243” in concluding provisions.
- 1984 Pub. L. 98-369 Pub. L. 98–369, § 712(i)(1), substituted “complete liquidation” for “partial or complete liquidation” in subsec. (e)(2), which became subsec. (g)(2).
(3) Application of section 312(n)(7) not affected 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.
(4) Regulations The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection.
(f) Special rules
Amended 1962, 1976, 1984, 1988
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 1006(e)(12), redesignated subsec. (g) as (f). Former subsec. (f) redesignated (e).
- 1984 Pub. L. 98-369 Pub. L. 98–369, § 61(d), added subsec. (f). Former subsec. (f) redesignated (g).
- 1984 Pub. L. 98-369 Pub. L. 98–369, § 54(b), redesignated former subsec. (e) as (f).
- 1976 Pub. L. 94-455 Pub. L. 94–455, § 1901(b)(32)(A), struck out subsec. (f) which related to special rules for distribution of antitrust stock to corporations.
- 1962 Pub. L. 87-403 Pub. L. 87–403 added subsec. (f) and redesignated former subsec. (f) as (g).
(1) For distributions in redemption of stock, see section 302.
Amended 1987
- 1987 Pub. L. 100-203 Pub. L. 100–203 substituted “subsections (k) and (n)” for “subsection (n)”.
(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).
Amended 1986
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1804(f)(2)(B), substituted “this subsection” for “this section”.
(4) For taxation of dividends received by individuals at capital gain rates, see section 1(h)(11).
Amended 2003
- 2003 Pub. L. 108-27 Pub. L. 108–27 added par. (4).