Amended 1976, 1990
- 1990 Pub. L. 101-508 Pub. L. 101–508 struck out subsec. (d) “Exchanges under the final system plan for ConRail” which read as follows: “No gain or loss shall be recognized if stock or securities in a corporation are, in pursuance of an exchange to which paragraph (1) or (2) of section 374(c) applies, exchanged solely for stock of the Consolidated Rail Corporation, securities of such Corporation, certificates of value of the United States Railway Association, or any combination thereof.”
- 1976 Pub. L. 94-253 Pub. L. 94–253 added subsec. (d).
Cases: Reef Corp. v. Commissioner, 368 F.2d 125 (5th Cir. 1966)
Final rules 3
(a) General rule
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(1) In general No gain or loss shall be recognized if stock or securities in a corporation a party to a reorganization are, in pursuance of the plan of reorganization, exchanged solely for stock or securities in such corporation or in another corporation a party to the reorganization.
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(2) Limitation
Amended 1980
- 1980 Pub. L. 96-589 Pub. L. 96–589, § 4(e)(1), redesignated existing pars. (A) and (B) as par. (A)(i), (ii), and added par. (B).
(A) Excess principal amount Paragraph (1) shall not apply if—
(B) Property attributable to accrued interest 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.
Amended 1997
- 1997 Pub. L. 105-34 Pub. L. 105–34, § 1014(e)(1), inserted “(including nonqualified preferred stock, as defined in section 351(g)(2))” after “stock”.
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(C) Nonqualified preferred stock
Amended 1997
- 1997 Pub. L. 105-34 Pub. L. 105–34, § 1014(b), added subpar. (C).
(i) In general Nonqualified preferred stock (as defined in section 351(g)(2)) received in exchange for stock other than nonqualified preferred stock (as so defined) shall not be treated as stock or securities.
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(ii) Recapitalizations of family-owned corporations
(I) In general Clause (i) shall not apply in the case of a recapitalization under section 368(a)(1)(E) of a family-owned corporation.
(II) Family-owned corporation For purposes of this clause, except as provided in regulations, the term “family-owned corporation” means any corporation which is described in clause (i) of section 447(d)(2)(C) [OLRC note: See References in Text note below.] throughout the 8-year period beginning on the date which is 5 years before the date of the recapitalization. For purposes of the preceding sentence, stock shall not be treated as owned by a family member during any period described in section 355(d)(6)(B).
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(III) Extension of statute of limitations The statutory period for the assessment of any deficiency attributable to a corporation failing to be a family-owned corporation shall not expire before the expiration of 3 years after the date the Secretary is notified by the corporation (in such manner as the Secretary may prescribe) of such failure, and 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.
Amended 1998
- 1998 Pub. L. 105-206 Pub. L. 105–206 added subcl. (III).
(3) Cross references
Amended 1980
- 1980 Pub. L. 96-589 Pub. L. 96–589, § 4(e)(1), designated existing provisions as subpar. (A), inserted provisions excluding property to which paragraph (2)(B) applies, and added subpar. (B).
(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 (2)(B) applies), see section 356.
Amended 1997
- 1997 Pub. L. 105-34 Pub. L. 105–34, § 1014(e)(2), inserted “nonqualified preferred stock and” after “subsection (including”.
(B) For treatment of accrued interest in the case of an exchange described in paragraph (2)(B), see section 61.
(b) Exception
Amended 1980
- 1980 Pub. L. 96-589 Pub. L. 96–589, § 4(h)(1), substituted “subparagraph (D) or (G) of section 368(a)(1)” for “section 368(a)(1)(D)”, wherever appearing.
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(1) In general Subsection (a) shall not apply to an exchange in pursuance of a plan of reorganization within the meaning of subparagraph (D) or (G) of section 368(a)(1), unless—
(A) the corporation to which the assets are transferred acquires substantially all of the assets of the transferor of such assets; and
“Substantially” implies facts and circumstances. Cited by Reg. § 1.108-7(e), Reg. § 1.367(a)-8(b)(1)(i)(B)(1), Reg. § 1.381(a)-1(b)(1)(iv), Reg. § 1.460-4(k)(3)(i)(B)
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(B) the stock, securities, and other properties received by such transferor, as well as the other properties of such transferor, are distributed in pursuance of the plan of reorganization.
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(2) Cross reference For special rules for certain exchanges in pursuance of plans of reorganization within the meaning of subparagraph (D) or (G) of section 368(a)(1), see section 355.
(c) Certain railroad reorganizations Notwithstanding any other provision of this subchapter, subsection (a)(1) (and so much of section 356 as relates to this section) shall apply with respect to a plan of reorganization (whether or not a reorganization within the meaning of section 368(a)) for a railroad confirmed under section 1173 of title 11 of the United States Code, as being in the public interest.
Amended 1978, 1980, 1995
- 1995 Pub. L. 104-88 Pub. L. 104–88 struck out “or approved by the Interstate Commerce Commission under subchapter IV of chapter 113 of title 49,” after “Code,”.
- 1980 Pub. L. 96-589 Pub. L. 96–589, § 6(i)(2), substituted “confirmed under section 1173 of title 11 of the United States Code, or approved by the Interstate Commerce Commission” for “approved by the Interstate Commerce Commission under section 77 of the Bankruptcy Act, or”.
- 1978 Pub. L. 95-473 Pub. L. 95–473 substituted “subchapter IV of chapter 113 of title 49” for “section 20b of the Interstate Commerce Act”.