Cases: Peracchi v. Commissioner, 143 F.3d 487 (9th Cir. 1998)
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(a) General rule In the case of an exchange to which section 351, 354, 355, 356, or 361 applies—
Amended 1976, 1990
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11801(c)(8)(G)(i), substituted “or 361” for “361, 371(b), or 374”.
- 1976 Pub. L. 94-253 Pub. L. 94–253, § 1(b)(1), substituted “371(b), or 374” for “or 371(b)”.
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(1) Nonrecognition property The basis of the property permitted to be received under such section without the recognition of gain or loss shall be the same as that of the property exchanged—
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(A) decreased by—
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(i) the fair market value of any other property (except money) received by the taxpayer,
(ii) the amount of any money received by the taxpayer, and
(iii) the amount of loss to the taxpayer which was recognized on such exchange, and
Amended 1958
- 1958 Pub. L. 85-866 Pub. L. 85–866 added cl. (iii).
(2) Other property The basis of any other property (except money) received by the taxpayer shall be its fair market value.
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(b) Allocation of basis
Amended 1976, 1990
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11801(c)(8)(G)(ii), struck out par. (3) “Certain exchanges involving ConRail” which read as follows: “To the extent provided in regulations prescribed by the Secretary in the case of an exchange to which section 354(d) (or so much of section 356 as relates to section 354(d)) or section 374(c) applies, for purposes of allocating basis under paragraph (1), stock of the Consolidated Rail Corporation and the certificate of value of the United States Railway Association which relates to such stock shall, so long as they are held by the same person, be treated as one property.”
- 1976 Pub. L. 94-455 Pub. L. 94–455 struck out “or his delegate” after “Secretary”.
- 1976 Pub. L. 94-253 Pub. L. 94–253, § 1(b)(2), added par. (3).
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(1) In general Under regulations prescribed by the Secretary, the basis determined under subsection (a)(1) shall be allocated among the properties permitted to be received without the recognition of gain or loss.
Amended 1976
- 1976 Pub. L. 94-455 Pub. L. 94–455 struck out “or his delegate” after “Secretary”.
- 1976 Pub. L. 94-253 Pub. L. 94–253, § 1(b)(2), added par. (3).
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(2) Special rule for section 355 In the case of an exchange to which section 355 (or so much of section 356 as relates to section 355) applies, then in making the allocation under paragraph (1) of this subsection, there shall be taken into account not only the property so permitted to be received without the recognition of gain or loss, but also the stock or securities (if any) of the distributing corporation which are retained, and the allocation of basis shall be made among all such properties.
(c) Section 355 transactions which are not exchanges For purposes of this section, a distribution to which section 355 (or so much of section 356 as relates to section 355) applies shall be treated as an exchange, and for such purposes the stock and securities of the distributing corporation which are retained shall be treated as surrendered, and received back, in the exchange.
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(d) Assumption of liability
Amended 1978
- 1978 Pub. L. 95-600 Pub. L. 95–600 designated existing provisions as par. (1) and added par. (2).
Cases: Black & Decker Corp. v. United States, 436 F.3d 431 (4th Cir. 2006); Coltec Industries, Inc. v. United States, 454 F.3d 1340 (Fed. Cir. 2006)
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(1) In general Where, as part of the consideration to the taxpayer, another party to the exchange assumed a liability of the taxpayer, such assumption shall, for purposes of this section, be treated as money received by the taxpayer on the exchange.
Amended 1999
- 1999 Pub. L. 106-36 Pub. L. 106–36 struck out “or acquired from the taxpayer property subject to a liability” after “liability of the taxpayer” and “or acquisition (in the amount of the liability)” after “such assumption”.
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(2) Exception Paragraph (1) shall not apply to the amount of any liability excluded under section 357(c)(3).
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(e) Exception This section shall not apply to property acquired by a corporation by the exchange of its stock or securities (or the stock or securities of a corporation which is in control of the acquiring corporation) as consideration in whole or in part for the transfer of the property to it.
Amended 1968
- 1968 Pub. L. 90-621 Pub. L. 90–621 substituted exchange of stock and securities for issuance of stock or securities as the transaction involved and inserted parenthetical provisions making reference to stock or securities of a corporation which is in control of the acquiring corporation.
(f) Definition of nonrecognition property in case of section 361 exchange For purposes of this section, the property permitted to be received under section 361 without the recognition of gain or loss shall be treated as consisting only of stock or securities in another corporation a party to the reorganization.
Amended 1988
- 1988 Pub. L. 100-647 Pub. L. 100–647 added subsec. (f).
(g) Adjustments in intragroup transactions involving section 355 In the case of a distribution to which section 355 (or so much of section 356 as relates to section 355) applies and which involves the distribution of stock from 1 member of an affiliated group (as defined in section 1504(a) without regard to subsection (b) thereof) to another member of such group, the Secretary may, notwithstanding any other provision of this section, provide adjustments to the adjusted basis of any stock which—
Amended 1997
- 1997 Pub. L. 105-34 Pub. L. 105–34 added subsec. (g).
(1) is in a corporation which is a member of such group, and
(2) is held by another member of such group,
to appropriately reflect the proper treatment of such distribution.
(h) Special rules for assumption of liabilities to which subsection (d) does not apply
Amended 2000
- 2000 Pub. L. 106-554 Pub. L. 106–554 added subsec. (h).
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(1) In general If, after application of the other provisions of this section to an exchange or series of exchanges, the basis of property to which subsection (a)(1) applies exceeds the fair market value of such property, then such basis shall be reduced (but not below such fair market value) by the amount (determined as of the date of the exchange) of any liability—
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(A) which is assumed by another person as part of the exchange, and
Amended 2002
- 2002 Pub. L. 107-147 Pub. L. 107–147 amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: “which is assumed in exchange for such property, and”.
(B) with respect to which subsection (d)(1) does not apply to the assumption.
(2) Exceptions Except as provided by the Secretary, paragraph (1) shall not apply to any liability if—
(A) the trade or business with which the liability is associated is transferred to the person assuming the liability as part of the exchange, or
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(B) substantially all of the assets with which the liability is associated are transferred to the person assuming the liability as part of the exchange.
“Substantially” implies facts and circumstances. Cited by Reg. § 1.752-6(b)(2)
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(3) Liability For purposes of this subsection, the term “liability” shall include any fixed or contingent obligation to make payment, without regard to whether the obligation is otherwise taken into account for purposes of this title.