§ 1.997-1. Special rules for subchapter C of the Code.
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/us/cfr/t26/s§ 1.997-1·A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
(a)For purposes of applying the provisions of sections 301 through 395 of the Code, any distribution in property to a corporation by a DISC, or former DISC, which is made out of previously taxed income or accumulated DISC income shall be treated as a distribution in the same amount as if such distribution of property were made to an individual, and have a basis, in the hands of the recipient corporation, equal to such amount treated as having been distributed.
(b)This section may be illustrated by the following example: Example.X Corporation is the sole shareholder of Y Corporation which is a DISC. Y makes an actual distribution of property to X with respect to X's stock in Y. The property has a basis of $50 and a fair market value of $100. The distribution is treated as made out of accumulated DISC income under section 996(a) and is taxable as a dividend under section 301(c)(1). Even though X is a corporation, the amount of the distribution is $100 notwithstanding the provisions of section 301(b)(1)(B) and the basis the property in X's hands is $100 notwithstanding the provisions of section 301(d)(2). [T.D. 7324, 39 FR 35125, Sept. 30 1974]
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§ 1.997-1
Special rules for subchapter C of the Code.
Treas. Dec.T.D. 7324
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