§ 336. Gain or loss recognized on property distributed in complete liquidation
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(a)General rule Except as otherwise provided in this section or section 337, gain or loss shall be recognized to a liquidating corporation on the distribution of property in complete liquidation as if such property were sold to the distributee at its fair market value.
(b)Treatment of liabilities If any property distributed in the liquidation is subject to a liability or the shareholder assumes a liability of the liquidating corporation in connection with the distribution, for purposes of subsection
(a)and section 337, the fair market value of such property shall be treated as not less than the amount of such liability.
(c)Exception for liquidations which are part of a reorganization For provision providing that this subpart does not apply to distributions in pursuance of a plan of reorganization, see section 361(c)(4).
(d)Limitations on recognition of loss
(1)No loss recognized in certain distributions to related persons
(A)In general No loss shall be recognized to a liquidating corporation on the distribution of any property to a related person (within the meaning of section 267) if—
(i)such distribution is not pro rata, or
(ii)such property is disqualified property.
(B)Disqualified property For purposes of subparagraph (A), the term “disqualified property” means any property which is acquired by the liquidating corporation in a transaction to which section 351 applied, or as a contribution to capital, during the 5-year period ending on the date of the distribution. Such term includes any property if the adjusted basis of such property is determined (in whole or in part) by reference to the adjusted basis of property described in the preceding sentence.
(2)Special rule for certain property acquired in certain carryover basis transactions
(A)In general For purposes of determining the amount of loss recognized by any liquidating corporation on any sale, exchange, or distribution of property described in subparagraph (B), the adjusted basis of such property shall be reduced (but not below zero) by the excess (if any) of—
(i)the adjusted basis of such property immediately after its acquisition by such corporation, over
(ii)the fair market value of such property as of such time.
(B)Description of property
(i)In general For purposes of subparagraph (A), property is described in this subparagraph if—
(I)such property is acquired by the liquidating corporation in a transaction to which section 351 applied or as a contribution to capital, and
(II)the acquisition of such property by the liquidating corporation was part of a plan a principal purpose of which was to recognize loss by the liquidating corporation with respect to such property in connection with the liquidation.
Other property shall be treated as so described if the adjusted basis of such other property is determined (in whole or in part) by reference to the adjusted basis of property described in the preceding sentence.
(ii)Certain acquisitions treated as part of plan For purposes of clause (i), any property described in clause (i)(I) acquired by the liquidated corporation after the date 2 years before the date of the adoption of the plan of complete liquidation shall, except as provided in regulations, be treated as acquired as part of a plan described in clause (i)(II).
(C)Recapture in lieu of disallowance The Secretary may prescribe regulations under which, in lieu of disallowing a loss under subparagraph
(A)for a prior taxable year, the gross income of the liquidating corporation for the taxable year in which the plan of complete liquidation is adopted shall be increased by the amount of the disallowed loss.
(3)Special rule in case of liquidation to which section 332 applies In the case of any liquidation to which section 332 applies, no loss shall be recognized to the liquidating corporation on any distribution in such liquidation. The preceding sentence shall apply to any distribution to the 80-percent distributee only if subsection
(a)or (b)(1) of section 337 applies to such distribution.
(e)Certain stock sales and distributions may be treated as asset transfers Under regulations prescribed by the Secretary, if—
(1)a corporation owns stock in another corporation meeting the requirements of section 1504(a)(2), and
(2)such corporation sells, exchanges, or distributes all of such stock,
an election may be made to treat such sale, exchange, or distribution as a disposition of all of the assets of such other corporation, and no gain or loss shall be recognized on the sale, exchange, or distribution of such stock.
(Added Pub. L. 99–514, title VI, § 631(a), Oct. 22, 1986, 100 Stat. 2269; amended Pub. L. 100–647, title I, §§ 1006(e)(1)–(3), (21)(A), 1018(d)(5)(D), Nov. 10, 1988, 102 Stat. 3400, 3403, 3580.)
Connections43 cite this · traces to 2
Cited by 43 sections · top 32
U.S. Code
- § 26Limitation based on tax liability; definition of tax liability
- § 337Nonrecognition for property distributed to parent in complete liquidation of subsidiary
- § 367Foreign corporations
- § 852Taxation of regulated investment companies and their shareholders
- § 897Disposition of investment in United States real property
- § 338Certain stock purchases treated as asset acquisitions
- § 453Installment method
- § 312Effect on earnings and profits
- § 311Taxability of corporation on distribution
- § 1374Tax imposed on certain built-in gains
- § 332Complete liquidations of subsidiaries
- § 1248Gain from certain sales or exchanges of stock in certain foreign corporations
- § 333Repealed. Pub. L. 99–514, title VI, § 631(e)(3), Oct. 22, 1986, 100 Stat. 2273]
- § 334Basis of property received in liquidations
- § 453BGain or loss on disposition of installment obligations
- § 1375Tax imposed when passive investment income of corporation having accumulated earnings and profits exceeds 25 percent of gross receipts
- § 1363Effect of election on corporation
- § 1366Pass-thru of items to shareholders
- § 1276Disposition gain representing accrued market discount treated as ordinary income
- § 1255Gain from disposition of section 126 property
- § 467Certain payments for the use of property or services
- § 346Definition and special rule
statutes-at-large
- Public Law 403
- Public Law 97–362To reduce the amount of LIFO recapture in the case of certain plans of liquidation adopted during 1982, to make adjustments in the net operating loss carryback and carryforward rules for the Federal National Mortgage Association, and for other purposes
- Public Law 100–647To make technical corrections relating to the Tax Reform Act of 1986, and for other purposes
- Public Law 96–223To impose a windfall profit tax on domestic crude oil, and for other purposes
- Public Law 97–248To provide for tax equity and fiscal responsibility, and for other purposes
register
- Proposed RulesWithdrawal of notice of proposed rulemaking, notice of proposed rulemaking by cross-reference to temporary regulations
- Rules and RegulationsDEPARTMENT OF THE TREASURY
- Rules and RegulationsFinal regulations and removal of temporary regulations
- NoticesTemporary regulations
- UnknownFinal regulations
Traces to 2 documents
25 references not yet in our index
- Pub. L. 99–514, title VI, § 631(a)
- 100 Stat. 2269
- Pub. L. 100–647, title I
- 102 Stat. 3400
- Aug. 16, 1954, ch. 736
- 68A Stat. 106
- Pub. L. 96–223, title IV, § 403(b)(1)
- 94 Stat. 304
- Pub. L. 96–471, § 2(b)(1)
- 94 Stat. 2253
- Pub. L. 97–248, title II, § 222(b)
- 96 Stat. 478
- Pub. L. 99–514, § 631(a)
- Pub. L. 100–647, § 1006(e)(21)(A)
- Pub. L. 100–647, § 1018(d)(5)(D)
- Pub. L. 100–647, § 1006(e)(1)
- Pub. L. 100–647, § 1006(e)(2)
- Pub. L. 100–647, § 1006(e)(3)
- Pub. L. 100–647
- Pub. L. 99–514
- section 1019(a) of Pub. L. 100–647
- Pub. L. 99–514, title VI, § 633
- 100 Stat. 2277
- Pub. L. 100–647, title I, § 1006(g)
- 102 Stat. 3407
Citation graph
cites case law
§ 336
Gain or loss recognized on property distributed in complete liquidation
U.S.C.×22
Stat.×12
Fed. Reg.×9
Pub. L.Pub. L. 99–514, title VI, § 631(a)
Stat.100 Stat. 2269
Pub. L.Pub. L. 100–647, title I
Stat.102 Stat. 3400
ActAug. 16, 1954, ch. 736
Cites 27 · showing 7Cited by 43 across 3 sources