- § 361. Nonrecognition of gain or loss to corporations; treatment of distributions
- § 362. Basis to corporations
- [§ 363. Repealed.
§ 361. Nonrecognition of gain or loss to corporations; treatment of distributions
(a) General rule
(b) Exchanges not solely in kind
(1) Gain
If subsection (a) would apply to an exchange but for the fact that the property received in exchange consists not only of stock or securities permitted by subsection (a) to be received without the recognition of gain, but also of other property or money, then—
(A) Property distributed
(B) Property not distributed
The amount of gain recognized under subparagraph (B) shall not exceed the sum of the money and the fair market value of the other property so received which is not so distributed.
(2) Loss
(3) Treatment of transfers to creditors
(c) Treatment of distributions
(1) In general
(2) Distributions of appreciated property
(A) In general
If—
(i) in a distribution referred to in paragraph (1), the corporation distributes property other than qualified property, and
(ii) the fair market value of such property exceeds its adjusted basis (in the hands of the distributing corporation),
then gain shall be recognized to the distributing corporation as if such property were sold to the distributee at its fair market value.
(B) Qualified property
For purposes of this subsection, the term “qualified property” means—
(i) any stock in (or right to acquire stock in) the distributing corporation or obligation of the distributing corporation, or
(ii) any stock in (or right to acquire stock in) another corporation which is a party to the reorganization or obligation of another corporation which is such a party if such stock (or right) or obligation is received by the distributing corporation in the exchange.
(C) Treatment of liabilities
(3) Treatment of certain transfers to creditors
(4) Coordination with other provisions
(5) Cross reference
(Aug. 16, 1954, ch. 736, 68A Stat. 118; Pub. L. 99–514, title XVIII, § 1804(g)(1), Oct. 22, 1986, 100 Stat. 2805; Pub. L. 100–647, title I, § 1018(d)(5)(A), Nov. 10, 1988, 102 Stat. 3578; Pub. L. 101–508, title XI, § 11321(b), Nov. 5, 1990, 104 Stat. 1388–463; Pub. L. 108–357, title VIII, § 898(a), Oct. 22, 2004, 118 Stat. 1649; Pub. L. 109–135, title IV, § 403(jj)(1), Dec. 21, 2005, 119 Stat. 2632.)
§ 362. Basis to corporations
(a) Property acquired by issuance of stock or as paid-in surplus
If property was acquired by a corporation—
(1) in connection with a transaction to which section 351 (relating to transfer of property to corporation controlled by transferor) applies, or
(2) as paid-in surplus or as a contribution to capital,
then the basis shall be the same as it would be in the hands of the transferor, increased in the amount of gain recognized to the transferor on such transfer.
(b) Transfers to corporations
(c) Special rule for certain contributions to capital
(1) Property other than money
Notwithstanding subsection (a)(2), if property other than money—
(A) is acquired by a corporation as a contribution to capital, and
(B) is not contributed by a shareholder as such,
then the basis of such property shall be zero.
(2) Money
Notwithstanding subsection (a)(2), if money—
(A) is received by a corporation as a contribution to capital, and
(B) is not contributed by a shareholder as such,
then the basis of any property acquired with such money during the 12-month period beginning on the day the contribution is received shall be reduced by the amount of such contribution. The excess (if any) of the amount of such contribution over the amount of the reduction under the preceding sentence shall be applied to the reduction (as of the last day of the period specified in the preceding sentence) of the basis of any other property held by the taxpayer. The particular properties to which the reductions required by this paragraph shall be allocated shall be determined under regulations prescribed by the Secretary.
(d) Limitation on basis increase attributable to assumption of liability
(1) In general
(2) Treatment of gain not subject to tax
Except as provided in regulations, if—
(A) gain is recognized to the transferor as a result of an assumption of a nonrecourse liability by a transferee which is also secured by assets not transferred to such transferee; and
(B) no person is subject to tax under this title on such gain,
then, for purposes of determining basis under subsections (a) and (b), the amount of gain recognized by the transferor as a result of the assumption of the liability shall be determined as if the liability assumed by the transferee equaled such transferee’s ratable portion of such liability determined on the basis of the relative fair market values (determined without regard to section 7701(g)) of all of the assets subject to such liability.
(e) Limitations on built-in losses
(1) Limitation on importation of built-in losses
(A) In general
(B) Property described
For purposes of subparagraph (A), property is described in this subparagraph if—
(i) gain or loss with respect to such property is not subject to tax under this subtitle in the hands of the transferor immediately before the transfer, and
(ii) gain or loss with respect to such property is subject to such tax in the hands of the transferee immediately after such transfer.
In any case in which the transferor is a partnership, the preceding sentence shall be applied by treating each partner in such partnership as holding such partner’s proportionate share of the property of such partnership.
(C) Importation of net built-in loss
(2) Limitation on transfer of built-in losses in section 351 transactions
(A) In general
If—
(i) property is transferred by a transferor in any transaction which is described in subsection (a) and which is not described in paragraph (1) of this subsection, and
(ii) the transferee’s aggregate adjusted bases of such property so transferred would (but for this paragraph) exceed the fair market value of such property immediately after such transaction,
then, notwithstanding subsection (a), the transferee’s aggregate adjusted bases of the property so transferred shall not exceed the fair market value of such property immediately after such transaction.
(B) Allocation of basis reduction
(C) Election to apply limitation to transferor’s stock basis
(i) In general
If the transferor and transferee of a transaction described in subparagraph (A) both elect the application of this subparagraph—
(I) subparagraph (A) shall not apply, and(II) the transferor’s basis in the stock received for property to which subparagraph (A) does not apply by reason of the election shall not exceed its fair market value immediately after the transfer.(ii) Election
(Aug. 16, 1954, ch. 736, 68A Stat. 118; Pub. L. 90–621, § 2(b), Oct. 22, 1968, 82 Stat. 1311; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), title XXI, § 2120(b), Oct. 4, 1976, 90 Stat. 1834, 1913; Pub. L. 99–514, title VIII, § 824(b), Oct. 22, 1986, 100 Stat. 2374; Pub. L. 106–36, title III, § 3001(b)(2), June 25, 1999, 113 Stat. 182; Pub. L. 108–357, title VIII, § 836(a), Oct. 22, 2004, 118 Stat. 1594; Pub. L. 109–135, title IV, § 403(dd)(2), Dec. 21, 2005, 119 Stat. 2631; Pub. L. 113–295, div. A, title II, § 221(a)(51), Dec. 19, 2014, 128 Stat. 4045; Pub. L. 115–141, div. U, title IV, § 401(a)(67), Mar. 23, 2018, 132 Stat. 1187.)
[§ 363. Repealed. Pub. L. 94–455, title XIX, § 1901(a)(49), Oct. 4, 1976, 90 Stat. 1773]