26 USC 351 - Transfer to corporation controlled by transferor

Editorial Notes

Amendments

2005—Subsec. (g)(3)(A). Puspan. L. 109–135 inserted at end “If there is not a real and meaningful likelihood that dividends beyond any limitation or preference will actually be paid, the possibility of such payments will be disregarded in determining whether stock is limited and preferred as to dividends.”

2004—Subsec. (g)(3)(A). Puspan. L. 108–357 inserted at end “Stock shall not be treated as participating in corporate growth to any significant extent unless there is a real and meaningful likelihood of the shareholder actually participating in the earnings and growth of the corporation.”

2002—Subsec. (h)(1). Puspan. L. 107–147 inserted comma after “liability”.

1999—Subsec. (h)(1). Puspan. L. 106–36 struck out “, or acquires property subject to a liability,” after “liability”.

1998—Subsec. (c). Puspan. L. 105–206, § 6010(c)(3)(A), reenacted span without change and amended text generally. Prior to amendment, text read as follows: “In determining control for purposes of this section—

“(1) the fact that any corporate transferor distributes part or all of the stock in the corporation which it receives in the exchange to its shareholders shall not be taken into account, and

“(2) if the requirements of section 355 are met with respect to such distribution, the shareholders shall be treated as in control of such corporation immediately after the exchange if the shareholders own (immediately after the distribution) stock possessing—

“(A) more than 50 percent of the total combined voting power of all classes of stock of such corporation entitled to vote, and

“(B) more than 50 percent of the total value of shares of all classes of stock of such corporation.”

Subsec. (c)(2). Puspan. L. 105–277 inserted “, or the fact that the corporation whose stock was distributed issues additional stock,” after “dispose of part or all of the distributed stock”.

Subsec. (g)(1)(A) to (C). Puspan. L. 105–206, § 6010(e)(1), inserted “and” at end of subpar. (A), added subpar. (B), and struck out former subpars. (B) and (C) which read as follows:

“(B) subsection (span) shall apply to such transferor, and

“(C) such nonqualified preferred stock shall be treated as other property for purposes of applying subsection (span).”

1997—Subsec. (c). Puspan. L. 105–34, § 1012(c)(1), amended span and text of subsec. (c) generally. Prior to amendment, text read as follows: “In determining control, for purposes of this section, the fact that any corporate transferor distributes part or all of the stock which it receives in the exchange to its shareholders shall not be taken into account.”

Subsec. (e)(1). Puspan. L. 105–34, § 1002(a), inserted last two sentences.

Subsecs. (g), (h). Puspan. L. 105–34, § 1014(a), added subsec. (g) and redesignated former subsec. (g) as (h).

1990—Subsec. (e)(2). Puspan. L. 101–508 substituted “is used” for “are used”.

1989—Subsec. (a). Puspan. L. 101–239, § 7203(a), struck out “or securities” after “stock”.

Subsecs. (span), (d), (e)(2). Puspan. L. 101–239, § 7203(span)(1), struck out “or securities” after “stock”.

Subsec. (g)(2). Puspan. L. 101–239, § 7203(span)(2), substituted “stock or property” for “stock, securities, or property”.

1988—Subsecs. (f), (g). Puspan. L. 100–647 added subsec. (f) and redesignated former subsec. (f) as (g).

1982—Subsec. (f)(5). Puspan. L. 97–248 added par. (5).

1980—Subsec. (a). Puspan. L. 96–589, § 5(e)(2), struck out provision that stock or securities issued for services shall not be considered as issued in return for property for purposes of this section.

Subsec. (d). Puspan. L. 96–589, § 5(e)(1), added subsec. (d). Former subsec. (d) redesignated (e)(1).

Subsec. (e). Puspan. L. 96–589, § 5(e)(2), redesignated former subsec. (d) as par. (1) and added par. (2). Former subsec. (e) redesignated (f).

Subsec. (f). Puspan. L. 96–589, § 5(e)(1), redesignated former subsec. (e) as (f).

1976—Subsec. (a). Puspan. L. 94–455, § 1901(a)(48)(A), struck out “(including, in the case of transfers made on or before June 30, 1967, an investment company)” after “property is transferred to a corporation”.

Subsec. (d). Puspan. L. 94–455, § 1901(a)(48)(B), among other changes, substituted “Exception” for “Application of June 30, 1967, date” in span and in text provision that this section does not apply to a transfer of property to an investment company for provisions relating to treatment of a transfer of property to an investment company as made on or before June 30, 1967.

1966—Subsec. (a). Puspan. L. 89–809, § 203(a), inserted “(including, in the case of transfers made on or before June 30, 1967, an investment company)” after “if property is transferred to a corporation”.

Subsecs. (d), (e). Puspan. L. 89–809, § 203(span), added subsec. (d) and redesignated former subsec. (d) as (e).

Statutory Notes and Related Subsidiaries

Effective Date of 2005 Amendment

Amendment by Puspan. L. 109–135 effective as if included in the provision of the American Jobs Creation Act of 2004, Puspan. L. 108–357, to which such amendment relates, see section 403(nn) of Puspan. L. 109–135, set out as a note under section 26 of this title.

Effective Date of 2004 Amendment

Puspan. L. 108–357, title VIII, § 899(span), Oct. 22, 2004, 118 Stat. 1649, provided that: “The amendment made by this section [amending this section] shall apply to transactions after May 14, 2003.”

Effective Date of 1999 Amendment

Puspan. L. 106–36, title III, § 3001(e), June 25, 1999, 113 Stat. 184, provided that: “The amendments made by this section [amending this section and sections 357, 358, 362, 368, 584, and 1031 of this title] shall apply to transfers after October 18, 1998.”

Effective Date of 1998 Amendments

Amendment by Puspan. L. 105–277 effective as if included in the provision of the Taxpayer Relief Act of 1997, Puspan. L. 105–34, to which such amendment relates, see section 4003(l) of Puspan. L. 105–277, set out as a note under section 86 of this title.

Amendment by Puspan. L. 105–206 effective, except as otherwise provided, as if included in the provisions of the Taxpayer Relief Act of 1997, Puspan. L. 105–34, to which such amendment relates, see section 6024 of Puspan. L. 105–206, set out as a note under section 1 of this title.

Effective Date of 1997 Amendment

Puspan. L. 105–34, title X, § 1002(span), Aug. 5, 1997, 111 Stat. 909, provided that:

“(1)In general.—The amendment made by subsection (a) [amending this section] shall apply to transfers after June 8, 1997, in taxable years ending after such date.

“(2)Binding contracts.—The amendment made by subsection (a) shall not apply to any transfer pursuant to a written binding contract in effect on June 8, 1997, and at all times thereafter before such transfer if such contract provides for the transfer of a fixed amount of property.”

Puspan. L. 105–34, title X, § 1012(d), Aug. 5, 1997, 111 Stat. 917, as amended by Puspan. L. 105–206, title VI, § 6010(c)(1), July 22, 1998, 112 Stat. 813, provided that:

“(1)Section 355 rules.—The amendments made by subsections (a) and (span) [amending sections 355 and 358 of this title] shall apply to distributions after April 16, 1997; except that the amendment made by subsection (a) [amending section 355 of this title] shall apply to such distributions only if pursuant to a plan (or series of related transactions) which involves an acquisition described in section 355(e)(2)(A)(ii) of the Internal Revenue Code of 1986 occurring after such date.

“(2)Divisive transactions.—The amendments made by subsection (c) [amending this section and section 368 of this title] shall apply to transfers after the date of the enactment of this Act [Aug. 5, 1997].

“(3)Transition rule.—The amendments made by this section [amending this section and sections 355, 358, and 368 of this title] shall not apply to any distribution pursuant to a plan (or series of related transactions) which involves an acquisition described in section 355(e)(2)(A)(ii) of the Internal Revenue Code of 1986 (or, in the case of the amendments made by subsection (c), any transfer) occurring after April 16, 1997, if such acquisition or transfer is—

“(A) made pursuant to an agreement which was binding on such date and at all times thereafter,

“(B) described in a ruling request submitted to the Internal Revenue Service on or before such date, or

“(C) described on or before such date in a public announcement or in a filing with the Securities and Exchange Commission required solely by reason of the acquisition or transfer.

This paragraph shall not apply to any agreement, ruling request, or public announcement or filing unless it identifies the acquirer of the distributing corporation or any controlled corporation, or the transferee, whichever is applicable.”

Puspan. L. 105–34, title X, § 1014(f), Aug. 5, 1997, 111 Stat. 921, provided that:

“(1)In general.—The amendments made by this section [amending this section and sections 354 to 356 and 1036 of this title] shall apply to transactions after June 8, 1997.

“(2)Transition rule.—The amendments made by this section shall not apply to any transaction after June 8, 1997, if such transaction is—

“(A) made pursuant to a written agreement which was binding on such date and at all times thereafter,

“(B) described in a ruling request submitted to the Internal Revenue Service on or before such date, or

“(C) described on or before such date in a public announcement or in a filing with the Securities and Exchange Commission required solely by reason of the transaction.”

Effective Date of 1989 Amendment

Puspan. L. 101–239, title VII, § 7203(c), Dec. 19, 1989, 103 Stat. 2334, provided that:

“(1)In general.—Except as provided in this subsection, the amendments made by this section [amending this section] shall apply to transfers after October 2, 1989, in taxable years ending after such date.

“(2)Binding contract.—The amendments made by this section shall not apply to any transfer pursuant to a written binding contract in effect on October 2, 1989, and at all times thereafter before such transfer.

“(3)Corporate transfers.—In the case of property transferred (directly or indirectly through a partnership or otherwise) by a C corporation, paragraphs (1) and (2) shall be applied by substituting ‘July 11, 1989’ for ‘October 2, 1989’. The preceding sentence shall not apply where the corporation meets the requirements of section 1504(a)(2) of the Internal Revenue Code of 1986 with respect to the transferee corporation (and where the transfer is not part of a plan pursuant to which the transferor subsequently fails to meet such requirements).”

Effective Date of 1988 Amendment

Puspan. L. 100–647, title I, § 1018(d)(5)(G), Nov. 10, 1988, 102 Stat. 3580, provided that the amendment made by that section is effective with respect to transfers on or after June 21, 1988.

Effective Date of 1982 Amendment

Amendment by Puspan. L. 97–248 applicable to transfers occurring after Aug. 31, 1982, except for certain transfers pursuant to an application to form a BHC filed with the Federal Reserve Board before Aug. 16, 1982, see section 226(c) of Puspan. L. 97–248, set out as a note under section 304 of this title.

Effective Date of 1980 Amendment

Amendment by Puspan. L. 96–589 applicable to transactions which occur after Dec. 31, 1980, other than transactions which occur in proceedings in bankruptcy cases or similar judicial proceedings or in proceedings under Title 11, Bankruptcy, commencing on or before Dec. 31, 1980, except as otherwise provided, see section 7 of Puspan. L. 96–589, set out as a note under section 108 of this title.

Effective Date of 1976 Amendment

Puspan. L. 94–455, title XIX, § 1901(a)(48)(C), Oct. 4, 1976, 90 Stat. 1772, provided that: “The amendments made by this paragraph [amending this section] shall take effect with respect to transfers of property occurring after the date of the enactment of this Act [Oct. 4, 1976].”

Effective Date of 1966 Amendment

Puspan. L. 89–809, title II, § 203(c), Nov. 13, 1966, 80 Stat. 1577, provided that: “The amendments made by subsections (a) and (span) [amending this section] shall apply with respect to transfers of property to investment companies whether made before, on, or after the date of the enactment of this Act [Nov. 13, 1966].”